The VRTrader.com VR Silver Newsletter - Monday8/13/2007
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LEIBOVIT FILES | by Mark Leibovit
Monday, August 13, 2007
PPT Intervention Saves The Day
Economic Data and other events scheduled for August 13 - 17:
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MONDAY, August 13:
Retail Sales for July (8:30 am ET)
Business Inventories for Jun (10 am ET)
Treasury auctions 3 & 6-month bills (1 pm ET)
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TUESDAY, August 14:
Producer Price Index (PPI) for July (8:30 am ET)
International Trade for June (8:30 am ET)
Weekly Chain Store Sales (8:55 am ET)
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WEDNESDAY, August 15:
Consumer Price Index (CPI) for July (8:30 am ET)
NY Empire State Index for August (8:30 am ET)
Treasury Int'l Capital for June (9 am ET)
Industrial Production & Capacity Util. for July (9:15 am ET)
EIA Petroleum Status Report (10:30 am ET)
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THURSDAY, August 16:
Housing Starts & Building Permits for July
Weekly Initial Jobless Claims (8:30 am ET)
Philadelphia Fed Index for August (12 pm ET)
Weekly Money Supply (4:30 pm ET)
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FRIDAY, August 17:
U. of Michigan Consumer Sentiment Index (10 am ET)
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Panic in the 'Streets' or a warning of dire things ahead?
No doubt, a real financial crisis has been unfolding before us and with the news fromEurope this past week it is clear the contagion is spreading. Weakness in the Swiss Market(one of my indicators) reconfirms this thinking - a market that the Paulson's PlungeProtection Team has no control. On August 10th, the DJI-30 went into a free fall,extending a 650-point plunge from 36-hours earlier, to as low as 13,050, far below the keyInflection point of 13,250 set by the Plunge Protection Team. Yet despite all the negativenews surrounding the sub-prime debt bomb, the DJI-30 managed to recover its losses, endingup with a scratch of just 31-points, to close at 13,240. In the background however, theSwiss Market Index plunged 257-points to close at its worst level since March13th.Reflecting worries that toxic US sub-prime mortgage debt could also be in the handsof UK brokers and banks, the Footsie-100 plunged 183-points to 6,038, its lowest levelsince March 13th. Historically, the Footsie-100 and the Dow Industrials have been closecousins, so why would the escalating foreclosure rate on UK homes be bearish for the UKstock market, while the DJI-30 stays 10% above its March lows?
Here we have our strongest circumstantial evidence of PPT intervention!
I believe this is the first time in modern history, where a government has tried tointervene in a stock market, to hold it up near record highs. In the past, Japan andTaiwan has intervened to buy stocks with tax payer money, but only after long extendedbear markets or market crashes. Trying to support a market near record highs after a bigrally, would be much more difficult to defend, if fundamentals are bearish.
I suppose we should all be grateful that the PPT is out there ready, willing and ableto pull the trigger and either jawbone the market higher (I presume that is their mainstrategy) or flood the gates with buy orders for Dow Jones or S&P 500 futures. At thesame time, we know that the market forces will ultimately prevail and if the internationaleconomic ship is sinking all this can do is provide a temporary band-aid.
Sources tell me that not since 9/11 has the European Central Bank been forced to act asthe lender of last resort in the banking system. The ECB pumped a record 94.8 billioneuros ($130.6 billion) into Europe's money markets on August 9th, as banks scrambled forcash, after France's biggest listed bank, BNP Paribas froze $2.6 billion of its hedgefunds. A third of the funds are invested in sub-prime US mortgage loans. Funds are nowforced to sell blue chip stocks to meet frenzied demand for early withdrawals.The $2trillion market for mortgages not backed by government- sponsored agencies is at astandstill. About $11.2 billion of non-agency mortgage bonds, those not guaranteed byFannie Mae, Freddie Mac or Ginnie Mae, were sold in July. That's down from $41.6 billionin June and from a monthly average of $86.6 billion this year. It would be extremely toughfor funds to sell their mortgage paper right now, to meet panicky redemption calls.Instead, the only alternative is to sell other assets in their portfolios, including bluechip stocks, corporate bonds, or commodities.
Fed rate cuts could be bearish for the US stock market, if its leads to the unwindingof"yen carry" trades and liquidation of US stocks. How do we know this?Yesterday, the ECB injected 96 billion euros into the local money markets, which sent theEuro 2.5% lower to 161-yen, which in turn, knocked the German and French stock markets3.5% lower. Thus, recent trading action sheds some light on the toughest question of howFed rate cuts would impact the stock market, - a Bearish trend, punctuated with viciousand short lived rallies, similar to January 2001 until March 2003. The US Dollar Index, isin a weak position, sitting just above the psychological 80-level, with the Fed poised tocut interest rates as soon as September. The Fed might have to cut rates in half-pointincrements to stave off a credit crunch induced recession, pushing the dollar off thecliff and into the abyss.
Well, on Friday we touched 12,958.04 on the 'theoretical' intra-day numbers and 13,061on an actual print before the market 'mysteriously' reversed higher. The 'theoretical'numbers for the Dow Industrials erroneously assume each and every stock component had hittheir lows simultaneously, but over the years this reading has been a reasonable goodbenchmark in making projections in my technical work. From Wednesday's high of 13,695that's nearly 700 points! Volatility has been great in raw points, but on a percentagebasis really very minimal. Us old-timers who experienced the 1987 'Crash' and witnessed a20% decline over a couple of days, this past week's decline is childs play top to bottomat 5%!
My TIMER DIGEST 'Buy' Signal based in part on the AFM (VR Forecaster Report) lookedpretty good as the Dow Industrials rallied to my 13,600 target area (actually exceeding itby trading as high as 13,695). And, as you know, I advised aggressive Platinum subscribersto exit their long positions on Wednesday, though offically for the service we exitedearly on Thursday. The advice given was to look for a couple of days of weakness possiblystretching into the following week. I did not expect to see such a vicious sell-off, butI'm sure glad we stood aside. Since I am on a 'Buy' signal, I was less inclined to goshort, but certainly that was an option on Wednesday when the 13,600 target zone wastouched and, in fact, exceeded when we traded as high as 13,695. As inferred from above,we are not clearly out of the woods with regard to potential downside risk. I am of coursereferring to the 12,700-12,800 in the Dow Industrials. But, for now I'm going to give theupside the benefit of the doubt in view of the current market hysteria and our friends atthe PPT.
Precious metals are benefiting from the current market uncertainty, especially asgovernments pour money (inflate) in an attempt to halt the current financial crisis.However, the US Dollar Index has bounced a bit the past couple of sessions and any furtherstrength will put an end to a rally here, as a long-standing inverse relationship exists.Uranium shares and the metal continue to experience severe weakness, none of which comesunexpected. I would use current weakness to add to current positions listed in ourPlatinum Current Portfolio.
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TIMER DIGEST has named Mark Leibovit of VRTrader.com 'TIMER OF THE YEAR' for 2006. TIMERDIGEST also ranks Mark as the #1 Intermediate Market Timer for the 10 year period endingin 2006! Currently in the #1 spot for 2007!
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The legendary VRTrader.com Annual Forecast Model is waiting for you! Don't miss theopportunity to subscribe to this special report and mid-year update that long agovindicated OUR claim that it represents a 'blueprint to the future'. If you had been asubscriber, you would have known ahead of time that the market would likely nosedive inFebruary/March and then rally to June.
Remember, folks, there is no price too high for good information!
Editors note: As you may have noticed, we have been posting our daily VR list for bothSilver and Platinum subscribers. Silver subscribers who find this useful should upgrade toPlatinum where you can pull down VR charts for many securities and watch the patternsunfold for yourself.
I've extended posting this information on a complimentary basis to Silver subscribersfor now. There is no technical service on the planet that posts Positive and Negative VR!Why? Because they are proprietary to VRTrader.com! And, Platinum subscribers can pull upVR Charts on just about any stock from the home page of my website.
A Volume Reversal ™ is change from a Rally day to a Reaction day accompanied by anincrease of volume or a change from a Reaction day to Rally day accompanied by an increasein volume. Volume Reversals ™ coming off intermediate lows or highs have greatersignificance in helping to define those lows or highs and important pivot points in themarketplace.
List of Volume Reversals 8/10/07 - Sectors
*** Sectors Positive Volume Reversals ***
**** NONE ****
*** Sectors Negative Volume Reversals ***
Health Services - Long Term Care Facilities
ODSY - Odyssey Healthcare Inc
Transportation - Air Delivery & Freight Service
AIRT - Air T Inc
KHK - Kitty Hawk Inc
UPS - United Parcel Service B
Suggestions? Comments? on the newsletter service. We would like to hear from each andeveryone of our subscribers. Our email is mark@vrsurvey.com.
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