Financial Market report for February 9, 2011
1) … Introduction
Nearing the end of earning season, stocks fell lower February 9, 20111, on the exhaustion of Quantitative Easing and China bank tightening, with Peru, Indonesia, Brazil, South Korea, China, and the Emerging Markets, as well as industrial metals, coal producers, copper miners, energy service, US basic materials, and banks leading the way down.
2) … Country and natural resource stocks, that had seen the largest inflation from hot money flows from quantitative easing, saw the greatest loss of value, as an epic investment sea change occurred today, February 9, 2011.
The world is passed from The Age of Leverage characterised by sovereign sovereign debt expansion, currency inflation, credit liquidity, stability, stock and junk bond inflation, economic growth and expansion and prosperity … and passing into The Age of Deleveraging characterised by failure of sovereign debt, currency deflation, credit ill-liquidity, instability, stock and junk bond deflation, economic contraction and austerity.
Anticipation of and the actual implementation of Ben Bernakes’s QE2 provided seigniorage, that is moneyness, to both stocks and junk bonds worldwide; and on February, 1, 2010 to Gold, GLD, as it started to rally once again, as investors saw a market turn lower at hand and bought the hard metal asset as a safe haven investment. This will be all the more the case, once more and more currencies, world stocks, VT, junk bonds, JNK, sovereign debt, BWX, and international corporate bonds, PICB, start to fall lower and lower.
Peru, EPU, -3.4%
Indonesia, IDX, -3.0%
Brazil, EWZ, -2.7%, Brazil Small Caps, BRF, -2.4, Brazil Financials, BRAF, -1.3%
South Korea, EWY, -2.6% and South Korea Small Caps, SKOR, -1.4
BRICs, EEB, -2.4
China Energy, CHIE, -3.0%,China Materials, CHIM, -3.0%, China Small Caps, HAO, -2.5, China All Caps, YAO, -2.4%, China Financials, CHIX, -2.0%, Shanghai Shares, CAF, -2.0% … Focus Media Holdings, FMCN, -2.4%
Emerging Markets, EEM, -2.3%
Thailand, THD, -2.2%
South Africa, EZA, -2.2%
Russia, RSX, -2.0%
Emerging Markets Small Caps, EWX, -2.0%
Mexico, EWW, -1.7%
Taiwan, EWT -1.7%
Philippines, EPHE, -1.6%
India, INP -1.4%
Turkey, TUR -1.4%
Emerging Market Consumer, ECON, -1.4%
Emerging Market Small Cap, DGS, -1.4
Latin America Small Caps, LATM, -1.3%
Canada Small Caps, CNDA, -1.1%
World Excluding US Real Estate, WPS, -1.0
New Zealand, ENZL, fell 1.0% on its relatively weak currency, the New Zealand Dollar, BNZ, which can be discerned from the chart of these two together with Australia, EWA, and the Australian Dollar, FXA, … ENZL, BNZ, EWA, and FXA; this is classic debt deflation underway.
Industrial Metals, CRBI, -3.3% … Southern Copper Corporation, SCCO, -3.4%, Headwaters, HW, -1.7%, BHP Billiton, BHP, -2.0%, Cliff Natural Resources, CLF, -3.7%, Companhia Vale Do Rio Doce, VALE, -2.5%
Coal producers, KOL, -2.7%
Copper miners, COPX, -2.5%
Metal Miners, XME, -2.4%
Energy Service, OIH, -1.9% ... Transocean, RIG, -4.7%, commenced an Elliott Wave 3 Down. Flotek, FTK, -3.4%. Halliburton, HAL, -2.2%, Chesapeake Energy, CHK, -2.1%
Steel Manufacturers, SLX, -1.9% … Schnitzer Steel, SCHN, -1.7%
Dow Jones US Energy Service, IEZ, -1.5%
Dow Jones US Materials, IYM, -1.4% ...Teck Resources, TCK, -8.1%; its fall today documents that this has been a leading speculative investment favored by both hedge funds and individuals. General Moly, GMO, -6.2%, commencing an Elliott Wave 3 of3 Down.
Solar Energy, TAN, -1.3% … LDK Solar, LDK, -1.2%, and SunPower Corp, SPWRA, manifested a spinning top doji.
S&P Clean Energy, QCLN, -1.3%
Energy, XLE, -1.3%
Shipping, SEA, -1.1% … Ship Finance, SFL, -1.8%,
Small Cap Energy, XLES, -1.1% … IO Geophysical, ION, -4.3%; FX Energy, FXEN, -2.7%; Bronco Drilling, BRNC, -2.0% ... GeoResources, GEOI, -1.6%
Water Stocks, FIW, -1.0 … American Water Works, AWK, has just completed an Elliott Wave 5 up and Aqua America, WTR, has just entered an Elliott Wave 3 Down.
Biotechnology, XBI, -1.0%
Banks, KBE, -1.0%
Small Cap Consumer Discretionary, XLYS, manifested a spinning top doji, at the top of what appears to be an Elliott Wave 2 up Crest, suggesting a soon entrance into an Elliott Wave 3 Down; these small cap shares will be a very fast faller.
World Financial Firms, IXG, manifested a spinning doji at the top of an Elliot 5 Wave Up; the rally top in these has been achieved.
Russell 2000 Growth, IWO, -0.52%
Morgan Stanley Cyclical Index, $CYC, -0.52% yet Freeport McMoran Copper and Gold, FCX, falling into an Elliott Wave 3 of 3 Down.
Cavco Industries, CVCO, American Axle, AXL, US Steel, X, are the leaders in the debt deflation bear market that commenced today in dollar denominated US stocks. Just as Grupo Televisa, TV, is the debt deflation leader the bear market in the Emerging Market Currency stocks, that commenced in late January 2011.
Investors purchased chemical manufacturers DD, NEU, LXU, and DOW; will they continue to stay invested in these as the stock market turns down?
Fertilizer manufacturer Potash, POT, has leverage up Deere, DE; will the stimulation continue? Which of the two will fall the fastest?
3) … Noteable fallers of the day included; these define the end of an age of profitably long the stock market.
Asset management company, Blackstone, BX, -3.2%.
Too Big To Fail Bank, Wells Fargo, WFC, -2.8%
Rental company, RSC Holdings, RRR, -2.8%
Semiconductor equipment manufacturer, Kulicke and Soffa Industries, KLIC, -2.5%
Game chip manufacturer, NVIDIA, NVDA, -2.4%; the chart shows three black crows.
Uranium mining company, Uranez, URZ, -2.3%
Truck manufacturer Navistar, NAV, -2.0
Health care small cap company, Jazz Pharmaceuticals, JAZZ, -1.9%
Industrial REIT, First Industrial Realty Trust, FR, -1.9% and DCT Industrial Trust, DCT -1.0%
Disk drive manufacturer, Western Digital, WDC, -1.7%
DRAM chips manufacturer Micron Technology, MU, -1.6%
Timber company, Deltec, DEL, -1.4%
Nanotechnology company, FEI Co, FEIC , -1.4%
Chemical manufacturer, Dow Chemical, DOW, -1.2%
Construction equipment manufacturer, TEX, -1.2%
Home improvement store, Lowes, LOW, -1.1%
King of display manufacturers, Panel Display, PANL, -1.0%.
Base Metals, DBB, -1.7% The sky high prices, that is the stratospheric prices seen in the charts of the following base metals has nothing to do with demand. Rather it has everything to do with Ben Bernanke wanting to prevent a deflationary collapse, and announcing his plans to print money to buy sovereign debt. The traders knew this full well, so they “gunned it for all it would give”, driving up the price of these commodities. Please note in the chart of base metals that the Elliot Wave 3 to 5 top came in AFTER QE 2 was announced. The traders saved the best for the last up. Today base metals got liberated, made free from the so called Free To Choose neoliberal regime to arrive at its true value.
Lead, LD, -3.6%
Aluminum, JJU, -1.6%
Copper, JJC, -1.6%
Nickel, JJN, -0.9%
Tin, JJT, -0.1%
California Municipal Bonds, CMF, -0.49%
Junk Bonds, JNK, fell strongly lower delineating today’s investment sea change in the failure of sovereign debt seigniorage, which came not with the fall of Treasuries, but the exhaustion of the US Federal Reserve’s Quantitative Easing Policy. The 0.62% fall in Junk Bonds, JNK, today, February 9, 2011 commenced the end of credit as it has traditionally been known.
The 30 10 US Sovereign Debt Leverage Curve, $TYX:$TNX, steepened; this is the inverse of the 10 30 Yield Curve, which flattened as US Treasuries bounce up from recent strong selling.
The Zeroes. ZROZ, 1.77%
30 Year US Government Bond, EDV, 0.95%
10 Year US Government Note. TLT, 0.90%
World Government bonds, BWX, -0.46% Sovereign debt, globally, is now confirmed in an Elliott Wave 3 Down.
Emerging Market Bonds EMB, -0.48%
International Corporate Bond, PICB, -0.58%
Russian Ruble, XRU, -2.3%
US Dollar, $USD, -0.5%
South African Rand, SZR, -0.4%
Indian Rupe, ICN, -0.5%
Mexico Peso, FXM, -0.4%
New Zealand Dollar, BNZ, -0.4%
Australian Dollar, FXA, -0.3%
Major Currencies, DBV, -0.33% ... World Major Currencies double topped out, first with the announcement of QE 2, and then on February 8, 2011.
Emerging Market Currencies, CEW, -0.27% … Emerging Market Currencies, made an Elliott Wave 5 high with the announcement of QE 2. Then a Elliott Wave 3 Down in early January, and then an Elliott Wave 3 of 3 Down on February 9, 2011.
Japanese Yen, FXY traded unchanged
Brazilian Real, BZF, +0.5%
Swiss Franc, FXF, +0.6%
The Euro, FXE, +0.7
The rise in the Euro, FXE, had nothing to do what soever with its intrinsic value; rather the rise in the Euro s simply a currency play of long the Euro or long the Euro and short a number of currencies including South Africa Rand, SZR, the Indian Rupe, ICN, the Mexico Peso, FXM, the New Zealand Dollar, BNZ. A rising Euro gave a shares of Siemens, SI, a boost; it manifested three white soldiers signaling a reversal is at hand; thus is is likely to fall into an Elliott Wave 3 Down. The European Financials, EUFN, in closing up at 24.33 manifested a massive dark cloud covering candlestick, suggesting an end to the EFSF rally.
The ratio of the Russell 2000 growth shares, relative to the Russell 2000 value shares, IWO:IWN, rose to strong resistance at 1.240. I expect the Russell 2000 growth shares, IWO, to start falling faster than the Russell 2000 value shares, as the dollar liquidity rally fails and yen carry trade investments unwind. The one percent fall in the Banks, KBE, as well as the 1.7% fall in Discover Financial Service, DFS, is an ominous sign for the Russell 2000 shares, as they use financing from banks and credit providers like American Express, AXP, and others to finance payroll and buy inventory and pay service bills. The recent strong rise in the US 10 Year Note, $TNX, is likely to soon pick up again and make borrowing increasingly burdensome to America’s small businesses, damaging their stock market value.
The currency leverage curve, the ratio of the pure small cap value shares to the pure small cap growth shares, RZV:RZG, rose out of its channel to resistance at 0.810. I expect the small cap value shares, RZV, to start falling faster than the small cap growth shares as this is the very metric of debt deflation.
The small cap pure value shares, RZV, rose today to an Elliott Wave 2 high; where as the small cap pure growth shares, RZG, manifested a bearish harami at an Elliott Wave 5 high.
The S&P, SPY, closed at 132.26, down from its February 8, 2010 high of 132.57 which was attained by a parabolic rise manifesting three white soldiers, a reversal pattern. Thus an Elliott Wave 3 Down has likely commenced in the S&P, as is seen in the weekly chart of the S&P, SPY Weekly.
Competitive currency deflation is underway at the hands of the FX currency traders. They have been successful in short selling three currencies: The first was the Emerging Market Currencies, CEW, on inflation destruction seen in Indonesia, IDX, and Turkey, TUR, and also on China bank and credit tightening. The second currency was the South Africa Rand, SZR, on a falling price of gold, GLD, and on Africa, AFK, turmoil. The third currency to be sold this year was the US Dollar, $USD, in advance of Ben Bernanke’s press statement of ongoing purchase of debt. The evidence is clear, cogent, and convincing that the bond vigilantes have teamed up with the FX currency traders to carry out a global currency war of competitive currency devaluation on the World Central Bankers, State Finance Ministers, and Treasury Secretaries, for domination of the worlds peoples and resources.
Inflation destruction is commencing, it is the fall in investment value that accompanies derisking and deleveraging out of investments that were formerly inflated by money flows to, and carry trade investing in, inflationary countries, such as Thailand, THD, and Indonesia, IDX, high interest paying financial institutions, such as the Brazilian Financials, BRAF, profitable natural resource companies, particularly coal mining companies as ANR Resources, ANR, and Arch Coal, ACI, high growth companies, such as the the Chinese Small Caps, HAO, countries and continually appreciating currencies such as the South African Rand, SZR, and the Emerging Market Currencies, CEW.
Inflation Destruction may precede Debt Deflation, which is the contraction and crisis that follows credit expansion. One of the most famous quotations of Austrian economist Ludwig von Mises is from page 572 of Human Action: “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency involved.”
In such an investment adverse environment, wealth is best preserved by investing in hard assets particularly, gold and silver bullion.
Bob Davis and Aaron Back of the Wall Street Journal report in article Inflation Worries Spread report Inflation Worries Spread. Inflation jitters spread through emerging markets on Tuesday, prompting China's central bank to raise interest rates for the third time in four months amid worries that a drought threatening the country's wheat crop will put further pressure on global food prices. With fireworks still echoing from China's Lunar New Year holiday, its central bank said it is raising rates by one-quarter percentage point. It was just the latest move by an emerging-market government—several of which are deploying a panoply of policies to battle inflation fueled by rising food and commodity prices and growth that is threatening to outstrip their productive capacity. In Brazil, Latin America's largest economy, the government reported Tuesday that inflation is accelerating, leading markets to expect its central bank to increase its overnight rate, already at 11.25%. Few emerging-market countries have a firm grip on the inflation problem. Just last week, John Lipsky, the International Monetary Fund's No. 2, said many emerging economies are running out of excess capacity "and yet most of them still have in place the expansionary … monetary and budgetary policies." The cure is clear, he said. "Everybody is going to need to tighten monetary policy, reduce budgetary stimulus and continue with the process of structural reforms."
4) … Summary
Lennar, LEN, is an outstanding short selling opportunity as it manifested a likely evening star and hammer in its trading today, with close at 20.85. The three white soldiers in its chart gives strong confirmation to short sell this stock. Chip Brian of Zachs Investment Research relates in February 7, 2011 news release relates the strength of this stock: “SmarTrend currently has shares of Lennar in an Uptrend and issued the Uptrend alert on September 09, 2010 at $14.54. The stock has risen 34.1% since the Uptrend alert was issued.” Lennar has a PE of 41. It is the very definition of the Ben Bernanke cool aid which has flowed freely at the end of the Age of Leverage. Lennar is the poster company for the neoliberal Milton Friedman Free To Choose floating currency regime which passed away today. Its success has nothing to do with future growth; its stock market strength defined the former US Dollar liquidity rally. All currencies will be sinking together in debt deflationary future causing the destruction of stocks and bonds.
Much of what was said of Lennar, can also be said of Sunrise Senior Living, SZR with a close of 9.09.
The great investment bubble that commenced in the late 1940s was priced by China bank and credit tightening, as companies finished for the most part, their earnings season today February 9, 2011:
5) … The neoliberal Milton Free To Choose economic regime is passing away and global economic governance will soon become the new reality.
In as much as Junk Bonds, JNK, fell strongly lower for the second straight day, the end of credit as it has been known has commenced.
And in as much as World Government Bond, BWX, and Emerging Market Bonds, EMB, fell lower today, the bond vigilantes have seized control of the sovereign debt interest rates. Bond vigilantes have taken debt sovereignty and debt seigniorage from the world central bankers. Aas a result, sovereign nation states will give way to regions of global government to be announced at summits, where Leaders announce framework agreements replacing constitutional law and the traditional rule of law, and appoint stakeholders to oversee corporatism as the operative form of government. This process is already underway in Egypt as it recovers from the throws of the people’s revolution.
World News Daily provides the BBC News report that Herman Van Rompuy In accepting his appointment as the first president of the European Union, Belgian Prime Minister Herman Van Rompuy announced that "global governance" is the only way to address the crises that beset the planet: "We're living through exceptionally difficult times – the financial crisis and its dramatic impact on employment and budgets, the climate crisis which threatens our very survival, a period of anxiety, uncertainty and lack of confidence," he said in his maiden press conference. "Yet these problems can be overcome through a joint effort between our countries. 2009 is also the first year of global governance with the establishment of the G20 in the middle of the financial crisis. The climate conference in Copenhagen is another step toward the global management of our planet."
It is inevitable that sovereign debt crisis will come soon with failed Treasury auctions, and a likely short selling run on banks such as Spain’s Banco Santender, STD, and Brazil’s Ita, ITUB, Banco Bradesco, BBD. Out of Götterdämmerung, that is a world-wide investment flame out, a Chancellor, that is a Sovereign, and a Banker, that is a Seignior, will arise to provide order, a new seigniorage and moneyness, as well as austerity for all. Eventually the Seignior will establish a global currency and unified regulation of banking globally.
6) … In today’s news:
1) ... LG to introduce table which enables one to see video transmissions as well as to transmit videos. Sanjeeb Banerjee reports in TopNews: In a last-week announcement which marks LG’s foray into the tablet market, the company confirmed on its official blog that it is coming up with a “groundbreaking” 4G, 3D tablet. The LG tablet will be launched as the T-Mobile ‘G-Slate’ in the US this spring; and as the ‘Optimus Pad’ in the UK at a later date. Though the specifications of the tablet will largely be same for the US and the UK, it is still not clear whether the UK tablet will get the 4G element. As per reports, LG will probably announce and unveil the tablet formally at the Mobile World Congress to be held in Barcelona next week. The G-Slate/Optimus Pad will run Google’s new tablet-optimized Android 3.0 ‘Honeycomb’ version; and will boast some compelling features like a 3D-capable multi-touch screen; Nvidia Tegra 2 dual-core processor; and dual rear-facing cameras allowing for 1080p HD 3D video recording. In addition, the tablet will also have the quick web browsing capability, along with the option for multitasking. Moreover, since the forthcoming LG tablet will among the first tablets with built-in 3D capabilities, the device will have support 3D graphics; thereby being an ideal product for consumers who make and share movies, as well as for business executives who share documents. However, 3D-capable glasses will be required by users to view the technology.
2) … Connected Home World reports that Rovi has announced its Connected Platform on Android which will enable consumers to access and manage their connected devices around their home right from their personal Android device, and stream their personal, premium and recorded content stored on their PC or NAS devices directly to the Android mobile device in the palm of their hand.