Stock trading ideas
LOU’S VIEW Tuesday 13th January 2009
Closing Prices
Dow Jones down 125 @ 8,474
CRB Index down 9.36 @ 220.55 (This is the mother of all index’s measuring 19 commodities)
WTI Oil down $2.85 @$38.25
Copper(PhD in stock market forecasting) down 9.9 % @ $146.05
Gold down 4.3% @ $819 (one month low)
The Hindsight
1.Friday’s U.S unemployment was predictably dire with the rate hitting 7.2% and “non farm payrolls”(workers who don’t work on the farms-why not include them?) at 524,000 making the total job loss for 2008 a massive 2.59 mln, a level not seen since 1945. All the U.S data will continue to be negative so it’s hardly worth mentioning until there are finally signs of an upturn.I guess it sells newspapers and people love wallowing in bad news but, maybe, just maybe everybody now has finally got the picture.It’s getting like reporting on the Gaza conflict, at first the number of civillians killed shocked but after awhile we just get immune to the rising death toll.
So reading about dire economic data on a daily basis is almost pointless.However, there is one annual report worth noting ; the very closely watched National Institute for Economic and Social Research published on Saturday which painted a gloomy yet also positive picture. This blue chip poll covers the top 52 economists, CEO’s and acadamia forecasts.The concensus was that the recession will end in the 3rd quarter and return to “normal” levels in 2010 with unemployment only peaking only then,i.e there will be a uneployment hang over(that is according to 50% of them).Also CPI will fall by 0.4%(1st time since 1955) with GDP falling by 1.6%, these are concensus estimates with the most bearish being Merrill Lynch(shouldn’t that read Bank of America?) expecting a 2.8% decline to the most bullish Fedex expecting a mere 0.2% decline. The report also showed an even split on the U.S $ prospects with 48% believing it will be higher by December 2009.
The Foresight
To me this macro big picture is significant as if these gurus are correct and baring in mind the stock markets forward think by 9 months then stocks at present levels are extremly cheap. Not only on these grounds but more obviously on the fact that domestically cash rates will soon underperform share dividend returns.It’s a no brainer, just a question of “selection,selection and selection”. For example, NAB is presently yielding 9.2% f.f, far more than you get if you deposited money with them and not to mention actual capital appreciation….and yes the dividend is safe.
The Key Events
Today: China to publish Trade figures for December expected to show exports fell 4.5% with Imports down 19%.However these numbers were leaked yesterday and were better than expected with exports down just 2.8% and imports down 21.3%. Also Chinese business confidence (again leaked) fell by 29 points to 94.6, a record low.-any reading under 100 is negative. ANZ J0b Ad’s (indicator for Thursday’s monthly employment figures).
Tuesday U.S Fed’s Beige book on the economy(renamed the black book)
Wednesday U.S Retail Sales expected @-1.0%. Oz Housing Finance for Nov’ expected up 3%
Thursday Oz December unemployment data expected up 4.5%(4.4% previously). ECB expected to cut rates 50bp cut to 2%. Fed Governor Bernanke talks in London on U.S economy. RBA monthly bulletin. U.S PPI(Producer Price Index). RIO report December production figures .
Friday U.S CPI, Industrial Production and Consumer Sentiment Index for January. All biggies!
The next 2 weeks will be critical for our market as the U.S banks report 4th Q figures(read losses) starting with J.P Morgan and Wells Fargo.The key will be to see what they are saying about future prospects, or should I say just how bad things are going to get.Again,much bad news is built in so we should see a “relief rally” which will feed into our banks. Our Company reporting season starts in 3 weeks so expect further company profit downgrades ahead plus more volatility. Until we can get our first true picture of how bad/good things are I don’t expect “real,new” money to be invested in our market.So Febuary will be key!
For those of you who took my last trade recommendation to buy Suncorp @$7.45(Closed Friday @ $8.55) I would look to take profits @ $8.90 with a stop loss at $7.45.
Expect our market to open 60 points lower on Monday however would look to buy BHP around recent low and old resistance level of $30.30, particularly as copper made decent gains along with the all important CRB index.Indeed, the commodities this year have shown significant signs of rebounding, with copper already up 20% from it’s lows and remember Copper prices are a great indicator.So with all these “Talking Heads” saying commodities are in trouble be contrarian and look to buy Resource stocks(see below) as it’s all in the Price Action, not opinions!
Have a great day.
QUOTE OF THE DAY: “Time is a great teacher and healer but eventually it kills all its pupils and patients”
Recent trade updates
1.RHG.Long @ 11 cents,closed @16 cents. Take 50% profits @18 cents, stop loss @ 10.5 cents.
2.TNE Long @ 76 cents,closed @ 80 cents.Stay long, stop loss @65 cents.
3.IPR Long @ 11 cents,closed @ 7.8 cents. Stay long.It’s a dividend trade for 10% return.
4.LLC Long av’ @ $7.30, closed @ $7.05. Stay long. Buy and hold.
5.CBH Long @ 4.3 cents, closed @ 6 cents. Stay long, stop loss @ 4.3 cents.
6.PEM Long @ 17 cents, closed @ 18 cents.Stay long, stop loss @ 13.9 cents.
7.BHP Long @ $30.00 closed at $30.43. Stay long. It’s a core investment.