Thursday, December 19, 2013 Zeb’s VUE

General Information and Analysis

 

US

Comment for 12/19/2013	Measure	Indicator	Ranking
Weekly RSI	WeeklyRSI	71.5	Neutral
Long Term MVA (200 day MVA)	200 MVA	9.32%	Bull
5 Day Slope of 55 day MVA	Slope55MA	0.73%	Bull
Intermediate Trend (Using ADX)	ADX(14)	17.6	Neutral
Short Term Trend (Daily RSI 3)	RSI(3)	76.3	Neutral
Relative Volatility (ATR% vs StdDev over last 90 days	ATR(90)	0.86%	Normal
VIX - MVA distance between 30 MVA and 10 MVA	Vix MVAs	93.00%	Bullish
The market is bullish with normal volatility over the last 90 days.

The table above is a rating for intermediate and long term trend in the S&P500.  I used the S&P 500 as the indicator for the USA stock market.  For day traders: You may find it useful to trade in the direction of the trend.  However, looking at any daily chart over lots of years, the trading direction for the day is pretty random most days. 

 

• Stocks – yesterday can only be described as EUPHORIA.  Overnight, trading has calmed down as Asian and European shares traded down or unchanged.  The Fed definitely candy coated the economy and tapering.  Investors loved the Fed’s emphasizing that it will keep interest rates at very low levels indefinitely.

 

 

 

• Oracle’s earnings beat expectations. 

• Boeing loses out on $4.5 billion Brazilian deal.  This was to supply 36 fighter jets to Brazil.  Brazil chose Sweden’s Saab (OTD:SAABF) Gripen over the Boeing’s F-18. 

• GE is very positive about growth for 2014. They say they are forecasting sales growth of up to 5% in 2014.  They are saying that their industrial business will grow, while the finance subsidiary (GE Capital) will fall in revenue. 

• Citigroup made a large announcement (and important I think) about selling life insurance through the US Bank’s network of 600 branches in 11 Asian Countries.  They have signed a 15 year exclusive deal with Hong Kong’s AIA group (OTCPK:AAIGF).  Bloomberg analysts are suggesting that this will bring in a minimum $20billion revenue. 
• Target hit by credit Card Breech.  Ouch… The theft occurred during “black Friday”.  It may have happened through software installed at the machines that customers use to swipe their cards when paying. http://online.wsj.com/news/articles/SB10001424052702304773104579266743230242538

• Senate passes budget bill.   There is still a battle over how to spend the money that is coming.  Congress has until January 15, 2014 to solve the problem, or the government will face another partial shutdown.

• Gold and silver investors are not enamored with Fed Tapering.  Gold is heading for the first annual decline in 13 years.

• For today, look at Madalena Energy (OTCPK:MDLNF).  They have pending asset sales in Argentina that could lead to doubling ++ share price.  Number 2 to look into is Cavium Networks (CAVM).  It is a potential acquisition target as large networking companies have lots of cash to invest in acquisitions.

• For stock day traders (who already know what I’m about to say)…  Look for the top 10 trending stocks up and the Rate of Change down for the 10 worst performing stocks.  You can research this for free on StockCharts.com. However, www.finviz.com will provide a list on the front page without any work. 

Comment on Fed’s Forward look!

OK, Dr. Bernanke appears to be talking out of both sides of his mouth simultaneously.  The numbers suggests “we” will taper, he suggested.

Wait, FOMC assured the markets that in spite of tapering, interest rates would remain low for an extended period.  They include guidance that the benchmark rate would stay low “well past the time that unemployment rate declines below 6.5%, especially if projected inflation continues to run below”. (Below means the Feds 2% PCE inflation goal).  Dr. Bernanke stated in dovish tones in his press conference following the conclusion of the FOMC meeting stating 'While we have passed or made significant progress on the labor market and growth hurdles, there is still this concern about inflation. If inflation does not show signs of returning to target we will take appropriate action."

 

So, Dr. Bernanke said something “hawkish” out of the left side “taper”, and out of the right side something “dovish” (we’ll keep interest rates low indefinitely even if we meet our unemployment goal). 

Ok, I can imagine the FOMC heads all squirming to guess what the stock market’s reaction was going to be.  By the way, the stock market liked it, even though “forward guidance” is almost always incorrect.  The USA (and global) economy is far too large and complex to expect much accuracy. 

If I take the $10billion dollar per month reduction, then by October 2014, all QE will be over.  Of course lots of things can occur in the next few months.  Look to Wall Street Banks to scream for more QE about July 2014. 

The rubber-meets-the-road when we review the Federal Reserve’s balance sheet.  The balance sheet is poised to exceed $4 Trillion dollars.  The Fed’s assets on Dec. 11, 2013 were reported at $3.99 trillion. 

The Fed report also pointed to the recovery in the housing market.  I am of the opinion the data is not overwhelmingly positive.  Yesterday in economic reports, housing market shows a drop of 1.1%, and October’s numbers show a 1.8% increase.  They specifically pointed out housing starts for November which showed a very impressive 22.7% increase. However, if you (the reader) look deeper, the November building permits fell by 3.1%. 

Today, the “Existing Home Sales” was released.  It shows a M/M change of -4.3%.  The actual sales missed expectations a lot.  Demand for existing homes is definitely down.  The news is attributing the lack of sales to the Y/Y median price which is up 9.4%.  Unattractive mortgage rates are also a factor.  However, I have to wonder about the employment numbers.  (Further research is required, but I have this speculation.)  If people are being employed in part-time jobs (and many are being employed at way less than they earned before being laid off), then those people cannot afford to buy a home.  Also, investors (not individuals) have been driving existing home sales. Are they tapering off? 

It would seem to this observer that what the Federal Reserve used to justify tapering, is pretty uncertain at this point. The whole set of economic vectors could be very much like herding cats – going off in every direction except the one the Federal Reserve would like.  Make no mistake, 2013 has been a very  good year for real estate, but much of that has been investors; not the public.  This is just one area where a “stumble” is very possible.