Still waiting
Dow Jones down 9 @ 8,270
CRB Index down 45 @ 223.9
Oil down 34 @ $39.83
Copper down 2.35 @$160.50
Gold down 16,4 @ $897.9
THE HINDSIGHT
Overnight the Dow flip flopped either side of unchanged in directionless trading. As much as it is becoming boringly repetitive we are waiting the Obama stimulus package. Treasury Secretary Geithner delayed the financial package until Tuesday 11.am Washington time (he was probably still filling out his income tax returns). The market is hearing that an “aggregator bank” will be formed to buy the toxic debts and interestingly will be partly funded by private investors and hedge funds. Now why any savy investor would want to buy these toxic debts is beyond me even accepting that they will be guaranteed by the Treasury. I guess the idea would be when things return to normal then the price of these CDO’s could be actually worth something; personally I would rather put my money on red or black!
General Motors and Chrysler have been ordered to pay back the Treasury their small $17.4 bln loan…I’m sure these guys have that kind of cash lying around, no? No, both CEO’s said that would force them into bankruptcy….only in America!
THE FORESIGHT
The Dow Jones looks more and more positive the longer we stay above the 8,000 level. Indeed there are further signs that the bears aren’t growling as loudly as data released overnight showed the biggest monthly drop in short selling , falling in January by 28% from it’s peak in July. This isn’t a false dawn; valuations and the charts are certainly pointing to higher prices. The key U.S yield curve is steepening almost daily which points to a stronger economy by year end; just as in 2007 when it was inverted it screamed that we were heading for a recession…it amazes me how so many “talking heads” ignore or don’t understand this ultimate indicator. Further more , many say copper has a PhD in predicting the stock market and that has certainly risen substantially , now some 30% off its lows.
I continue to favour the medium sized miners. I’m very wary of BHP facing massive resistance at $33.80/$34.00 however any decent close above this quadruple top on the charts and then expect a new leg up, towards $40.00. Also CBA is cheap around $29.50 but be wary of their dividend announcement on Wednesday.
Yesterday I recommended Fortescue Metals and we saw a 25 cent rally to $2.57, would certainly add on any weakness around the $2.25 level with a near term target of $3.00.
Have a great day,
Regards,
Lou Muddaris