Stock Trader Man

Lou’s View                    Monday 19th January

Dow Jones up 68 @ 8,281 (remember the critical 8,000 level)

SPI up 10 @ 3,534

CRB up 2.18 @ 221. (This is the only commodity index you to need to watch)

Oil up .11 @ $36.51

Copper up 7.4 @ $152.75 lb (The Nostradamus of all markets)

The Hindsight Stuff

As  I said on Friday’s report basically who cares about the macroeconomic data to be released , we should all know its bad and will get worse although must say the Consumer Sentiment Index was a tad better than expected. Anyway, for the Bears, Industrial Production fell2.0% (exp’ - 1.0%) and CPI fell to its lowest in over 50 years. Just keep reading these dire reports as  they will continue for the next 6 months and you’ll miss the next big move upwards on stocks,the collapse of U.S Treasury Bonds, the fall in the U.S $ and the spike in Oil and Commodities. It’s a no brainer.

Citibank was split into 2 units ,” Citicorp”(retail banking) and “Citi Holdings”(”Asset Management”). Bank of America was given $20bln with guarantees of a further $118 bln. The US treasury will be creating a “Bad Bank ” which will essentially buy all the banks bad debts.The UK Government is going the same way to the tune of 100 bln pounds on condition the banks “come clean” about all their debts, this can of worms will soon be a relief to the market as there is nothing investors hate more than “uncertainty”. Confession is as good for the soul as it is for investors!

The Foresight

Thankfully this week’s economic data is light  the “highlight” being on Thursday with the weekly unemployment claims and housing starts. However more importantly we see the heavyweights reporting their 4th Q figures; IBM, General Electric , Microsoft , Google et al.So this week could be the week we  rally as so much bad news is built in. Analysts (Citigroup) are saying earnings per share could fall by 20% yet stocks are already pricing in falls of 25%.; it will need something truly horrendous for the market to take another leg down.Technically speaking,and more importantly the confirmation of the lows made on November 21st (Dow @ 8,000)were retested on Thursday and proved the Fibonacci 61.8% retracement from the highs was solid. As I have said before any break of this vital, nay make that critical 8,000 level and all bets are off!

There are positive signs emerging “around the edges”.

1/Figures published showed investors sold Treasury bonds in November for the 1st time since August 2007.We need the yield curve to start steepening as it proves economic recovery is coming;certainly the crucial 10 year yield rose last week off its all time lows by 13 bp to 2.32%.Yields and stocks move the same way.

2/The price of copper is 25% of its lows, this commodity is the mother of all predictors. There are signs the recent production cut backs are working with Chinese copper inventories tumbling 30% last week to 15,871 tons, the biggest fall since Jan 24th 2008.

3/Domestically there are signs of recovery in the housing market according to recent data and anecdotal evidence. The RBA and Kevin are making things happen!

4/The Obama package of $800 bln…enough said.

5/Oil prices still sliding and lower interest rates will eventually give the consumer a lift. You don’t need a degree in Economics to know that…I often feel you don’t need a degree in economics period!( wasted 3 years)

These are certainly positive signs of hope and its not wishful thinking.

Today the U.S markets are closed for Martin Luther King holiday. It’s just a great shame he isn’t around to see tomorrow’s inauguration and finally witness his ” I have a dream” speech become more than fulfilled.

Have a great day.

QUOTE OF THE DAY:

“Whether you believe you can or you can’t….either way you will be absolutely right”