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Stocks Top Out On Rising World Currencies As Oil Turns Lower

Financial Market Report for January 24, 2011

1) US Treasuries and world government bonds rose.
Zeroes, ZROZ, 0.7%
30 Year US Government Bond, EDV, 0.3
10 Year US Government Note, TLT, 0.1

World government bonds, BWX,  rose higher on rising major world currencies and emerging market currencies and appears to be cresting up into an Elliott Wave 2 up; suggesting that an Elliott Wave 2 Down is imminent.

International corporate bonds, PICB, rose higher as well; and they appear to be cresting up into an Elliott Wave 2 of 2 up, making for a soon coming Wave 3 of 3 down. Notice how these as well as the world government bonds, fell lower with the announcement of QE 2 in early November 2010. It was at this time that the bond vigilantes gained control of interest rates globally as the Fed’s actions constitute monetization of debt.    

2) Stocks rose on rising world currencies, making for excellent short selling entry points.
Stocks rose on rising major currencies, DBV, and emerging market currencies, CEW.  

The rise in these stock ETFs made for a good short selling entry point, as well as an opportunity to add to one’s shorts, as in a bull market one buys into weakness and in a bear market one sells into strengths.  

The following ETFs are likely cresting into an Elliott Wave 2 up, and are preparing to enter an Elliott Wave 3 Down; some such as the timber stocks are coming into an Elliott Wave 5 up high.
Solar, TAN, 4.0%; solar stocks that have risen dramatically this year include GT Solar, SOLR.
Semiconductors, XSD, 2.6
Nasdaq Clean Energy, QCLN, 2.6
S&P Clean Energy, ICLN, 2.4
Timber stocks, WOOD, 2.0 on a higher timber commodity, CUT,  price,
Metal Manufacturing, XME, 1.8
Steel, SLX,  1.7
Nasdaq 100, QTEC, 1.7
Mid Cap Blend, FVL, 1.6
Home Building, ITB 1.3
Small Cap Basic Materials, XLBS, 1.4
Small Cap Information Technology, XLKS, 1.2
Basic Materials, IYM, 1.2; the chart of Dow Jones Basic Materials shows that the way down is more steep than the way up.  
Wind Energy, FAN, 1.1; these stocks are coming into an Elliott Wave 2-2 high, which means an Elliott Wave 3 of 3 Down will be coming to these stocks very soon. Solar Energy stocks have been hot since January 1, 2011 whereas  the Wind Energy stocks have not as hot.
Small Can Energy Shares, XLES 1.1; the small cap energy shares have maintained their strength compared to the other basic material shares; but with the falling price of oil, these too will now be giving way.  
Water Stocks, FIW 1.0
Environmental Services, EVX, 1.0

The Morgan Stanley Cyclical Index, $CYC, shows to be cresting up into an Elliott Wave 2 up today; a fall lower into an Elliott Wave 3 down is coming soon.

Investors rotated into the Morgan Stanley Cyclical Index, Building Systems Component, United Technologies, UTX, which rose 1.6% higher. Not to be outdone, its European peer Siemens, SI, rose 2.2%

The Morgan Stanley Cyclical Index, Packaging Component, Temple Inland, TIN, rose 5.3% higher and the Morgan Stanley Cyclical Index: Paper Component, International Paper, IP, 3.2% rose higher on a higher timber commodity, CUT, price.

The Morgan Stanley Cyclical Index Basic Materials Component, Alcoa Aluminum, AA, rose 4.1% higher on a higher aluminum commodity, JJU, price

Rising industrial shares across the board took the Morgan Stanley Cyclical Index Industrial Component,  ETN, 0.3% higher.

The Morgan Stanley Cyclical Index Transportation Component, Goodyear Tire, GT, rose 2.1% higher.

The Morgan Stanley Cyclical Index Chemical Component, Dupont, DD, rose 1.2% higher.

3M Co. MMM, is known as “The Extermer” or “The Exclaimer”, as it makes a statement at market turns in the Morgan Stanley Cyclical Index. Its 1.5% rise shows it to be cresting now, just as it collapsed in early June 2010, immediately before the announcement of the EFSF.  

3) Stocks falling today included the following
Thailand, THD, -5.9%; Thailand’s shares utterly gave way to what I term “inflation destruction”. Shihar Aneez of Reuters reports  Thailand Down 4% on Region Inflation Worries. Thailand's stock market fell 4.3 percent on Monday, leading most other Southeast Asian bourses down as foreign investors continued to bale out of markets they believe are vulnerable to growing inflationary pressures. Thailand .SETI posted its biggest loss since Oct 15, 2009, led by energy and banking shares. Indonesia .JKSE, the region's worst-performing bourse this year, lost 1 percent and the Philippines .PSI fell 1.2 percent to a 4-½ month low. On Monday, Indonesia and the Philippines saw net foreign outflows of $27.5 million and $14.7 million respectively. On Friday Thailand saw an outflow of $251 million. In baht terms, according to stock exchange data, it was the highest figure since May 24 last year when Bangkok was still picking itself up after bloody political protests. On Monday, the exchange recorded foreign selling of 4.05 billion baht ($132 million), according to exchange data. In the four weeks to Jan. 21, Thailand suffered outflows of $465 million, while Indonesia, IDX, and the Philippines, EPHE, saw selling worth $280 million and $52 million respectively, according to Nomura Research. (Hat Tip to Gary of Between The Hedges)

Gold mining stocks, GDX, -0.9%
Silver mining stocks, SIL, -1.4
China materials, CHIM, -1.3%
Banks, KBE, -1.0

4) The automotive stocks have been the unsung heroes of the investment recovery.
Yet, the downturn in AXLALVMGA TEN  … TRW and Merrill Lynch Cyclical Component, F, seen in this 5 day Google Finance chart bodes ill for investing long in these stocks and stocks in general.

5) Country stocks rising higher included:
South Korea Small Caps, SKOR 1.8%
South Korea, EWY 1.4
Australia, EWA 1.5 on a higher Australian Dollar
Australia Small Caps, KROO 1.4
India, INP 1.3 on a higher India Rupe
India Small Caps, SCIF, 1.3
Brazil, EWZ 1.3 on a higher Brazilian Real
Brazil Small Caps, BRF 1.1
Japanese Small Caps, JSC, 1.1% on a higher Yen
European Shares, VGK , 0.8 on a higher Euro, FXE, which closed at 135.92.

Emerging Markets, EEM 0.8% on higher Emerging Market currencies

Asia High Yielding Securities, DNH, 1.4%

Junk Bonds, JNK, rose 0.2% to close at 40.31; a top is coming in to junk bonds; when it crests, the world will be entering into the end of credit as it is commonly known.

6) Oil will likely be turning the price of commodities lower; then stocks will soon be following commodities lower.
Cocoa, NIB, 2.4%; cocoa prices have risen vertically for the fourth day now.
Timber, CUT, 2.0%

Today marked the end of opportunities for investing long in commodities. Falling commodity prices mean stocks will be turning lower globally, as well as in the United States.
Commodities, DJP, -0.8%
US Commodities, USCI, -0.1%

Natural Gas, UNG,  -2.5%

Silver, SLV, -1.8%
Gold, GLD, -0.5

Clearly, baring the breakout of a middle east war, the charts show that the way is now down in oil prices.
Gasoline, UGA, -1.7%
200% of DJ-AIG Crude, UCO, -3.0%
Oil, USO , -1.6
Petroleums, DBC, -0.9
West Texas Intermediate Crude, $WTIC,  -1.4%

Energy stock, XLE, and Exxon Mobil, XOM, will be falling lower on lower crude oil prices, as will the energy service companies, OIH.

The chart of the Dow ETF, DIA, shows a market top being achieved. The chart of the Nasdaq 100, QTEC, shows a rise up into an Elliot Wave 2 high, and what will soon be an Elliott Wave 3 Down.

The 0.8% rise in the Russell 2000, IWM, is a rise up in an Elliott 2 up; and what will soon be an Elliott Wave 3 down.  The same is true of world small caps, VSS. As well as the Brics, EEB.

Gold, GLD, and gold mining stocks, GDX, such as Newmont Mining, NEM, and Agnico Eagle Mines, AEM, ASA Limited, ASA,  and Goldfields, GFI, are ready for a bounce up.

The chart of Gold, GLD, shows that it is is in the middle of a massive wave higher with support now coming in at 127.5 to 130.

7) The crescendo of calls for greater European federalism is growing louder by the day -- they will not be, nor can they be, ignored much longer.
Open Europe relates that Les Echos in article Sarkozy Et Zapatero Favorables A Un Gouvernement Economique Européen reports that, following bilateral talks held in Paris on Friday, French President Nicolas Sarkozy and Spanish Prime Minister José Luis Rodríguez Zapatero have acknowledged their “complete identity of views on European issues, especially as regards the creation of a European economic government.”

And Open Europe relates that Handelsblatt’s finance commentator Frank Wiebe warns that the idea of bond buy-backs "is only a variation on bundling all national debts together on the market into EU debts, thereby burdening the creditworthiness of the EU."

Nasdaq provides the Robin van Daalen, Dow Jones Newswires report that European Central Bank President Jean-Claude Trichet called for further reinforcement of macroeconomic and fiscal European policies in a television interview Sunday. “We are calling for a quantum leap in the reinforcement of the governance of the European economy, particularly in the euro area.”

Given a Quantum Leap appears imminent, do you as an investor feel comfortable having your investments in a brokerage account where they might be accessed by a global leader such as Mr. Trichet to assist in resolving sovereign debt issues, or where they might suffer loss in a sovereign debt collapse or inflation crisis collapse?  I’ve decided to invest in and take personal possession of gold bullion.