Housing Starts Fail to Start (XLB, ITB)
by ilene - September 20th, 2011 11:08 am
Courtesy of John Nyaradi.
August Housing starts decline, miss estimates and hit three month low.
by Wall Street Sector Selector Staff
August housing starts fell to an adjusted 571,000 versus last month’s 604,000, missed expectations and came in well below the 1.2 million rate that is considered to be a “healthy” market.
However, permits were up to 620,000 versus the previous month’s report of 601,000 indicating builders might be looking forward to better days ahead.
The housing market remains mired in depressionary conditions and near the lowest levels of 2009 when 554,000 homes were started, only slightly above today’s rate.
As a prime driver of employment and economic recovery, the weak building market continues to be a drag on economic growth.
Disclaimer: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.
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How Far Can Gold And Silver Climb?
by ilene - September 20th, 2011 2:02 am
Courtesy of John Nyaradi.
Courtesy of Jeff Clark, Casey Research
With gold a stone’s throw away from $2,000 and already up 27% on the year, the objective investor might begin wondering how much higher both it and silver can climb. After all, gold is nearing its inflation-adjusted 1980 high – and that peak was a spike that lasted only one day.
So, how much return can we realistically expect in each metal at this point? And is one a better buy than the other? There are dozens of ways to calculate price projections, but I’m going to use data based strictly on past price behavior from the 1970s bull market.
First, let’s measure what today’s inflation-adjusted price would be if each metal matched their respective 1980 highs, along with the return needed to reach those levels:
| Metal | Inflation-Adjusted Price |
Percent Climb to Match 1980 High |
| Gold | $2,330 | 30% |
| Silver | $136 | 246% |
Based on the CPI-U (the government’s broadest measure of inflation), gold is a couple of jumps away from matching its 1980 high of $850. Silver, meanwhile, has much further to climb and would return over three times our money if it reached its former peak.
But the CPI is a poor measure of real inflation. Let’s use John Williams’ Shadow Government Statistics calculations. His data are much closer to the real world, and the statistics are calculated the way they were during the Carter administration, stripped of later manipulations.
Check out how high gold and silver would soar if they adjust to this level of inflation:
| Metal | Price to Match ShadowStats CPI |
Percent Climb to Match ShadowStats |
| Gold | $15,234 | 755% |
| Silver | $348 | 785% |
Clearly, both metals would hand us an extraordinary return…
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Turbulent Economic Skies (SPY, DIA, IWM, QQQ)
by ilene - September 19th, 2011 6:09 pm
Courtesy of John Nyaradi.
Economic skies remain turbulent and uncertain as Greece shakes up global stock markets
Investors faced another uncomfortable and turbulent ride today as the ongoing fight to stave off default by Greece rattled world markets.
President Obama and German Chancellor Merkel found the issue important enough to discuss by phone and agreed on “concerted action” being necessary after Dr. Merkel had a bad weekend, losing yet another regional election, this time in Berlin, as support for a Greek bailout continues to dwindle in Germany.
Bond markets aren’t happy as the yield on Greek 10 year notes topped 20% and the 2 year note topped 60%, and this is not good news before a large auction scheduled to take place tomorrow.
President Obama delivered his jobs plan and proposed tax increases which Republicans promptly labeled as “class warfare” and so it looks like the gridlock drama is due to continue.
Tomorrow starts the long awaited Fed meeting with markets looking for some version of “Operation Twist” on Wednesday in an effort to further drive down interest rates.
Finally retail investors continue to flee the gut wrenching volatility as Bloomberg reported that more money has been withdrawn from U.S. stock funds since April than in the five months after the collapse of Lehman Brothers three years ago.
Major stock market indexes took a wild ride with the DJIA (DIA) experiencing a 250 point high to low swing.
Tomorrow’s economic reports include August Housing Starts and August Single Family Permits
Stock Market Wrap:
DJIA: (DIA) -108; -0.9%
S&P 500 (SPY) -11.9; -0.9%
Russell 2000 (IWM) -2; -1.7%
NASDAQ (QQQ) -9.5; -0.4%
Disclosure: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.
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Homebuilders Index Sinks: Economic Report Card (XHB, ITB)
by ilene - September 19th, 2011 5:46 pm
Courtesy of John Nyaradi.
National Association of Home Builders Index sinks to three month low in September and misses expectations.
by Wall Street Sector Selector Staff
The NAHB report today painted an ongoing dismal picture of the U.S. housing industry as its index slipped to 14 from a previously reported 15 and touched a three month low.
The report mentioned that home builders continue to face problems with competition from foreclosed homes, tough credit conditions and poor consumer sentiment and all three internal components declined from previous measures. (sales conditions, sales expectations in the next six months, prospective buyer traffic)
Two ETFs focused on the homebuilder sector, (XHB) and (ITB) declined today.
A reading of “50″ is considered to indicate “good” conditions and so clearly this vitally important sector has a long way to go on the climb back to positive territory.
Disclaimer: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.
Click here to learn more about John’s book and for a free membership to Wall Street Sector Selector
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Second Greek Bailout May Not Stabilize Markets (TLT, UUP, GDX, SH)
by ilene - September 19th, 2011 5:29 pm
Courtesy of John Nyaradi.
Courtesy of Chris Ciovacco, Ciovacco Capital
Financial markets tend to get fixated on a small number of issues, which often leads to questionable decision making for investors. It is important to look at a scenario where the second Greek bailout package is approved. The immediate question for the markets would become, “Now what?” The odds are fairly low approval of the second bailout will stabilize the bond, currency, and stock markets for an extended period of time. The excerpts below shed light on this concept:
The Economist – September 17:
The latest, inadequate plan for a second Greek bail-out, agreed at a summit in July, should be thrown away and rewritten.
National Public Radio (NPR) – September 12:
Juergen Michels, chief eurozone economist at Citigroup, says the size of the European rescue fund will very likely have to be increased. He says talk of eurozone defaults in the next year or so is simply realistic. “We’ll probably also have to see defaults,” Michels says. “Greece, at the end of the day, is likely to have one, and it’s also likely to happen for Portugal and Ireland.”
Wall Street Journal (WSJ) – September 19:
But even if Greece gets its money in October, it may only postpone the reckoning: Its budget deficit this year is likely to be 10% compared with a target of 7.5%, says Citigroup. And Athens has barely started on a promised privatization program. The market is convinced the Troika—the name given the team of officials from the International Monetary Fund, European Central Bank and European Commission—will ultimately have to admit that Greece won’t meet its targets. That would pave the way for a default and coercive, rather than voluntary, debt restructuring.
We will maintain a bearish bias until fundamental (mainly Europe) and technical conditions improve. If the S&P 500 breaks below last Monday’s low of 1,136, we would consider adding to our deflationary/bearish stance, which includes bonds (TLT), the dollar (UUP), gold mining stocks (GDX), and a short (SH). As covered in the video below, stock market technicals were raising some yellow flags as of the September 16 close, even before the near waste of time weekend meetings in Europe.
When Bloomberg noted investors have pulled more money from U.S. equity funds since the…
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Can Central Banks and Governments Stop the Tidal Wave? (SPY, DIA)
by ilene - September 18th, 2011 12:10 pm
Courtesy of John Nyaradi.
Fast moving developments in the “Greek Tragedy” pressure central banks and governments to prevent a Greek default and a potential tidal wave of financial calamity across Europe and the rest of the world.
On My Wall Street Radar
Last week, markets staged an impressive bear market rally but were repeatedly stopped at significant technical resistance levels. Much of the cheer came from the central banks’ global liquidity intervention on Thursday, but that was perhaps particularly chilling in that it came on September 15th, the 3rd anniversary of the collapse of Lehman Brothers which touched off the financial crisis that we still live with today.
chart courtesy of StockCharts.com
On the chart above you can see how the rally stopped at significant resistance and that the 50 Day Moving Average is just above which also represents significant resistance. The “death cross” remains visible and the index is still below its 200 Day Moving Average which is widely viewed as the boundary between bull and bear market.
Furthermore, using point and figure charting not depicted here, the index broke through the bullish support line and is now in a bear market trend, as well. These lines in point and figure methodology tend to act as very hard walls less subject to whipsaws and reversals than the 200 day moving average, and so it will be very difficult to call this a bull market for quite sometime.
The Economic View from 35,000 Feet
Last week’s economic news continued to be glum and further confirmation of a slowing economy.
As reported in our nightly emails during the week, small business confidence dropped for the sixth month in a row, retail sales for August showed 0% growth, weekly new unemployment claims climbed to 428,000, up from the previous week and missing expectations, and the Philadelphia Fed and Empire State Index reports both declined from previous readings and more than expected.
The Census issued a shocking report indicating that one in six Americans lives in poverty, an all time record at 46 million, and that medium income today is below levels last seen in 1999, and so truly we have had a “lost decade.”
But the real spotlight was on Greece and the tensions for a possible “Lehman” event resulting from a Greek default.
Treasury Secretary Geithner made two trips to Europe…
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Paper Vs. Gold: Which Will Win? (UUP, EUO, GLD, SLV)
by ilene - September 17th, 2011 1:42 pm
Courtesy of John Nyaradi.
An epic struggle is underway between paper currencies like the U.S. Dollar and Euro dollar (fiats) and precious metals represented by gold and silver.
Many analysts this week have commented on Gold and Silver’s dips after near parabolic rises over the last few weeks. Investors seem stuck on the fence of indecision regarding whether Gold or Silver will continue their meteoric rises, or if indeed the gold and silver bubbles have popped.
A recent chart of the SPDR Gold Trust Shares ETF (GLD) displays a sharp decline after a steady upward swing. As one can see below, it will take a lot of sellers (a whole lot) to cross the 50 day moving average, and even more sellers to break its 200 moving day average, indicating that buyers are still in power over the metal. However, the MACD indicator has shown a strong downward trend in the last few days, so anything is possible when the Fed and European Central Bank are making promises they can apparently keep in regards to keeping Greece alive and defusing the crisis in Europe.
The iShares Silver Trust (SLV) has also shown a sharp decline in prices in recent days. While silver has broken its 50 Day Moving Average, it is still well above its 200 day moving average as indicated by the red line, and thus demand is still in control.
chart courtesy of www.stockcharts.ccom
So, long story short, after a crazy round of “Greek” looking problems and the horrible gridlock in Congress over several months, precious metals appear to be taking at least a pause in their recent run.
Regardless of what happens in the precious metals department, the more important question to ask is, “Are the Fiats Back?” or in other words, can we investors carefully look into investing into that thing called paper money, the once reliable form of exchange and commerce?
Looking at the technical indicators, there is significant volatility and even some new potential for the fiats once more.
The weekly view of the PowerShares DB US Dollar Index Bullish Fund (UUP) tells us that a baby bull market might be emerging for the greenbacks; the MACD indicator is starting to swing upwards, and the 50 day moving average might (I say might very carefully) start to move up and possibly cross with the…
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The Party Will Continue…? (DIA, SPY, QQQ, IWM)
by ilene - September 16th, 2011 9:28 pm
Courtesy of John Nyaradi.
Stock markets continued their party today, as markets climbed for the 5th straight day in a row, and turned out to be the best “party” that the stock market has seen since July.
Could this be real, or is this just fantasy?
Hard to tell, because the “Greek” problem is still very “Greek” to the Greeks and members of EU community. In response to the inherent difficulty of the situation, the almighty dollar has surged again, but for how long? How long and how painful likely depends on the actions of the Fed and EU elites.
Reports from Capitol Hill claim that Congress is ratcheting back Obama’s job’s plan, indicating more in-house (shall we say animal house?) fighting to come. After looking at July’s debacle and the markets’ response to the debt ceiling crisis, things could get really ugly really fast, again. This animal house of politics does not even include the fighting that will likely occur in the ‘super committee’ in the near future–either way, cuts will automatically take place regardless of how much the ‘super committee’ fights over where these cuts will take place. Can one say “blood bath on Capitol Hill?”
Stock Market Summary:
DJIA (DIA): +0.81, +0.71%
S&P 500 (SPY): +.72, +0.6%
NASDAQ (QQQ): +0.51, +0.92%
Russel 2000 (IWM): +0.11, +0.15%
So again, is this for real, or is this fantasy?
The numbers today and this week were real, but the problems on the horizon are very real as well. Bottom Line: Brace yourself, because this “isn’t over until its over,” and when its all over, the results will be very real and this week’s party might be a fantasy of the past…
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Disclaimer: Wall Street Sector Selector trades a wide variety of Exchange Traded Funds (ETFs) and positions can change at any time.
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September Consumer Sentiment Report Gets a D- | Economic Report Card
by ilene - September 16th, 2011 8:34 pm
Courtesy of John Nyaradi.
By Wall Street Sector Selector Staff
September’s Consumer Sentiment report was released today, and American consumers have a better opinion of the US economy than they did in August.
The index rose from 55.7 in August (a three year low) to 57.8 this month. Economists say that the rise is related to hopes that the economy is improving.
The stock markets apparently agreed with consumer sentiment, as the markets had multiple field days this week and closed out this afternoon on top. Is this sustained growth or only a mask of what might really happen?
However, the rise of consumer sentiment and possibly the economy might be short lived, especially since the European crisis is not yet resolved, and both political parties in The United States are likely to start fighting to the death (again) over stimulus, budgets, and deficits very soon.
The consumer sentiment report measures how consumers view the general condition of the economy, in particular, it studies how consumers view buying conditions and their own ability to spend.
Even though consumer sentiment rose this month, looming threats to the economy and more possible volatility down the road warrant a”D-” grade for this report.
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Gold To Fall By 50%
by ilene - September 16th, 2011 7:16 pm
Courtesy of John Nyaradi.
Courtesy of Abigail F. Doolittle, Peak Theories Research
Abigail F. Doolittle, of Peak Theories Research, comments about potential volatility in the Gold market due to recent and future Fed actions and debt dramas. Please enjoy Doolittle’s “The Weekly Peak-September 16th, 2011″
In summary:
-Gold’s long-term monthly chart is showing a major and bearish Rising Wedge pattern with a target range of $555 to $1,045 per ounce.
-This pattern seems to reflect investor anticipation over an ever-weakening dollar driven by the by the Fed and the debt drama in the US.
-However, gold’s near-term uptrend recently reversed and this suggests that investors may believe that the Fed will not be weakening the dollar any time soon.
-In fact, one possible policy step to be announced from next week’s FOMC meeting is “Operation Twist” and something that might boost the buck.
-Perhaps it is this possibility that has caused gold to trade into a Diamond Top that carries a target of $1,600 per ounce.
-It would be a decline toward that target and gold’s 150 DMA near its QE2 trendline that could kick gold’s Rising Wedge into corrective action.
“The Weekly Peak-September 16th, 2011″
Courtesy of Abigail F. Doolittle, Peak Theories Research
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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