Market Talk

[Spaf]

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Market Talk Sunday February 13, 2005

Friday ended with a bullish pattern for trading, but will it hold? Stocks are now above the 50 day moving average. However, the market has gone through a recent complex retracement (pullback) of several steps. Will it recover to the previous high and reclame the bullish primary direction? We are not out of the woods yet! We are getting conflicting signals from indicators. The slow stoch has oscillated from overbought to oversold and back to overbought. The MACD has oscillated around the "0" level not giving a strong indication or direction.

Basic Fundamentals remain intact for the market and TSP funds. Techicinal analysis is difficult because of the choppy conditions of day to day fluctuations. However, the recent rally's and conditions indicate that investors for the most part are holding (61%) and buyers (23%) outnumber sellers (16%). Indicators are still in ocillation between long and caution.

Where does this leave us? Somewhere on the lake with a rowboat, the engine sputtering and one paddle (as someone wetted the spark plug). But the weather seems to be holding (hopefully)!

Yeh. I know, the bread was stuck in the toaster, burning! Some of us unplugged it. Some got their toast.

Attachment: S&P 500 chart for 3 months with a 50 day moving average, slow stoch, and MACD.

 

[teknobucks]

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Goldilocks economy may live again

By Marshall Loeb, MarketWatch
Last Update: 5:55 PM ET Feb. 11, 2005

NEW YORK (MarketWatch) -- Back at the dawn of the 21st Century, inflation was low, employment was high, growth was strong and markets were up.

Things were going so swimmingly that many economists and investors said the United States was enjoying a Goldilocks economy -- not too hot and not too cold, but just right.

Now at least one of the nation's most influential economists, Princeton University professor Alan Blinder, former Deputy Chairman of the Federal Reserve Board, says we may well be going through the early stages of a Goldilocks Economy once again. He notes that the economy is growing around 3.5 to 4 percent, inflation is down to about 2 percent and falling, and productivity has been expanding about 4 percent annually.

The last mentioned is particularly important.

Until now, the United States has rarely been able to achieve more than 4 percent annual growth in productivity. Signs show a slowdown in its growth later this year. But Blinder expects a longer term pickup. Says he of productivity: "I think we're going through a revolution."

Beyond the key numbers, Blinder sees two big issues ahead this year. First, what, if anything, will happen with Social Security? Second, who will replace Alan Greenspan, whose fifth term as Chairman of the Federal Reserve Board runs out next January, shortly before his 80th birthday.

Says Blinder: "It's the greatest job in the world. Greenspan's shoes are going to be impossibly difficult to fill. What kind of qualities must the Fed Chairman have? He needs a certain unflappability, which Greenspan has in abundance. He also needs flexibility of mind. Greenspan does not lock himself into ideological positions."

Looking still farther ahead, what worries Blinder is that more and more service jobs will become vulnerable to foreign competition. Now he estimates that only 300,000 to 1 million jobs may be lost to outsourcing. But over the coming decades that number will get larger and larger. "Everybody is thinking of competition from China," says Blinder, "But we really should be worried about India for the simple reason that they speak English."

His advice: "We have to change the foci of our school system so that it will turn out people who can get work in America."

Lynn Reaser, chief economist of Banc of America Capital Management in St. Louis, also sees "an economy on a very good footing, doing quite well, starting to approach a comfortable cruising altitude."

She reckons that economic growth in this year's first quarter is running at a brisk annual rate of 4 percent, which is greater than in Europe or Japan. Business capital spending on equipment and software will grow in the United States as companies continue to invest. That will help productivity, which in turn will help overall growth.

She expects to see moderate growth in government spending, helped by some rise in defense spending, and continued growth in housing, supported by low mortgage rates. New claims for unemployment insurance have dropped to the lowest level in four years, she notes, meaning that the employment picture is brightening.

Inflation, says Reaser, seems to be held in check, somewhere between 1.5 and 2 percent. Wage increases are still moderate, and companies, restrained by competition at home and abroad, have only limited pricing power.

As for the dollar, Reaser figures it has dropped about as far as it has to in order to make U.S. goods more competitive in the global marketplace. It has declined dramatically in the last three years: down about 15 percent against all the currencies in which the United States trades, down 20 percent against the yen, 30 percent against the euro.

Still other experts see an economy that's not too hot, and not too cold. Says Sam Stovall, chief investment strategist at Standard & Poor's: "With good economic growth but moderating inflation, it appears we're getting the best of both worlds." S&P economists expect the economy to grow 3.7 percent this year, vs. 4.4 percent last year, and inflation to fall from 2.7 percent last year to 2 percent this year.

As for the investment markets, S&P expects stocks to rise about 7.5 percent this year. Add to that a dividend yield averaging about 2 percent, and you get a total return of 9.5 percent. That's about twice as much as the expected total yields on bonds, which S&P pegs at an average about 5 percent.

Given this picture, S&P's recommended asset allocation for what it calls the average balanced investor is 45 percent in U.S. equities, 15 percent in foreign equities, 25 percent in bonds of 1 to 5-year maturities and 15 percent in cash.

S&P still finds value in both selected large- and small-cap stocks. Some of the areas of the market that the firm currently recommends include companies in transportation and logistics such as Burlington Northern Santa Fe Corporation, CNF Inc., Federal Express and Landstar Systems Inc. In construction-related issues, it favors such companies as American Standard Companies Inc., Ingersoll-Rand Company Ltd. and The Manitowoc Company Inc. In health care it recommends companies in the medical device area and managed care, such as The Cooper Companies Inc., Covance Inc., WellPoint Inc., St. Jude Medical Inc. and Humana Inc. S&P also thinks that selected energy stocks will continue to do well, including Chevrontexaco Corp., Devon Energy Corp., Kerr-McGee Corporation and Nabors Industries Ltd.. Finally, they think there is still potential for selected steel and chemical companies, such as Carpenter Technology Corporation, The Dow Chemical Company and FMC Corporation

 

[teknobucks]

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http://tinyurl.com/4oqov 10 YR COMPQ shows LONG TERM POSITIVE RISING trend lines have done something they haven't done for at least 10 yr (this chart) but most likely since they signalled SECULAR BULL MKT.

They were rising and paralell with slower 200 ABOVE 400 WK.

NOW? 200WK has crossed down BELOW 400 WK ! The trend lines SHOW importance by repelling LAST advance.

WHEN slower 400 WK also turns down there will be confirmation Bear is back in force.....should that occur.


*****reducing my position monday

tekno

 

[teknobucks]

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hmmmmmmmm...

30-year mortgage falls for 6th week
Average at 5.57% is lowest since early April: Freddie Mac

By Rachel Koning, MarketWatch
Last Update: 12:48 PM ET Feb. 10, 2005

CHICAGO (CBS.MW) - The average rate paid on a 30-year fixed mortgage fell for sixth straight week to its lowest since early April, the latest survey from Freddie Mac, released Thursday, showed.

The average rate on a 30-year fixed mortgage was 5.57 percent in the week ending Feb. 10, down from last week's 5.63 percent, Freddie Mac (FRE: news, chart, profile) said.

The drop came alongside a decline in the benchmark 10-year Treasury yield, which fell when January's U.S. payrolls tally, reported last Friday, fell short of estimates.

The 30-year rate has not been this low since the week ending April 1, 2004, when it hit 5.52 percent.

Last year at this time, the 30-year rate averaged 5.66 percent, said Freddie Mac, which has been tracking mortgages on a regular basis since the late 1970s.

The average for the 15-year fixed loan this week was 5.10 percent, down from last week's 5.14 percent, but up from last year's 4.96 percent.

A five-year Treasury-indexed hybrid adjustable-rate mortgage, or ARM, averaged 4.99 percent this week, down slightly from 5 percent. There is no annual historical information for last year since Freddie Mac began regularly tracking this mortgage rate only at the start of this year.

A one-year ARM averaged 4.11 percent in the week through Thursday, down from 4.23 percent.

A weekly drop in the ARM has been a rare occurrence; this week's decline is the first in five weeks.

The rate has been rising in step with an increase in the Federal Reserve's target interest rate. The Fed has lifted its rate, currently at 2.5 percent, six times since last June and is likely to do so again next month. See the Economics and Politics page.

The one-year ARM averaged 3.57 percent at this time last year.

Mortgage rates may continue to drift lower in the short run.

The 10-year Treasury note yield, a key influence on longer-term mortgage rates, fell below 4 percent this week for the first time since last October. The yield did drift back above 4 percent Thursday. See Bond Report.

Frank Nothaft, Freddie Mac's chief economist, said data show the 30-year mortgage rate has been held below 6 percent over six months, a factor he says has kept the housing market bustling.

He predicts the rate will average roughly 6 percent this year.

For the latest loan results, the 30-year fixed-rate and the one-year ARM assumed the payment of an average of 0.8 point to achieve the rate; the 15-year loan and the five-year ARM required 0.7 point. A point equates to 1 percent of the loan amount, charged as prepaid interest.

 

[teknobucks]

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Economic Week in Review: February 7-11, 2005

A reduction in the U.S. trade deficit in December highlighted a relatively light week for economic news. Consumer debt rose less than expected in December, while the number of weekly initial jobless claims fell to its lowest level in more than four years. For the week, the S&P 500 Index rose 0.2% to 1,205. The yield of the 10-year U.S. Treasury note was unchanged at 4.08%.

The trade gap narrowed to $56.4 billion in December, down from $59.3 billion the month before, according to the Commerce Department. The reduction in the trade gap was generally in line with Wall Street forecasts. Exports of goods and services rose 3.2% in December to a record $100.2 billion. Imports, meanwhile, advanced just 0.1%, held back primarily by a drop in oil imports and oil prices. For all of 2004, the trade deficit widened to a record $617.7 billion, well above the 2003 trade deficit of $496.5 billion.

According to the Federal Reserve Board, the amount of consumer debt outstanding rose $3.1 billion in December. The modest increase, however, was well below analysts' forecasts. Nonrevolving debt, which includes auto loans, rose at a 2.0% annual rate while revolving debt, which includes credit card activity, rose 1.4%. Meanwhile, November's consumer debt figure was revised significantly upward, from an initially reported $8.7 billion decrease to a $2.0 billion increase.

The Labor Department said the number of people filing first-time applications for unemployment insurance fell by 13,000 to 303,000 for the week ended February 5, the lowest level since October 2000. The four-week moving average of first-time claims, which irons out the fluctuations in the more volatile weekly numbers, fell by 16,000 to 315,500, the lowest level since November 2000. Continuing claims, however, rose by 47,000 to 2.74 million for the week ended January 29.

The economic week ahead:

A full slate of economic reports is on tap for next week, including retail sales and business inventories (Tuesday), new residential construction and industrial production (Wednesday), leading economic indicators (Thursday), and the Producer Price Index (Friday).

 

[teknobucks]

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interesting post off another stock BBS...

TREND is Your Friend

And this Bear recognizes that trend across most indexes and world markets is UP.

But here and in Japan, it is more of like a trading range, as we bob between the extremities. On the Dow, has there been much talk of the 2000 top ONLY being 700 or so points away?

On the SPX 20% from top. Q's STILL over 50% from top. TRANNIES made NEW top as did small caps! Both have fallen away.

As I scratch a few seconds and think, the AREA that would signal a "new friend" has arrived would seem to be in the BOND MArket and that would be a significant rise in rates, because falling rates don't seem to bother anyone. (yet rising rates could be signal of strength in economy....and the coveted infaltion FED has tried to induce?)

Second the US Dollar. EWT theory sees a rise to around 94 the .382 retrace of entire swoon. As it bounced off 80 the 10 YR support, and has risen some 6%, not a bad argument.A SERIOUS breakdown in the dollar would be early warning to get out of equities, to me, that would be a BREACH of 80 on the index.....so if trend is UP for dollar....shouldn;t markets hold up OK?

But lately gold has revived, off trend lines, could a multi week or better rally have begun?

Reading some snippets from Dines and a few other respected market timers, the argument for being guardedly optimistic for now is understood. A down JAN is meaningless IMHO

CYCLE has been bottoming every 4 years like clockwork 1990 1994 1998 2002, if still holding TRUE next one up 2006, however I have read from some pundits NO problems until 2007...so that would not agree with this cycle analysis.

I also don;t read much for a case of a down 2005, though 1st year of second term is usually the worst, last 2 years better, that supports a bottoming in 2006 and a rise into 2008.

I think there is NO calling the end to a credit expansion until FIRM evidence it has begun....I don;t see it yet.

But if one believes in Kondratief cycles, seeing the US debt, the TOTAL CREDIT MKT DEBT as per cent of GDP grow to OVER 300% of GDP, I am rather, very concerned with that figure, be it mortgage debt or not. IN 1929-1930 era, the other PEAK of WINTER WAVE, it stood at 265% of GDP..

...so what comes next is a CREDIT CONTRACTION.....and a pretty rotten environment there after until it troughs.

ACCESS to CHEAP rates doesn't WASH AWAY FACT that what used to be a $250- $350K mortgage DEBT 3-5 years ago is now more like $600- 700K.....but LOWER rates make payments possible....some interest ONLY....some ADJ.

EVEN an increase like we have seen in property taxes can STRANGLE the finances of some NEW home buyers...who HAD to STRETCH to buy in.

ANY additional needs are funded by MORE EXPENSIVE CREDIT CARD DEBT.....which if I ventured a guess MUST be rather substantial in its increase....and effect on those trying to keep it together, for unfortunately WAGES have NOT grown much at all this expansion.

WHO can call the end to the housing boom? I can't others have tried and lost their shirts if short....but LIKE TASR...all good things eventually come to an end....I say WATCH the home builders group closely....FRI there were some steep losses.

CYCLICAL BULL may still be intact, BUT the trendline from the 1870's 1980's lows WAS BROKEN by the previous BEAR market, we operate BELOW that trendline today...a GOOD argument for the SECULAR BEAR still being in effect.

Trading accounts for the MAJOR HOUSES are really being worked, the black boxes are alive and kicking. SMALL investors to this point have little or no impact, IMHO.

ALL this program trading IF and WHEN the BEAR returns is really going to make this nasty IMHO.

Market volume is not impressing me either way.

MANY talking about need for URANIUM.....and limited supply.

WMY stock looks DOA yet I ventured in one today and it was MOBBED.

Restaurants are MOBBED. SHopping malls FULL.FED STILL ON GAS even as they continue to raise.

If you look at history, at some point the raising of FED FUNDS rate SLOWS economy....it shows you BUY stocks in falling rate envrionment......you SELL IN RISING RATE ENVIRONMENT.

This market smells of MAJOR DISTRIBUTION. TECH has serious OVER CAPACITY issues and profitablitiy. I think even IF SPX moves higher.....tech very well may lag behind....eventually bringing them all down.

2002 lows seem SO FAR AWAY....even I cannot see them...or imagine a trip back there...at this time.

But a buy and hold portfolio has been taken to its best levels IMHO....we are now in a traders market....all else should be wary.

 

[teknobucks]

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http://quote.bloomberg.com/apps/news?pid=10000006&sid=aHpqXvneuGNU&refer=home

 

[teknobucks]

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down day monday me thinks

 

[Spaf]

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teknobucks wrote:

down day monday me thinks

We are in a period of a retracement. Absent any obvious sell signals, such as an island reversal or a downside breakout from a flag, pennant, or trading range formation, you can wait to see how the retracement resolves itself.

If the stock recovers and heads higher, so much the better, but if it establishes another lower high and trades below it's next lower low, it's time to exit.

I favor conservative allocations duringperiods of pullbacksbased on risk tolerance. A % in safe funds, a % in stocks. Not looking to find the Holy Grail.

Rgds, and be careful! Spaf

 

[learning]

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teknobucks wrote:

down day monday me thinks

Yea, Three days up. No, I do not see it. That is ok though. Give me a big down day. Then put more money in and do Ok. I only wish that we could trade in the last hour. I understand why not and that is life. It is better then the month it use to take or was it a pay period. The companythat took over the TSP are doing a far better job then the onethat started it.

 

[Skip]

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The nas100 finnaly made its 1%+ move friday as well... So all indexes have had there followup day...

I got a little gun shy and pulled the trigger to soon... Thursday...
Getting back in monday at the close already put the order in as 12:00 is a bitch to get to a cpu...

40c30s30I

Skip

 

[Spaf]

imported post

Hi Learning where have you been!

Skip....we got to get out of this correction and above the December of high of 1213, otherwise we could be on the transition road to Bearsville. I do not want to go there.

Dell didn't have good reports. Iraq was good news. Tekno had some good things in the fundamentals he reported on.

Rgds, and waiting Spaf

 

[teknobucks]

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WOW!...watch our dollar...

http://quote.bloomberg.com/apps/news?pid=10000006&sid=aDYBhDglEhZs&refer=home

 

[teknobucks]

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Key events in the week ahead

The government reports January retail sales Tuesday. Sales probably fell 0.4 percent, according to economists surveyed by Briefing.com, after rising 1.2 percent in December. Excluding autos the average forecast is up 0.4 percent after a 0.3 percent rise


Two reads on regional manufacturing in February are due: the New York Empire State index on Tuesday (forecasts for New York area manufacturing are a dip to 20.0 from 20.8 in January) and the Philadelphia Fed index Thursday is expected to have risen to 17.8 from 13.2


Wednesday brings reports on the housing market in January. Housing starts are expected to have fallen to a 1.950 million unit annual rate from a 2.0 million rate in December


On Wednesday and Thursday, Federal Reserve Chairman Greenspan gives his semi-annual testimony before panels in the House and the Senate on the economy and monetary policy


The index of leading economic indicators, due Thursday, is expected to have fallen 0.2 percent in January after rising 0.2 percent in January


Friday's producer prices report is expected to show a rise of 0.2 percent in January, according to forecasts, following December's big 0.7 percent drop. The core PPI, excluding volatile food and energy prices, is seen up 0.2 percent after rising 0.1 percent in December


Friday also brings the first read on consumer sentiment in February from the University of Michigan. A dip to 94.8 from January's final 95.5 ix expected

Earnings to watch

Applied Materials (Research) reports results after the bell Tuesday. The chip gear maker is expected to have earned 16 cents a share, up from 12 cents a year ago, according to First Call estimates.


Coca-Cola (Research) reports Wednesday morning. The Dow component is expected to have earned 40 cents per share, 6 cents short of what it earned a year ago.


Wednesday night brings earnings from Hewlett-Packard (Research), whose CEO Carly Fiorina was ousted this past week. The tech behemoth is expected to have earned 34 cents per share, a penny less than a year earlier.


Wal-Mart Stores (Research) reports earnings Thursday morning. The retailer is expected to have earned 74 cents a share, up from 63 cents a year earlier

 

[Spaf]

imported post

Market Talk..........TSP Funds
Starting with Feb 1, 2005 and ending with Feb 11, 2005; 9 trading days.
G-fund F-fund C-fund S-fund I-fund
+0.01 +0.04 +0.19+0.21 +0.11

Feburary: choppy, in a correction, so far so good, may be pulling out! Bull confirms at 1213 (S&P)

Two + days last week Thurs + Fri, ending in bullish single bar pattern. Mondays are generally ??. New allocation for Mon. effective Tues: G25, F10, C25, S30, I10. Basically; conservative bullish, but will exit if lower high hits and drops before 1213.

Rgds, and be careful! Spaf

 

[Mike]

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The dollar very well could be reversing course and heading back down.

If I see the I fund fall a couple days in a row, I may make a play there. The wildcard is Greenspan... nobody knows what he'll say, and he has had an impact on the market before with his comments (that one-day drop in November immediately comes to mind).

 

[Guest]

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Mike wrote:

The dollar very well could be reversing course and heading back down.

If I see the I fund fall a couple days in a row, I may make a play there. The wildcard is Greenspan... nobody knows what he'll say, and he has had an impact on the market before with his comments (that one-day drop in November immediately comes to mind).

While the dollar is down so far today, it's short term trend is still up. It could very well do many things in the future.

 

[Mike]

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saraho wrote:

While the dollar is down so far today, it's short term trend is still up. It could very well do many things in the future.

Actually, it can only do three things: go up, go down, or stay the same.

 

[Guest]

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Mike wrote:

saraho wrote:

While the dollar is down so far today, it's short term trend is still up. It could very well do many things in the future.

Actually, it can only do three things: go up, go down, or stay the same.

Actually, it can do all three simultaneously if the timeframes are different.

(e.g. The dollar is currently in a long term decline, a short term rally, staying the same over the past week, and down in the past day)

 

[Mike]

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I can do more things simultaneously than the dollar can. :l

What a no-talent currency we have.