Thursday, May 13, 2004
Issue Contents:
| 08:28 | The Day Ahead U.S. Market Calendar |
| 08:33 | Economic Data Summary of Today's Releases |
| 08:38 | Headlines and Reaction Between the Lines |
| 08:45 | Market Internals $VIX, $VXN, High/Low Statistics Analysis |
| 08:50 | Market Sentiment CBOE Equity Put/Call Ratio Analysis |
| 09:07 | The Swing Trade Today's Stock Picks |
| 16:16 | TrendVue Active Trader Today's transcript. |
| 16:16 | TrendVue Trader Talk Today's transcript. |
| 16:38 | Focus on CRUDE OIL Technical Update |
Thursday, May 14
- 8:30AM Producer Price Index
- 8:30AM Jobless Claims
- 8:30AM Retail Sales
- 11:00AM FOMC Chairman Greenspan delivers a speech via video to the Chicago Federal Reserve Bank's Smart Money conference on financial literacy.
- 11:00AM 3-Month Bill Announcement
- 11:00AM 6-Month Bill Announcement
- 1:00PM 10-Year Note Auction
- 4:30PM Money Supply
- 6:00PM Federal Reserve Governer Susan Schmidt Bies participates in a panel discussion on fair value accounting at Goldman Sachs in New York.
For earnings highlights, please see today's WSJ Earnings Calendar. For a list of speeches, congressional testimony, Federal Open Market Committee material, and statistical releases, please visit the What's Next page of The Federal Reserve Board website.
Producer Price Index +0.3%; +0.2% less Food & Energy
(Econoday.com) - The producer price index increased 0.5 percent in March after inching up a modest 0.1 percent in February. Both higher energy and food prices contributed to the gain. Excluding food and energy prices, the PPI rose 0.2 percent in March after a 0.1 percent hike in February. The Bureau of Labor Statistics is hoping to hold to the originally scheduled date for the PPI, after having problems these past few months. If it can't report on the 13th, it will issue an announcement on the 12th.
Jobless Claims 320K
(Econoday.com) - New jobless claims fell 25,000 in the week ended May 1 to 315,000, the lowest weekly pace in several years. This brought the 4-week moving average to 343,250. While the decline in jobless claims was encouraging, the April average is higher than the March average by a small margin.
Retail Sales -0.2%; -0.2% less Autos
(Econoday.com) - Retail sales increased 1.8 percent in March after a healthy 1 percent rise in February. Indeed, retail sales have increased for six months in a row. Excluding the volatile auto component, retail sales rose 1.7 percent in March after a 0.6 percent hike in February and a 1.5 percent gain in January.
10-Year Note Auction Yield Awarded 4.848%
(Econoday.com) - The high yield at the Treasury's 10-year note auction came in at 4.848 percent, 110 basis points above the last 10-year auction in March.
Much of the 110-basis-point change reflects expectations of Federal Reserve tightening in overnight rates, while some of it also reflects the emerging risk of inflation, which is particularly damaging to long term securities.
Demand for the auction, like Wednesday's 5-year offering, was very strong. The bid-to-cover was 2.78 compared with 1.81 last month. The bid-to-cover is more impressive given the larger $15 billion issuance in today's auction compared to $11 billion in March.
A further sign of strength is the wide spread between the high yield and the when-issued yield at bidding time, which was nearly 2 basis points higher.
Indirect bidding, which includes central banks and retail customers of primary dealers, was also strong, at 43.5 percent.
The Treasury's remarkably successful auction this week underscores investor attraction to higher yields. But it also underscores expectations that interest rates, now well out in front of Federal Reserve tightening, may not be moving much higher anytime soon.
We don't have to read between the lines today. Everybody can read the headlines loud and clear. Long after the horses left the barn, attempts are being made to close the door.
(WSJ.com) - Producer prices rose 0.7% in April, evidence that inflation in the pipeline stayed mild last month despite strong economic growth. Retail sales fell by 0.5% in April; first-time jobless claims rose 13,000 last week.
As we head into the open, S&P futures are down about 7 points while the bond market has taken a hit from the early morning economic releases. Be careful at 1:00PM Eastern today, as results from the 10-Year Treasury Note are announced. /Teresa
I think that spike up to 600 for the NYSE new lows is perhaps an incorrect number, and I will get to the bottom of that today. Otherwise, we see that [$VIX] hit the upper Bollinger Band while the 5-day RSI has hooked down from above 70. This is an indication that we should be expecting a short-term bounce for the Dow 30 and the S&P 500 on the daily chart.
Conditions are similar for the NASDAQ 100 Index, except the 5-day RSI has not quite come down under 70 yet.
For background information on market internals, please visit the Market Internals, Sentiment and Psychology section of the Knolwedge Base. /Teresa
With investors buying puts hand over fist over the past three days, we've seen fear rise to a level where bottoms have been made in the recent past. Given this observation, we should consider the potential of a small bounce on the daily chart, and be careful on the short side.
For background information on market sentiment, please visit the Market Internals, Sentiment and Psychology section of the Knolwedge Base. /Teresa
In addition to yesterday afternoon's price action in the attempt at a reversal, we are now on the alert for a possible short-term bounce on the daily charts given the market internals and sentiment readings.
Even with a gap down at the open on the S&P and NASDAQ futures, the market will be trading near the high end of yesterday's price range, so the immediate thoughts are that if sellers cannot capitalize on the gap down, then there will be ample opportunity for more upside.
The SwingScanner sell lists have a number of stocks that feature bear flags, but the fact is that a larger number of them have had many swings down already, some in the old "waterfall" style. What we know is that every trend will bend at some point, and the last thing we want to do is to be short when there is a fair chance that it might bend upwards.
If I had to pick a couple of short candidates, I think I would take a couple of the higher priced ones that are bouncing after the first big downswing such as [CMX] and [SUN]
IF there is a reversal going on, THEN it will be quite early in the game for these two. Traders looking to get short will use a break of Wednesday's low as the alarm. As usual, there are pros and cons of using yesterday's low, and it is our preference to look for the first decent small bounce that might form on the 15-minute charts to enter, after yesterday's low has been breached. The initial stop should be no higher than Wednesday's high.
There are a couple of extreme ADX reversal setups here on the buy side. The first one is [NOK], and aggressive traders interested in a quick hit and run attempt should use Wednesday's high as the alarm. Again, I would attempt to look for an entry on the 15-minute chart as soon as yesterday's high is breached, and the initial stop loss should be place no lower than Wednesday's low.
Same buying strategy can be used for a hit and run swing trade on [LEN]. We are only looking for a quick bounce of less than two days. If any of the trades are not in the money near the close, we will not be carrying them overnight.
For background information on our approach to swing trading, please visit the Swing Trading Principles section in the Knowledge Base. /Teresa
Today's transcript.
Click on the title above to expand this document.
Today's transcript.
Click on the title above to expand this document.
We last visited crude oil about on March 25, just as price was starting to capture newspaper headlines.
This is the monthly continuous contract [@CL] chart as of today. We can see that the harami ("pause to digest") pattern that had formed at the end of March was not followed by a tall bar that closed near the low in the month of April, and therefore, there was no confirmation of a reversal pattern.
Now that we're practically being reminded every minute of every day about the high price of oil, we need to zoom in on the daily chart, as we have done for gold when it went to the extreme.
We last reviewed the AMEX Oil Index [$XOI.X] on May 6 when we noted the formation of a rising wedge pattern. If we look at June Crude [CL] vs. [$XOI.X], we can see that there is a glaring disparity between the price of the index and the underlying commodity. While the index has never tracked the commodity with 100% accuracy, the general principle is that they should more or less move together, usually with the stocks leading the commodity.
As I have mentioned many times before, when it comes to gold vs. the gold indexes, the stocks typically lead the commodity until the end, when things start to go really crazy in the trading pit, perhaps with a little bit of help from the ubiquitous "they", what we normally consider some sort of conspiracy-type of short squeeze that is only doable in small trading pits.
We saw this same phenomenon at the top as gold futures [GC] spiked while the AMEX Gold Bugs Index [$HUI.X] made a lower high.
While Freeport McMoran [FCX] might not be the perfect copper stock to use, the company is the world's lowest-cost copper producer and one of the world's largest producers of copper and gold. Again, we see that the price of the stock peaked prior to the spike in the commodity itself.
So, while oil probably has better fundamentals, we know that we are witnessing an interesting price divergence phenomenon between the stock and the underlying commodity. What this tells us is that while it looks like the move up in oil might never stop, we have to expect the unexpected. /Teresa