This will get worse
Dow Jones down 89 @ 7,465
Oil up 4.9 @ $39.6 (fall in U.S oil inventories)
Gold down $1.7 2 $976.5 (minor profit taking, still targeting $1,000 and very soon)
CRB Index up 4.5 @ 205.14(measures 19 of the world’s most important commodities)
Copper up 3.5 @$147.1 (stuck in a trading range of $130 to $167)
THE HINDSIGHT
Yesterday I highlighted why we are going lower in stocks where the only buying needs to be so stock specific its almost impossible; shares that are vulnerable to take overs and certain sectors, such as oil and gold are my choices. In fact there is a stock called Ceramic Fuel Cell (CFU) which is going up on nothing! Something must be forthcoming so buying them at 10 cents purely on speculation could be the trade.
There are many great opportunities to make money in this bear market(becoming more grizzlier by the day) as highlighted in yesterday’s report.
Overnight the Dow hit a 6 year low pushed by Hewlett Packard’s(worlds biggest pc maker) profit report making for dire reading. Also the U.S banks hit levels not seen since 1995 as data showed rising credit card defaults….oh, and just for good measure the Fed’ sharply downgraded its GDP growth estimates for 2009 by between down 0.5% to down 1.3%; in October they were 0.2% to 1.1%.
The most alarming new “skip of worms” is the high risk of East European banks going under and possibly taking their governments with them. Italian P.M Berlosconi even admitted the G8 are considering nationalising the banks…and you want to be a bank shareholder!? I appreciate Australian banks are far removed from this doomsday scenario, indeed Westpac was voted the most profitable bank by an independant U.S research body, but their share prices will go lower simply because they have “bank” in their name!
Another disaster is G.M, Ford and Chrysler.These guys are facing bankruptcy within weeks and Obama isn’t exactly being reassuring when he says “they could go bankrupt”. I guess when there are 2 cars for every U.S citizen it does seem like a small case of over supply BUT if they go under then about 1 in 10 U.S jobs will go the same way.As the legendary Paul Volcker (Ex Fed’ Governor) said “some companies are too big to continue, and not too big to let fail”.It’s pure Milton Friedman, Thatcherism and even Darwinism. As Bob sang “The times they are a- changing”
THE FORSIGHT
I repeat my trading ideas from yesterday, this is a traders market and will be for many months. I would sell the major stock index’s not only on the dire economic situation(not to mention the vast majority of “experts” are saying we have seen the lows) but also on the charts which are pointing one way. There are many ways to illustrate this but I think the most compelling one is The S+P 500 breaking 839 which represented the 50% rally from 1982 lows to 2007 highs. As I have frequently said Fibonacci and 50 % levels are key indicators., so now we have screamed through the 50% level look for the next Fibonacci level of 61.8% which means the index will hit 665.
Our market has bounced off the 50% retracement from the highs made in November 2007 of 6,740, hitting recent lows of 3,317. It’s only a question of when, and not if, we hit the 2,800 level in April 2003 when the market started the bull run.
Please refer to my company website www.trendinvest.com
Have a great weekend!
QUOTE OF THE DAY: ” The Board are truly sorry for the massive losses suffered by our shareholders” Elizabeth Nosworthy, Chairman of Babcock and Brown.