Stock Trader Man

Dow Jones up 38 @ 8,116

Oil down 80 cents @ $45.67

Gold up $15 @ $902.30 ( buy on any pull back, circa $850. Target $1,000

Copper up $10.80 @ $158 (this mother of all indices is telling us something…higher stocks)

CRB Index up 1.38 @ $227.17 (another future indicator)

The Hindsight

OK we finally saw some economic data which was better than expected with Leading Economic indicators (a forward gauge of all economic activity such as housing, retail sales, factory orders, money supply etc) gaining 0.3% (expected to fall 0.2%) and home sales jumping an incredible 6.5% (expected down 4.4%). However this is like seeing a heart attack victim having a nervous twitch; the data will get worse! The key to the next major move in stocks is the Dow Jones around the 8,000 level. We have spent nearly 2 weeks flirting with this level which illustrates just how key traders are viewing this level. As I have said before a decent break and close under and we are in a free fall, any decent bounce and consistent closes say above 8,400 and yep, we are going places; it’s a home run.

U.S Money supply is getting out of control with figures showing it has ominously exploded from 9.9% annual growth in last September to 98.9%. This is pure Friedman economics as when such excessive supply exists then it means one thing; in about 9 months time we will have huge inflation! The smart traders money is not looking at the constant dire economic data but looking at the price actions of the 3 most important markets; gold, copper and U.S 10 year yields. All three have bottomed and are all set for major leg ups.

The Foresight

THE MOST CRUCIAL INDICATOR- 10yr bonds

The U.S 10 year bond is the sale of the century. I have been advising clients to short 10 yr futures at around 140 (2.25% yield) for the past 10 days to target 3%  yield. If  you just sold 1 futures contract you would be already sitting on a $5,000  profit. There is more money on the table. The reckless comments by Geithner directed at the Chinese and their cool response back isn’t good! As the world’s largerst bond porfolio manager, Mr Gross said, “treasuries are way over valued”. Even ex Fed Governor Poole said the Fed is in danger of creating a false market and bubble if they start buying 10 year bonds.  The price action underscores this scenario as yields should be falling(prices rising) when the stock market is collapsing and yet it’s doing the exact opposite. So tell me? What can possibly make T. Bonds rally? Believe me, if you never trade another thing in your life, please sell U.S 10 year futures!

DOMESTIC

Our markets saw a decent bounce on the rallying commodities with the heavyweights leading the charge. I won’t buy anything until I see the Dow Jones move significantly away from that 8,000 level. It’s as simple, yet important as that.

Tomorrow see’s 4th Q CPI data which will show the short term trend is falling and will now allow the RBA to cut rates next week by a minimum of 75bp with the futures traders saying it’s a 50/50 call on 100bp.

For those of you who get the Courier Mail newspaper then I invite you to turn to page 24…I do have more hair than that in real life!

Have a great day and if you get the chance you most see the most awesome film ever made…Slumdog Millionaire. If you’re not blown away then you don’t have a pulse.

QUOTE OF THE DAY: “If you lend somebody $20 and you never see them again then it was money well spent”