Friday, April 15, 2005
Issue Contents:
| 09:23 | The Day Ahead Economic releases and news |
| 15:11 | Three Black Crows NYSE at 2005 Lows |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 16:29 | Wrapping up a profitable week |
Good morning, its Friday April 15th, the 105th day of 2005.
Company news is center stage this morning as GE offers a positive earnings report as does Citi, IBM surprises the street with an early, negative, report on earnings and prospects. Before the open stock index futures have recovered somewhat – last night markets were facing a significant gap down.
Meanwhile, import prices are up1 almost 2% in March although prices for goods other than oil were up 0.3%. The NY State Empire Index reported its weakest measurement in 2 years, coming in well below expectations giving treasuries a lift2 and pulling the US Dollar down marginally following the release.
US President George Bush attributed high crude and gasoline prices to China’s growth:
“My view of China is, is that it’s a great nation that’s growing like mad,” said Bush, according to a transcript of his remarks made to the American Society of Newspaper Editors convention on the White House website. “And that’s one of the reasons why Americans are seeing over $2 gasoline, is because demand for energy in China is huge, and supply around the world hasn’t kept up with the increase in demand,” he said.
Just released – Industrial Production came in with an as-expected increase of 0.3% – however capacity utilization fell to 79.4. Coupled with the Empire State Index this colours the day with a picture of weaker than expected underlying economic fundamentals – so the question here is which story will traders listen to? Dry statistics or GE’s report?
Will GE – widely viewed as a proxy on the economy due to vast array of businesses – support the market today? Only time will tell and we’ll find out by 4:00 pm ET!
US Market Calendar
- 8:30 am: Trade Price Indices – Mar.1
- 8:30 am: Empire State Manufacturing Survey – Apr.2
- 9:00 am: Foreign Purchases of U.S. Securities – Feb.
- 9:15 am: Industrial Production – Mar.
- 9:15 am: Capacity Utilization – Mar.
- 9:45 am: University of Michigan Consumer Sentiment Index – Apr. P
Canadian Market Calendar
- 8:30 am: Manufacturing Shipments & Orders – Feb.
Earnings and the Federal Reserve
For earnings highlights, please see today's WSJ Earnings Calendar.
For a list of upcoming speeches, congressional testimony, Federal Open Market Committee material, and statistical releases, please visit the What's Next page of The Federal Reserve Board website. Recently released Federal Reserve Board material, including market moving FOMC decisions and speeches by members, will be found on their What's New page.
1 U.S. March import prices rise 1.8%
2 Treasuries Up After Empire State Index
Its impossible not to think that at least a short term selling climax may be available later today or next week, with NYSE now joining the other markets and coming in close to 2005 lows:
NYA – NYSE Composite index.
Few regular folks follow the NYA but I assure you its important. The NYSE Composite index represents all the other stocks we don’t see represented in the Nasdaq Composite COMPX, the S&P 500, or the Dow 30.
But we have to remain careful and skeptical about any bounce. I’ll be doing a little work over the weekend on the very long term picture but in recent memory I would have to say that the market as a whole is acting far weaker on balance than during many corrections in the past.
Even in the start of the big market bubble burst in 2000, the NYSE held up for a very long time afterwards. Now the deep cyclicals and commodities are all shedding price rapidly, joining the Nasdaq point for point in pain.
FYI I’ve taken profits off my market shorts from Friday and have a small size short in the Dow 30 futures which I will probably close at the end of day as well. On Monday if a tradable bounce comes in we should consider exploiting it with either short term-longs, or use the opportunity to shed poor performers from our portfolios.
If this market is heading much lower there will be plenty of time and room for a sellable bounce to get short again at a later point in time. The head and shoulder pattern on the daily chart stretching out from 2004 implies a potential 500 futher points of decline; the other broad market indexes show similar patterns that effectively would bring price down to August 2004 levels if they fully play out.
Today's transcript.
Click on the title above to expand this document.
Close to 500 Dow points ago last Friday we warned that a change of trend was in place until proven otherwise:
In the early going we don’t panic, but we do get defensive. IF price starts to trend down below resistance here on the 5 and then 15M charts, we THEN call it a confirmed change in trend. Currently am short from 10550 with a break even stop in place.
Until today, I’ve been short ever since, but for your information I have now closed 100% of my short positions, dropping my 1508 NQ short in the late afternoon, and closing out the balance of my Dow 30 YM short at the close of trading today.
Today felt like panic, and our custom internals indicator, the TrendVue Market Oscillator, shows that a short term panic bottom may now have been reached:
NYSE:
Nasdaq:
We also note that new lows have expanded radically on both markets, another heads up for a possible tradeable bounce, but we must also keep in mind that these levels are no where near where new 52 week lows can head to at the end of a protracted decline.
Whether any rise here forms a lasting bottom can only be determined in hindsight, but we do have some markers along the road map that can help us – more on this next week.