Friday, May 14, 2004
Issue Contents:
| 08:58 | The Day Ahead U.S. Market Calendar |
| 09:00 | Economic Data Summary of Today's Releases |
| 09:14 | The Swing Trade Today's Stock Picks |
| 09:22 | Canadian Markets Before the bell review. |
| 09:55 | Focus on Gold Snapshop update |
| 11:08 | Intraday Gold Update Swing Trade Idea |
| 15:03 | Update on PDG, XGD Preparing for the close. |
| 16:16 | TrendVue Active Trader Today's transcript. |
| 16:16 | TrendVue Trader Talk Today's transcript. |
Friday, May 14
- 8:30AM Consumer Price Index
- 8:30AM Business Inventories
- 9:15AM Industrial Production
- 9:45AM Consumer Sentiment
12:00Noon Dallas Federal Reserve Bank President Robert McTeer gives opening remarks at the Five Years of the Euro conference in Dallas.
1:30PM Federal Reserve Governer Edward Gramlich delivers a speech on budget and trade deficits to a University of Massachusetts seminar.
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. /Teresa
Consumer Price Index +0.2%, +0.3 Less Food & Energy
(Econoday.com) - An easing in energy costs held down consumer price inflation in April, as the CPI rose a slightly softer than expected 0.2 percent.
But the core rate, closely watched by policy makers and the financial markets, was a little troubling, rising a slightly higher than expected 0.3 percent. The year-on-year rise in the core rate, however, remains tame at 1.8 percent, as does the overall year-on-year rate of 2.3 percent.
Energy prices rose only 0.1 percent in the month with gasoline down 0.3 percent. Remember these are seasonally adjusted data that compensate for springtime increases in gas prices. Unadjusted gas prices rose 3.7 percent.
But the modest pressure in energy prices is not likely to continue into May as gas prices, pushed up by low inventories, strong global demand, and trouble in the Middle East, are currently rising sharply across the nation.
Also note that energy prices at the producer level, released Thursday, rose a sharp 1.6 percent, pressure that may eventually work its way to the consumer level. The Bureau of Labor Statistics in fact warned that energy prices may rise sharply in May.
Food prices, a volatile category like energy, rose only 0.2 percent, not reflecting the 1.4 percent rise at the producer level. Beef was sharply higher again at 0.8 percent as was dairy at 1.6 percent and fresh fruit at 0.9 percent. But other categories were lower, headed by a 1.9 percent decline in vegetable prices. Like energy, food prices at the consumer level may be rising in the months ahead.
Categories outside of food and energy generally showed more pressure in April, including housing, lodging, airfares, education and medical care.
But not showing pressure were inflation-adjusted wages, which rose only 0.2 percent in April compared with a 0.7 percent decline in March and a 0.1 percent decline in February. Job growth has yet to pick up enough steam to allow workers to bid up wages.
Friday's data suggest that manufacturers and service providers, needing to defray higher input costs while at the same time naturally wanting to expand profit margins, are still not able to significantly raise prices to consumers, a positive for the bond market and the interest rate outlook.
Business Inventories +0.7%
Business inventories rose a sharp 0.7 percent in March to an adjusted $1.21 trillion, a record and the seventh straight monthly increase. The results confirm ongoing inventory replenishment, a sign that businesses are gearing up for stronger demand ahead.
Business sales sharply outpaced inventories, rising 2.9 percent to a record $928.7 billion and suggesting that inventories may have to be beefed up. The sharp rise in sales pushed the inventories-to-sales ratio down sharply, to another record of 1.30. The ratio confirms that businesses are squeezing enormous efficiency out of their supply chains.
Inventory growth was spread broadly across the three categories: manufacturer inventories rose 0.3 percent for a fourth straight monthly gain; wholesaler inventories rose 0.6 percent for a seventh straight gain; and retailer inventories, the new information in Friday's data, rose 1.1 percent, the sixth gain in seven months.
Inventory gains were broad, led by a 1.9 percent gain in autos & parts and further sharp rises in furniture and building materials. General merchandise inventories also showed a sharp increase at 0.9 percent.
Rising demand and concerns of shortages may shift business priorities away from cost-consciousness and to the need to secure supplies. Inventories, however efficiently managed, are likely to build as economic growth, spurred further by job growth, picks up steam.
Industrial Production +0.8%
Capacity Utilization 76.9%
(Econoday.com) - Industrial production rose sharply in April, up 0.8 percent and compared with an average 0.4 percent increase in the prior three months.
The results pushed up capacity utilization, a key indicator during economic recovery, to 76.9 percent, up 0.4 percentage points in the month.
Capacity utilization at manufacturers rose 0.5 percentage points to 75.7 percent, while utilization at mines and utilities, the other two categories in the industrial production report, also rose sharply to 85.6 percent and 85.0 percent, respectively.
Output among the three groups rose sharply in the month. Manufacturers posted a 0.7 percent gain, utilities a 1.5 percent gain, and mining a 0.8 percent increase.
Specific production gains were led by construction supplies, up 1.1 percent in the month, with non-industrial supplies also showing strength. Business equipment posted a respectable gain of 0.5 percent with consumer goods up 0.6 percent.
Motor vehicle production, a large and volatile category, was unchanged on the month, pushing down the overall gain by 0.1 percentage point.
The industrial production data confirm an abundance of other data that the nation's manufacturing sector is on a sharp upswing. But available capacity, though narrowing, is still abundant and is not a threat to inflation or interest rates.
But once capacity begins to narrow into the 80 percent range, manufacturers may begin to muscle out price increases, a major though still distant threat to the inflationary picture and to Federal Reserve policy makers.
Consumer Sentiment 94.2
(Econoday.com) - The University of Michigan's consumer sentiment index remained unchanged at 94.2 at the mid-May reading, slightly lower than expected by market players and economists. The current conditions index increased moderately, but the expectations index fell slightly. No doubt, all the talk of rising interest rates is probably worrying consumers who have become accustomed to virtually free credit. In contrast to the Conference Board's consumer confidence measure, the sentiment index is geared more toward personal finances than labor market conditions. It is possible that the other measure may show more improvement for the month given the better nonfarm payroll data lately.
We are going to carry over yesterday's picks with the exception of [SUN] which was not elected in yesterday's trading, while the stop loss for [LEN] needs to be moved up.
Sell alarm for [CMX] is moved up to Thursday's low. No change in instructions except the initial stop loss should be place no higher than Thursday's high.
Buy alarm is moved down to Thursday's high for [NOK]. No change in instructions except the initial stop loss should be no lower than Thursday's low.
If you took this trade home, the stop loss for [LEN] should be moved up to just below Thursday's low. We want to see if there is one more day to this bounce and that's about it.
For background information on our approach to swing trading, please visit the Swing Trading Principles section in the Knowledge Base. /Teresa
We see all broad market indexes moving essentially sideways here trading under what can reasonably be called support.
Of particular note is the Canadian IT index, upon which the exchange traded fund XIT is based:
Which Thursday pushed through the high end of the triangle which has formed. We'll be looking for continuation or failure here. /Mike
As mentioned in prior Focus On Gold updates in the past few days, the juxtaposition of currency tests in various world currencies is adding a certain amount of drama to Gold watchers. After a three day bounce, Gold contract sold off Thursday, bringing a number of new short positions into the market. They will be looking for follow through today.
A quick look at a couple of currencies shows us that tests of bottoms are in play today in GBP:
And we can certainly imagine a test playing out here or shortly in EURUSD:
And in the Dollar Index itself, a test of top, failure of which would be heartening to the Gold group:
Stocks like PDG and ABX (these are in Canadian dollars, just as examples) and many others generally followed Gold down on Thursday:
PDG also happened to print an inside day on Thursday.
The bottom line: everyone wants to see if Gold continues down; or immediately reverses after a single down bar Thursday.
On the long side, swing trades can be attempted on a break of Thursday's high for stocks which share the configuration of Gold, PDG, ABX - the setup is buying the first "retracement" in an upswing. Occasionally when a market reverses, the first retracement will be a single down bar such as we see in these charts.
Swing traders will need to monitor these positions very carefully. Essentially you want the market to move immediately in your favour if stopped in. If we note any trigger intraday we'll place an update on the site today. Have a good Friday! /Mike
I'm looking to enter a long swing trade on a Gold stock or an ETF. Sadly no ETF yet trades in US markets. We do have XGD on the TSX which has pushed up above yesterdays high.
The setup here is buying the first retracement in a still valid upswing, after a high ADX bottom. Pretty tricky technical trading here, so we will want to demand that price go our way right away.
ABX:TSX / NYSE has triggered the same setup.
PDG had not yet triggered. This is the NYSE listing. You can see that intraday a retracement on the daily has set up - I've just entered this myself. I'd like to see PDF move to the previous high and close strongly if I am going to hold this.
Futher updates as warranted will be posted. /Mike
PDG has not yet triggered a trade off the daily chart, and, after failing to push higher than the first target on the intraday entry I attempted earlier, has so far drifted sideways.
I held this for much of the day and moved stops up tight on the bounce back towards T1, but price is not moving with any speed and I have been stopped out.
To be honest, I should have had stops up tight underneath price as it moved up to T1 right after entry - since the premise of this trade was to capture a quick move up which would also make a higher high against the prior day.
Since that premise failed, then was actually the right time to get out.
An alternative exit stop strategy would be to use the lower blue line, off the base of the tall up bar (low is 19.46 - less one or two cents) as a protective crash stop, to give PDF some room to resolve the consolidation pattern drawing out.
I myself prefer to cut losses very quickly, if price does move up, it will not scar me nor prevent me from finding another entry point - speaking generally, not just about PDG or any stock. Whats more important to me is protecting captial.
End of day oriented swing traders are not even in this name so this whole discussion is moot for them!
The XGD:TSX ETF did trigger and continues to hold its gains. Protective stops should be now lower than Thursday's low, and it would be wise to either place a stop at Fridays's low after the close, or at least an alert. We will want to see this, and the whole Gold group, move up on Monday rather directly.
Have a good weekend everyone. /Mike
Today's transcript.
Click on the title above to expand this document.
Today's transcript.
Click on the title above to expand this document.