Searching for “relative strength” in oil stocks
by Chart School - January 31st, 2011 11:21 am
Courtesy of Chris Kimble
Charts suggested to buy Oil Drillers ETF (OIH) last week (see post here) . In the chart below, Drillers (OIH) and Oil Stock ETF (XLE) have both broken channel resistance of late and are attempting to reach the next level of channel resistance.
CLICK ON CHART TO ENLARGE
These two started reflecting relative strength almost two weeks ago and continued to do so last week. Suspect the news from Egypt will keep a decent bid in on this sector.
Game Plan… Keep a 4% stop on the OIH position. Am picking up XLE here with a 3% stop.
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Digg“Flip That Bond” Continues: Primary Dealers Offload 26% Of Just Acquired 3 Year Auction Back To Fed
by Zero Hedge - January 31st, 2011 11:16 am
Courtesy of Tyler Durden
In today’s episode of “Flip That Bond”, the Primary Dealers succeeded in flipping a whopping 26% of the just auctioned off 1% of 1/25/2014 (912828PQ7) back to the Fed. Today’s POMO has closed with $7.720 billion in bonds maturing between 2013 and 2014 monetized by Sack Frost, of which, and this should come as no surprise to anyone, the bond most put back to the FRBNY, to the tune of $3.7 billion or 48% of all, was PQ7. Keep in mind that the PD take down in this bond was $14.2 billion. Just two weeks later the Primary Dealers have reduced their positions in this most recent auction by 26%. In other news, there is no monetization. And Tim Jeethner pays his taxes.
Graham Summers’ Free Weekly Market Forecast (Emerging Market Bloodbath Edition)
by Zero Hedge - January 31st, 2011 11:12 am
Courtesy of Phoenix Capital Research
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For months now I’ve been warning of a serious correction hitting the markets. Looking at last week’s action it looks as though it’s begun. And it may very well prove to be far greater than just a mere correction.
For starters, the Emerging Markets (which have lead US stocks since the 2008 Crash) have collapsed, breaking below the trendline that sustained them from their 2008 lows…
Throughout all the insanity of the last two years… the Emerging Markets have never once broken below this line before. Moreover, the fact that this line has held for not a few months but 24+ indicates that breaking below this line was a MAJOR trend change.
Indeed, the last time the Emerging Markets broke below their multi-year trendline, things got “interesting” really fast:
In light of this, the fact the Emerging Markets have broken multi-year trend support now is a MAJOR warning sign that we should all be on RED ALERT. Remember Emerging Markets have lead the S&P 500 on EVERY MAJOR turn of the last four years.
This definitely opens the door for a Crash similar to the one that hit in 2008 occurring. However, before we get there, we need to break initial support at 45. If we take that out, then we’ve got MAJOR support at 42.5. A break there would mean we’re not just having your garden variety 10% correction. And if we take out 37.5… WATCH OUT.
In plain terms, the Emerging Market space could rapidly turn into a bloodbath for the markets (in Egypt and other places it’s already a literal bloodbath). So be on watch for these support lines.
Another major item to watch for is the US Dollar. Earlier last week the US currency broke below CRITICAL support at 78. The Dollar is now trying to reclaim this line, which it NEEDS to do if the US currency is not set…
Dallas Fed Misses Consensus, Comes At 10.9 On Expectations Of 15.0, Prior 12.8, More Input Cost Warnings
by Zero Hedge - January 31st, 2011 10:35 am
Courtesy of Tyler Durden
The Dallas Fed prints at 10.9 and misses expectations. Stocks ramp as the miss would have been bigger if it had snowed in Texas, and so you must acquit. In the meantime, GETCO buying not just every single INTC share in Level 2 – 200, but moving on to everything not nailed down. Melt up must proceed as planned.
Since this index missed and is thus completely irrelevant, here is the only notable extract from the report:
Prices climbed again in January. The raw materials price index jumped from 43 to 62, reaching its highest level since mid-2008. The share of manufacturers who saw an increase in input costs surged to 64 percent, compared with only 2 percent who saw a decrease. Finished goods prices rose for the third month in a row, although the great majority of respondents continued to note no change. Sixty percent of respondents anticipate further increases in raw materials prices over the next six months, while 40 percent expect higher finished goods prices.
Those who have taken Bernanke economix will realize that this is great for corporate margins and S&P 500 Earnings forecasts.
And lest anyone blame the Dallas Fed of not doing the Hopium buffet, here is the refutation:
Although several of the current activity indexes fell from December levels, all future activity indexes rose this month. The future indexes for production and shipments moved up to their highest levels in four years. The future new orders index reached its highest level since 2005, with 56 percent of manufacturers expecting an increase in order volumes over the next six months. The future general business activity index advanced to a six-year high of 39, and the future company outlook index rose to 41.
Time to resume economic data laugh mode.
Full report.
Adventures In Cartography With Fox
by Zero Hedge - January 31st, 2011 10:11 am
Courtesy of Tyler Durden
What’s wrong with this map?
h/t Khaled Akbik via Kate Long
Intel Halted As Firm Cuts Q1 Forecast On Chipset Design Error
by Zero Hedge - January 31st, 2011 10:01 am
Courtesy of Tyler Durden
Just released PR:
As part of ongoing quality assurance, Intel Corporation has discovered a design issue in a recently released support chip, the Intel® 6 Series, code-named Cougar Point, and has implemented a silicon fix. In some cases, the Serial-ATA (SATA) ports within the chipsets may degrade over time, potentially impacting the performance or functionality of SATA-linked devices such as hard disk drives and DVD-drives. The chipset is utilized in PCs with Intel’s latest Second Generation Intel Core processors, code-named Sandy Bridge. Intel has stopped shipment of the affected support chip from its factories. Intel has corrected the design issue, and has begun manufacturing a new version of the support chip which will resolve the issue. The Sandy Bridge microprocessor is unaffected and no other products are affected by this issue.
The company expects to begin delivering the updated version of the chipset to customers in late February and expects full volume recovery in April. Intel stands behind its products and is committed to product quality. For computer makers and other Intel customers that have bought potentially affected chipsets or systems, Intel will work with its OEM partners to accept the return of the affected chipsets, and plans to support modifications or replacements needed on motherboards or systems. The systems with the affected support chips have only been shipping since January 9th and the company believes that relatively few consumers are impacted by this issue. The only systems sold to an end customer potentially impacted are Second Generation Core i5 and Core i7 quad core based systems. Intel believes that consumers can continue to use their systems with confidence, while working with their computer manufacturer for a permanent solution. For further information consumers should contact Intel at www.intel.com on the support page or contact their OEM manufacturer.
For the first quarter of 2011, Intel expects this issue to reduce revenue by approximately $300 million as the company discontinues production of the current version of the chipset and begins manufacturing the new version. Full-year revenue is not expected to be materially affected by the issue. Total cost to repair and replace affected materials and systems in the market is estimated to be $700 million. Since this issue affected some of the chipset units shipped and produced in the fourth quarter of 2010, the company will take a charge…
Chicago PMI Prints At Multi-Decade High At 68.8 On Expectations Of 64.5, “Steel Prices Are Going Crazy”
by Zero Hedge - January 31st, 2011 9:51 am
Courtesy of Tyler Durden
Chicago PMI Surges again, hitting 68.8 on expectations of 64.5, compared to the lower revised 66.8. And as recently has become trading, the only indicator everyone is looking at is the Price Paid (i.e., the margin collapse metric) which came at 81.7 compared to 78 previously. The key comment from the survey panel: “Steel prices are going crazy.” Nuff said.
Report Highlights, and try not to laugh…
Business Activity:
- Prices Paid, at 81.7, compared to 78.0 previously, indicated increased inflation, increasing to the highest level since July 2008
- Employment strengthened to a height not seen since May 1984
- New Order increased to the highest point since December 1983
- Production improved with New Order to the strongest level since 2004
Buying Policy:
- Lead times reported for MRO supplies plummeted.
Full comments from the report:
1. Lots of commodities price rising – steel, tin, aluminum, paper. Has not impacted sales though – have had large increase in orders.
2. Commodity inflation hurting profits, no pricing power with our customers.
3. Prices seem to be heating up, many suppliers are knocking on the door right now.
4. Some suppliers are holding prices to remain competitive, but others who have little to no competition in their sector are talking some significant increases in 2011. We are negotiating to keep those increases to a minimum.
5. Steel prices are going crazy
6. Business has increased mostly overseas higher prices, especially copper will kill us figure our cost has increased 40% same as oil too many speculators buying
7. Unfortunately the magic allure of a new year has not brought about improved service and pricing. Suppliers are continuing with pressures of increased pricing, decreased service levels and extended lead times.
8. Local foreclosures continue unabated. Small to medium sized business lending picking up slightly but remains very competitive due to lack of credit-worthiness of many of those businesses.
9. Business continues to improve. We have concerns about available experienced personnel to hire as well as pressures on capacity.
10. Business remains steady, orders are firm from month to month, back log remains solid…
11. Orders continue to come in spurts. No orders for 3 or 4 weeks then 3 or 4 in 1 week. The important thing is that the backlog is growing. The quote action is continuing strong.
12. The company for which I work…
WooLY Mu-BaRaK
by Zero Hedge - January 31st, 2011 9:37 am
Courtesy of williambanzai7
WOOLY [MU-]BARAK
(Wooly Bully, Sam the Sham and the Pharoahs)
WoolyBanzai7
Uno, dos, one, two, tres, quatro
Hilly told Bammy about a despot she saw.
Had two big horns and an Egyptian jaw.
Wooly Barak,
Wooly Mu-Barak,
Wooly Barak,
Wooly Mu-Barak,
Wooly Barak!
Bammy told Hilly,
“Let’s don’t take no chance.
Let’s not be L seven, while they burn all the gas.”
Wooly Barak,
Wooly Mu-Barak,
Wooly Barak,
Wooly Mu-Barak,
Wooly Barak!
[Musical Intelude: Here goes nuts dancin the BTFD]
Hilly told Bammy,
“That’s the thang to do.
Get you someone really to Wag the Dog with you.”
Wooly Barak,
Wooly Mu-Barak.
Wooly Barak,
Wooly Mu-Barak,
Wooly Barak.
Watch it now, watch it now!
Personal Consumption Expenditure Index for December
by Chart School - January 31st, 2011 9:35 am
Courtesy of Doug Short
The December Personal Income and Outlays report was published today by the Bureau of Economic Analysis. The chart below shows the monthly year-over year change in the personal consumption expenditures (PCE) price index since 2000. I’ve also included an overlay of the Core PCE (less Food and Energy) price index, which is a key measure watched by the Fed as a gauge of inflation.
The Headline PCE index has increased slightly in its annualized rate from 1.1% to 1.2% over the past month. The Core PCE index, however, has dropped from 0.8% to 0.7%, which is the lowest annualized rate in the 51-year history of this data series.
For a long-term perspective, here are the same two metrics spanning five decades.
Note: I use the data from Table 9 in the full release and tables available here.
Here Come the Black Swans
by Zero Hedge - January 31st, 2011 9:20 am
Courtesy of madhedgefundtrader
It is not my intention to ruin your day. But I may well do that if you read this piece. While traders pile on their longs with reckless abandon, and retail flows into equity mutual funds turn positive for the first time in two years, I am hearing a rising tide of negativity from the jungle telegraph. There are “black swans” circling out there everywhere, and the risk is that they alight upon us in great unexpected flocks, like a scene out of Alfred Hitchcock’s classic film, The Birds.
Let me give you a list of things that can go wrong this year:
*The ten year Treasury bond spikes to 5% and money gets expensive.
*Crude soars to $120 a barrel and gasoline rises to $4 a gallon.
*Europe blows up again, sending the dollar through the roof.
*Seeing stock prices soar, Ben Bernanke ends QE2 early, paring it down to QE 1 ½.
*The high frequency traders and quants hungry for a mean reversion smell blood in the water and trigger another “flash crash.”
*Retails investors conclude they were right to stay away and bail on what they have remaining.
And here is the scariest thing of all. All of these black swans could hit at the same time and reinforce each other, possible around March or April, triggering the recurrent double dip fears. Could this be the third consecutive “sell in May and go away” year? This conjures up the vision of a “ground hog year”, where 2011 is a carbon copy of 2010. A strong first quarter is followed by two dead quarters, and then a strong year end finish. This is what “lost decades” look like. Look at the 20 year chart of the (SPY) below and tell me this isn’t happening.
Of course, this is just one of many possible scenarios that could play out this year. As for me, I’m booking my chalet in Zermatt in the Swiss Alps now to beat out the rest of you.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by…
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