STOCK MARKET WATCH, Wednesday December 10.....(#1)

lots of information - especially for people who like charts.

Summary for Trading Week Ending 12-5-03

The indices broke support marginally three weeks ago, and subsequently they have spent the last 12-15 trading days rallying back up to the support line that they violated 3 weeks ago. After making contact with the previous support line--which now represents resistance--they pulled back, but only modestly. As it can be easily seen from the price charts, the indices are still "coiling." In other words, they are building energy for their next move, which should be either a break-out or a break-down. Unfortunately, there is plenty of evidence that can objectively support both scenarios almost equally. On one hand we have outlandish bullish sentiment (AAII had 69% bulls, and the Consensus Inc., 72% bulls this past week) deteriorating liquidity, ample signs of distribution, risk premiums at multi-year lows, several non-confirmations, and geopolitical uncertainty. On the other hand, we have strong breadth, exceptionally strong 52 week highs/lows ratio favoring the highs, and a chart pattern that in several occasions in the past, has resulted in upside break-outs. Take a look at the charts below for example:

Notice that a similar chart pattern for the NDX, accompanied with similar investor psychology, going into the end of 1999, resulted in the blow off top in March of 2000. Do the similarities "guarantee" a repetition? Of course, not. However, because the similarities are there, as long as price continues to hold above support, one can not dismiss the possibility of a break-out.

US Dollar: If it can't get above 91, it it will go to 88, and then 85.

a senior down a stairs. he's all about that. pushing kids off cliffs as well.

...the rest of you are on your own".

I saw this in the LBN forum. The dollar significance meant that I just had to post it here. This has been reported by different news sources.

http://www.petroleumworld.com/storyT1127.htm

OPEC´s Secretary General Alvaro Silva said Monday to Venezuelan news agency Venpress that OPEC is evaluating trading oil in euros or a basket of currencies other than the dollar to compensate for the recent decline of the US currency.

Silva, who is to hand over his OPEC post on Jan. 1. said that traiding in euros is just an alternative.

"There is talk of trading crude in euros - it is one of the alternatives," Silva told the Venpres.

This week there is talk on the markets that, the opinion of some OPEC ministers expressed last week concerning the decline in the value of the dollar that eroding their purchasing power, might prompt the OPECat the next meeting to reduce futher production, despite the price this week that has been in the upperside of the price band mechanism.

more...

I posted this on the econ forum yesterday, but with OPEC's open annoucement re the euro or a basket of currecnies for oil, well, the dollar will really be on the ropes. Please note the final paragragh...

*************

'Euro breaks through 1.22-dollar barrier in another record' (Dec 9, 2003
http://www.channelnewsasia.com/stories/afp_world_business/view/61101/1/.html

"The dollar's decline could escalate into a meltdown following the Fed meeting if the market perceives there has been no change on prospects for a rate hike, he warned.

Bear Stearns chief currency strategist Steve Barrow said he would not hesitate to push his euro-dollar forecast to 1.40 if the US currency does not rally in the face of tighter Fed policy in the coming days.

****The day's decline was sparked by a report from the Bank for International Settlements, which showed aggressive first-half 2003 repatriation of OPEC funds out of dollars. The report fueled existing concerns over financing the huge US current account gap."***

***********
Hmmmm, "aggressive"..."repatriation of OPEC funds out of dollars"...what does that tell us about the future & what is OPEC up to? (fyi: Iran is selling in euros, Iraq is back on the dollar - courtesy of this year's invasion - but Russia seems ready to switch...)

A spin of the old Chinese curse "May you live in interesting times."

Me thinks interesting times ahead...

http://www.petroleumworld.com/storyT1126.htm

"Venezuela´s Ramirez: No need for OPEC to adjust price due to dollar fall"

I interprete this that Chavez (plus Iran, Libya, Putin etc.) is playing hardball. Payback against Cheney and the gang. Big time.

Chavez is blackmailing Saudis and Gulf states and saying no more dollars, only switch to euro or currency basket. Check, mate is two moves away...

Wolfowitz with his "no Iraq deals for Russia, Canada, France, Germany" is starting to look one very sorry looser...

It seems they have a patition floating around to force new elections in Ven. California any one?

to the US that crude oil is traded in dollars and what happens if they switch to euros? I understand that trading in the dollar is good, buy why?

As you may know, when you simplay print more and more money, the value of the dollar deflates. Well, with our masive buget defisit, exactly this is happening. We are printing more and more paper dollars called "t-bills" or tresory bills.

But there is not the deflation going on. The resone why is there is still an artifichal demand for dollars. The need to buy oil. OPEC currently sells oil for US dollars. And if you want oil from OPEC, you have to bring dollars to buy with.

But if OPEC dumps the dollar, many contries will no longer have a need for dollars in there acounts. And as it is dropping quite rapidly, they will sell off there dollars, for Euros, and do so as quickly as they can.

And the dollar falls even furhter.

It was wonderful to read the running commentary yesterday. It sounded like a meeting of great minds in rapt discussion of all things economic. My admiration goes to all who contributed to the thought flow.

Work calls. Gotta dash.

Ozy

first the numbers

http://quotes.ino.com/chart/?s=NYBOT_DXY0

Last trade 88.78 Change +0.17 (+0.19%)

and then some words

http://www.suntimes.com/output/business/cst-fin-dollar10.html

Dollar falls sharply on Fed's signal that rates will stay low for some time

The value of the U.S. dollar headed sharply lower Tuesday after the Federal Reserve Board signaled that interest rates in the United States will remain at unattractive lows for investors for a "considerable period."

The Fed told overseas investors -- who have been piling up dollars in record amounts as the U.S. trade deficit deepened -- that buying U.S. debt will provide skimpy returns. Those investors responded by dumping greenbacks, and buying foreign currencies.

''Until the Fed makes it clear interest rates are headed higher, the dollar is likely to continue to decline,'' predicted Michael Woolfolk, senior currency strategist at Bank of New York.

...more...

and then

http://www.forbes.com/work/newswire/2003/12/10/rtr1175720.html

Dollar gets a lift vs yen, hand of BOJ suspected

LONDON, Dec 10 (Reuters) - The dollar staged a sharp rebound from recent three-year lows on the yen and life lows on the euro on Wednesday and traders said they strongly suspected Japanese yen- selling intervention was behind the move.

The greenback had already got a lift in Asian trade after the U.S. Federal Reserve promised to keep monetary policy easy "for a considerable period" on Tuesday but dropped its concern about deflation.

The dollar then surged over one percent to around 108.70 yen in a matter of minutes and dealers estimated the Bank of Japan may have bought up to $5 billion in covert action, even though there was no official confirmation from Tokyo.

<snip>

By 1050 GMT, the dollar was still 1.2 percent up on the day at 108.25 yen. It had touched a three-year low below 107.00 on Tuesday.

It was a third of a percent stronger at $1.2216 per euro, having hit a record low beyond $1.2270 in the previous session. The dollar was also up 0.3 percent on Swiss franc and just 0.2 percent versus sterling and the Australian dollar.

...more...

Ah the joys of intervention - so a reprieve was granted and the BoJ has decided that they are inextricably tied to the dollar - and the absolute love-fest with China yesterday! Oh my! Since black is white with this mal-administration, when they say that they want the Chinese and Japanese govs to cease and desist their intervention of the dollar, it must mean that the opposite is true -

ABC Evening News last night showed a lovely pre-canned film about why we should welcome all those shiny plastic "Made in China" products. They showed that those weren't "Chinese" products, those were "American" products - they just happened to be made by Chinese workers - but they were made for "America" by "American" companies - therefore you (the consumer and unemployed) need to embrace the fact that "American" companies are the ones that will "benefit" from the sale - and you (the consumer and unemployed) are just destroying the profits of the "American" companies by hesitating to purchase something just because it is "mis"-labeled "Made in China"!

Besides that, we need to get rid of those nasty tariffs because they are "hurting" the "American" companies that are actually "re-importing" their "American" products!

Are you ready for the re-education camp yet?

Great cartoon Ozy!

Wish we all had better wings, 'cause we're going to need them.

Have a Great Day Marketeers!

day about China backing off on buying our debt. Thought you might find it interesting.

http://www.lewrockwell.com/north/north233.html

From "The Bottom of the Food Chain" section

....Except for Japan, which remains in a slightly price deflationary mode (-0.3%), the world’s price level is inching above 2%.

This means that anyone who holds T-bills or a commercial CD is losing money. He pays an income tax on his earnings, yet even if his income were tax-free, he would be falling behind. Are people nuts? Why are they willing to do this? Because they don’t think the stock market will hold up. They don’t want to go into real estate.

Noland reports that China is no longer buying U.S. bonds. Instead, the country is using its dollars to buy oil.

Although still intervening heavily in the foreign-exchange market, in the last few months China has radically scaled back its purchases of United States bonds. In September, Chinese institutions were actually net sellers of U.S. government and agency debt by $2.8 billion, even though foreign reserves rose by $19 billion. Now, economists and market strategists are beginning to wonder what Beijing is doing with all the dollars it is buying. Chinese state media provided a partial answer in early December, reporting that Beijing plans to build up a 90-day, 50-million-tonne strategic oil reserve. At current crude prices of around $30 a barrel, that will cost China $10 billion. Bankers and brokers in Hong Kong predict further large purchases of strategic materials, together with the possible acquisition of equity stakes in overseas suppliers over the coming year. If pursued, China’s diversification away from U.S. government bonds will be bad news for Washington, which has relied heavily on China’s debt purchases to fund its fiscal and current-account deficits. In Asia, some economists even say Washington had it coming, suggesting that the switch is subtle retaliation for current U.S. trade pressures on Beijing.

This is consistent with my belief that China will become a competitor in the consumption of raw materials. This is also the view of "investment biker" James Rogers.
------------------

The "A WAVE OF CORPORATE BOND PURCHASES" section is pretty interesting as well.

Looks like it may not be so stellar a day on the Street. Foriegn markets not doin' so hot, currencies still slapping the $$, lots of layoffs and gold holding steady.

At least we are at the half-way mark through the week. There's always that if you seek bright spot. :-)

Julie

U.S. Markets to Finish Digesting the Fed
U.S. markets could take a second look at policy makers' statement with focus on future rates.
December 10, 2003: 5:31 AM EST
NEW YORK (CNN/Money) - The Fed has made its decision, and U.S. markets will follow through Wednesday after policy makers said they would keep the current low interest rates for a "considerable period" but be less concerned about deflation.

At 5:30 a.m. ET, futures pointed to a mixed start for the major indexes, which slid on the Fed's announcement late Tuesday

What might have spooked investors a little was the Fed's altering the tone of its statement to say the risk of deflation has lessened to become equal with inflation. That was seen by some as a signal of an improving economy and, eventually, higher interest rates.
~~~~~~~~~~~~~~~~~~~~~~~~~~
That is the web page title, not the title of the article, but I thought it fit better!
No major reports out today (saving it all for tomorrow), so "reaction" is apparently what it's all about. :eyes: Sometimes I think the market is an undigested bit of beef or a blob of mustard...(there's your literary reference for the day!)

I've got a meeting and some running to do, so y'all have an interesting day at the casino.

Good thing I spend the morning at the computer...but I'm still going shopping a bit later. So here's another commentary on the Fed, presented for what it's worth...

After the Fed: Still not good enough
MENLO PARK, Calif. (CNN/Money) - Professional investors analyzed the haiku-like pronouncements of the Fed's Federal Open Market Committee Tuesday afternoon. Then they yawned.
A flat-to-down market that earlier in the day danced around Dow 10,000 went flatter-to-lower (with the emphasis on lower) for the rest of the session.
Get used to it. After a surprisingly stellar year, this market requires not just good news, but really good news, and lots of it, in order to go up considerably.
<more>

Mortgage demand near 18-month low
New applications drop 12.2%; mortgage refinance index slides 15.5% for week ending Dec. 5.
December 10, 2003: 7:25 AM EST



NEW YORK (Reuters) - New applications for U.S. mortgages fell last week to its lowest level in nearly a year and a half, even as mortgage rates dropped, a U.S. mortgage industry group said Wednesday.

The Mortgage Bankers Association said its widely watched measure of mortgage loan demand for the week ending Dec. 5 fell 12.2 percent from the prior week to 601.6, the lowest reading since 565.5 for week ending June 14, 2002.

up from 5,400 yesterday to 7,400 today per the LA Times article

http://www.latimes.com/business/la-fi-wamu10dec10,1,1276170.story?coll=la-headlines-business

Home Lender Firing 7,400

http://www.latimes.com/business/la-fi-wamu10dec10,1,1276170.story?coll=la-headlines-business

Washington Mutual Inc., the second-biggest U.S. mortgage lender, cut its estimate for 2003 earnings Tuesday and said it was firing 7,400 people because of a decline in home borrowing. Shares of the company had their biggest drop in more than two years and dragged down those of other lenders.

<snip>

Chief Financial Officer Thomas Casey said at a New York conference with analysts and investors that the company planned to cut costs by $1 billion in the next six quarters by reducing staff and merging the technology systems of six companies Washington Mutual bought in 2001 and 2002.

Casey said 2,000 home loan staff members, mostly temporary and contract workers, would be cut in addition to 4,500 let go since August. A further 900 administrative and technology employees will lose their jobs, bringing the total reduction to about 12% of the workforce.

...more...

speaks volumes about how they foresee the mortgage industry future - looks grim in my crystal ball

Dow 9,922.97 -0.45 (0.00%)
Nasdaq 1,910.03 +1.71 (+0.09%)
S&P 500 1,059.71 -0.47 (-0.04%)
10-Yr Bond 4.306% -0.046

And I'm outta here till later!

Dow 9,955.27 +31.85 (+0.32%)
Nasdaq 1,914.93 +6.61 (+0.35%)
S&P 500 1,062.55 +2.37 (+0.22%)
10-Yr Bond 4.316% -0.036

and Mr. GreenJeans and the Wall Street Gang are celebrating his ability to double-plus-good speak

Ealier this week, Ozy or Maueve posted the Maket Wrap up titled "Is it just too big to see?" That article mentioned the decrease in volumes being traded.

Is big money out of the market? Read here that insider selling has been pretty high for a while now. The sharp ups and downs look like emotional responses and day traders. Is that all that's left in the markets - little guys, day traders, 401K mutual fund money and persion funds?

Did the big money move to commodities and foreign currencies?

...time ago.

an exact answer to your question, but here is a place to see what the volumes traded on any given day are:

http://bigcharts.marketwatch.com/javachart/javachart.asp?symb=djia&time=&freq=

pretty neat chart page :)

My own, amateur guess:

Big money is still in the markets, it's just not finding much reason to move in or out. It's simply standing pat with what it has now with maybe only a few moves here and there, hence the low volumes. I don't know if there's any connection, but earlier in the year I noticed some turnover in my mutual funds somewhat regularly. Now I don't notice quite as much. Again, my own theory is that generally large amounts of people are comfortable what they have in terms of stocks for the moment. They may be putting money into other investments, but it's not necessarily all flying out of the stock market to go into these other investments. If there was a lot of buying and selling going on, I would think volumes would be much higher. So I still think big money is in, it's just not adding major amounts at this point.

would you keep it in dollars and risk having less of it tomorrow? Or put it in Euros or Gold?

Conversely, if you owed a debt in dollars, would you pay it off today or down the road with cheaper dollars, giving yourself a 20% discount?

Hello all! Looks like I missed a bit of up and down this morning.

Dow 9,931.34 +7.92 (+0.08%)
Nasdaq 1,902.73 -5.59 (-0.29%)
S&P 500 1,059.14 -1.04 (-0.10%)
10-Yr Bond 4.345% -0.007

The markets are in about the same shape as they were in yesterday before the big jump at the end of the day.

Also, good to see more discusssion about where the money is going in the current US economy. Looks like we are all a little perplexed. Stocks go up or down, but this week only on comparatively light trading. Until today, the 10 year was showing a net outflow in buyers for the week. So where's the money going?

In the last 20 minutes the markets have dropped 0.25 - 0.4% across the board.

Dow 9,892.60 -30.82 (-0.31%)
Nasdaq 1,889.53 -18.79 (-0.98%)
S&P 500 1,054.57 -5.61 (-0.53%)
10-Yr Bond 4.331% -0.021

Where is the PPT? They buzy selling?

The sale of our debt tomorrow is largely dependant on the good news of job creation.

Link: http://www.forbes.com/markets/newswire/2003/12/10/rtr1176398.html

3:22:


Dow 9,902.97 -20.45 (-0.21%)
Nasdaq 1,894.34 -13.98 (-0.73%)
S&P 500 1,055.32 -4.87 (-0.46%)
10-Yr Bond 4.318% -0.034


Julie

But I'm actually somewhat...comfortable...with what the market has been doing lately. I think buyers are showing some restraint and treating the general conditions carefully. I've still got gains very well intact, barring a HUGE slide, and don't mind the sideways or even some downward motion. Of course I want positive numbers, but I just find positives in drops as well.

I'm not a market timer, but I work from the angle of having goals like "I want to buy 400 shares of such-and-such mutual fund before the Dow hits xxxx" or "I want to see if I can bump my average basis/share down to $x.xx" The current conditions, for me anyway, have been very conducive to that, and since the majority of my investing is done very long term (not anticpating selling until retirement for my IRAs or at least 5-7 years for my cash accounts).

but is very troubling. The basic thrust of this piece is that market analysts are being sanctioned for writing rosy stories on stocks where the underlying research proves the stocks are not safe investments. They caught analysts at four different investment firms doing this funny business.

http://biz.yahoo.com/rf/031209/financial_bofa_nasd_1.html

A lot of recovery from the 3:00 lows, but still in the negative for all stock market indexes.

Dow 9,921.86 -1.56 (-0.02%)
Nasdaq 1,904.65 -3.67 (-0.19%)
S&P 500 1,059.05 -1.13 (-0.11%)
10-Yr Bond 4.318% -0.034

See everyone back in the big casino tomorrow.