The VRTrader.com VR Silver Newsletter - Monday 3/24/2008
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Leibovit Files| by Mark Leibovit
Monday, March 24, 2008
End Of The Month Window Dressing Approaches - But Will It Work In A Bear Cycle?
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Economic Events and Market Reports March 24-28:
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MONDAY, March 24:
Existing Home Sales for Feb (10 am ET)
Treasury announces 2&5 year note auctions (11 am ET)
Treasury auctions 3 & 6-month bills (1 pm ET)
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TUESDAY, March 25:
Consumer Confidence Index for March (10 am ET)
Weekly Chain Store Sales (8:55 am ET)
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WEDNESDAY, March 26:
Durable Goods Orders for February (8:30 am ET)
New Home Sales for February (10 am ET)
EIA Petroleum Status Report (10:30 am ET)
Treasury auctions 2-year notes (1 pm ET)
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THURSDAY, March 27:
Gross Domestic Product (GDP) for Q4 (8:30 am ET)
Weekly Initial Jobless Claims (8:30 am ET)
Treasury auctions 5-year notes (1 pm ET)
Weekly Money Supply (4:30 pm ET)
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FRIDAY, March 28:
Personal Income & Consumption Exp. for Feb (8:30 am ET)
U. of Michigan Consumer Sentiment for March (10 am ET)
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The stock market is rallied on Thursday with the S&P 500 closing at 1330.00. It wastriple-witching options expiration. Recall I predicted over a weak ago, this is a bullishtime period following a 'Weird Wally Wednesday' (actually came the day before - Tuesday)correction. A lot of cyclical factors are coming into play in the current time periodincluding the vernal equinox which should be a catalyst for turning the markets higheralbeit temporarily? It's also end of the month 'window dressing' time - though many couldcorrectly argue during a bear market managers may choose to unload rather than add topositions. A break above last Tuesday's closing level of 1330.74 and last Wednesday's highof 1341.51 should propel us to the previous high of 1388.34. A test and failure of thatresistance and we could be heading back towards the lows in the 1270 area. Overall, we'renot out of the woods yet and the 'choppiness' is likely to continue, but looking forward abit up to and after tax season, money managers will have a renewed arsenal of funds to putto work in the markets coming from retirement account contributions. This should help tolead to further rally tries. Could we rally and test the upper end of the recent tradingrange (1388-1396 in the S&P 500) and then again retest lows? You bet. Meanwhile, Iwill keep you appraised, but for now I remain on a TIMER DIGEST 'Buy signal'.
What about the bigger picture prospects? Though I reserve the right to adjust myforecasts yearly based on what appears in my Annual Forecast Model, it appears that we'veentered a bear cycle. Bear markets have a nasty habit of showing up every four years orso. A decline of 20% or more is usually characterized as a bear market using one of themajor indexes. The problem with this thinking is that individual stocks generally do awhole lot worse. Let's compare. The Dow Industrials has declined from 14,198 to 11,647(2551 points) or 17.9% while the S&P 500 declined from 1576 to 1256 (320 points) or20.3%. Hot stock Apple Computer declined from 202 to 115 (87 points) for a 43% loss beforerecovering. During the last 100 years there have been 19 bear markets. The average lengthof a bear market is 18.5 months. The average bear market results in a decline of 36%. Thelongest bear markets lasted about three years. Specifically, they lasted 31, 34, andmonths for the bear markets ending in 1942, 1932, 1949 and 2003, respectively. Theshortest bear market lasted two months. This was the crash in 1987 when the Dow JonesIndustrials plunged 36%. For now, I am assuming we're going to some sharp rallies,especially since we're in the throes of a Presidential election year, but when the dustsettles we may very well see this bear carry well carry on for three years into 2010. Ihope I'm wrong.
The financials were in the lead once again as the New York Fed announced modificationsto its new Term Securities Lending Facility (TSFL). The TSFL auctions will now allowschedule 2 collateral, instead of the schedule 1 collateral previously proposed. Schedule2 collateral will now include collateralized mortgage obligations (CMOs) and AAA ratedcommercial mortgage-backed securities. That means that the Fed will lending banks highlyliquid Treasury securities in exchange for less liquid assets. The thrifts & mortgagegroup was up 10.3% while investment banks & brokerages were 11.2% higher. The XLF wasup 6.3%. The XLF has now rallied from a low of 22.29 at Monday's open to it's currentprice of 26.32, a rally of 18% in less than a week. I sold the XLF on a trade, but will belooking to repurchase.
Short term rates closed the day and week at 0.5%, the lowest rate since 1942. Where canI borrow some of this nearly free money? The 10-year bond rate is 3.33%, which is itslowest rate since 2003. The spread between the 90-day T-bill and 10-year bond is 2.83%,the largest spread since 2004. These are the kind of figures you see at the beginning ofbull markets. Does that mean we have seen the low? A lot of people are talking about howthe US of today is like Japan of the 1990s with permanently low rates. So which way willit be? Beginning of a bull or a 10 year long recession and bear market? The fact thatthese two choices are so diametrically opposed is why the markets have become so volatile.
Metals continued to fall as the day wore on and oil made a small comeback but remainedin the red. Gold is down 33.10 to 912.20 and silver dropped 1.66 to 16.785. Gold closedjust above the day's lows and silver closed at the lows. Crude oil rebounded though downjust 0.93 to 101.61. As you know, I remain a big picture bull on the precious metals, eventhough I did go short Silver via SLV this past week for a trade. I suspect there should beconsiderable technical support around $800 in gold (if it gets that low) and 15.00 insilver (ditto). The next upleg in gold should carry it anywhere from $500 to $1000 off itslow. For silver, I am assuming a $10.00 spread. I am now bidding under the market for bothgold and silver.
The US Dollar Index opened the day higher and remained there throughout the day. Thedollar index is up 0.58 to 72.73. Recently, the US Dollar Index would gain and quicklygive back its gains. The last few days have felt different than the past few months. Keepan eye on the 70.698 low. I would like to see a retest of that level, either to breakbelow it or to bounce off of it to tell us which way to trade. The US Dollar Index is akey determinant of commodities as well, as we have seen the last few days, so a clearer USDollar Index picture would also clear up the commodity picture even more. At present, weappear to be in a rally phase - though I must caution we've seen several false starts todate.
Initial claims jumped to 378,000, up 22,000 in the week and up 24,000 vs. a month agowhich offers a survey week comparison for the household employment report. There is aspecial factor as Market News International, citing the Labor Department, reports that anongoing strike at American Axle has shut down production at General Motors. But, weaknessis evident with continuing claims confirming trouble, up 32,000 in the March 8 week to2.865 million.
The Conference Board's index of leading economic indicators is pointing in thedirection of recession with a 0.3 percent decline and followed drops of 0.4 percent inJanuary and 0.1 percent in December. For the latest month, component declines were seen instock prices, initial unemployment claims, vendor performance, building permits, andconsumer expectations. While the component numbers are old news, the index release willincrease chatter of the U.S. being in recession. The latest number matched marketexpectations.
The slowdown is continuing in the Mid-Atlantic manufacturing region where thePhiladelphia Fed's business activity index is negative for a fourth month in a row, at-17.4 level vs. -24.0 in February, but better than expectations of -20.0. New orders,arguably the most important reading in the report, show less severe but still similarresults, at -9.3 vs. -10.9. In especially bad news, employment is back in negativeterritory, at -4.7 vs. February's 2.5.
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ATTENTION SUBSCRIBERS:
Full Annual Forecast Model charts and commentary for 2008 are now posted for THOSE WHOHAVE SUBSCRIBED to the VR Forecaster Report. Please click on the VR Forecaster link on theleft side of the Home Page and then click on 'Click to View 2008 Report'. You will then beprompted to enter your username and password. For the rest of 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 in 2007 would likelynosedive in February/March, rally to June, the nosedive into mid-August, then rally intoearly October and the sell-off into the third week of October - followed by a choppyNovember.
Remember, folks, there is no price too high for good information!
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VR TRADER.COM WATCHLISTS:
Please note: The VR Watchlist is currently now only available via the VRTrader.comwebsite accessed via your assigned username and password. Please email mark@vrsurvey.comif you misplaced that information.
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DAILY VR LIST:
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 patterns unfold for yourself.
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 greater significance in helping to definethose lows or highs and important pivot points in the marketplace.
How do you use this list? VRs are buy and sell triggers and are particularly useful indefining lows or highs in stocks and stock
indexes. Traders find them particularly useful, especially coming off market extremes asan indication of a change of direction. Use the VRs in conjunction with your othertechnical indicators and you've
added a unique technical tool to your arsenal.
Current VR List
Below is VRTrader.com's exclusive VR list (Volume Reversal tm).:
What is a Volume Reversal? There are several proprietary subtleties to the VolumeReversal ™ algorithm, but essentially a Volume Reversal ™ is a change from a Rallyday to a Reaction day accompanied by a increase of volume or a change from a Reaction dayto Rally day accompanied by an increase in volume. Volume Reversals ™ coming offintermediate lows or highs have greater significance in helping to define those lows orhighs and important pivot points in the marketplace. The Volume Reversals ™ presentedhere provide you with a unique research tool that may have trading (short-term)significance, but it also may have 'trend changing' (intermediate) significance as well.The sector Volume Reversals ™ show where big money is possibly affecting an entiregroup of stocks. The stocks listed under the group have posted Volume Reversals ™ alongwith the group as a whole. The individual stocks listed have posted Volume Reversals ™on their own and are valid plays as well.
To see a visual representation of Volume Reversals ™, please go our CurrentPortfolio section and click on any recommended stock. Or, if you would like to get a VRChart for a specific symbol, please click here. Please note that not all symbols may becurrently available.
The Volume Reversal ™ is a registered trademark and can only be used or quoted afterreceiving express written permission from VRTrader.com and Mark Leibovit.
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List of Volume Reversals 3/20/08 - Sectors
*** Sectors Positive Volume Reversals ***
**** NONE ****
*** Sectors Negative Volume Reversals ***
Automotive - Manufacturers - Major
HMC - Honda Motor Co
NSANY - Nissan Motor Co
Banking - Money Center Banks
BLX - Banco Latino Americano
CS - Credit Suisse Group
HBC - HSBC Holdings PLC
Drugs - Manufacturers - Major
LLY - Eli Lilly & Company
MRK - Merck & Co
RIGL - Rigel Pharmaceutcals Inc
WYE - Wyeth
Electronics - Printed Circuit Boards
FLEX - Flextronics Internat Ltd
RAVN - Raven Industries Inc
SANM - Sanmina-Sci Corp
Health Services - Hospitals
AMSG - Amsurg Corp Common
CYH - Community Health Systems
MDTH - Medcath Corp
Insurance - Life Insurance
AGO - Assured Guaranty Ltd
DFG - Delphi Financial Grp A
FFG - FBL Financial Grp
IPCR - IPC Holdings Ltd
Manufacturing - Industrial Equipment & Controls
CIR - Circor International Inc
PLAB - Photronics Inc
PNR - Pentair Inc
ROP - Roper Industries Inc
Materials & Construction - Manufactured Housing
CHB - Champion Enterprsies Inc
CVCO - Cavco Industries
Retail - Drug Stores
WAG - Walgreen Co
Transportation - Air Delivery & Freight Services
FDX - Fedex Corp
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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This newsletter is a publication dedicated to the education of stock traders. Thenewsletter is an information service only. The information provided herein is not to beconstrued as an offer to buy or sell securities of any kind. The newsletter picks are notto be considered a recommendation of any stock but an information resource to aid theinvestor in making an informed decision regarding trading in stocks. It is possible atthis or some subsequent date, the editors and staff of VRTrader.com may own, buy or sellsecurities presented. All investors should consult a qualified professional before tradingin any security. The information provided has been obtained from sources deemed reliablebut is not guaranteed as to accuracy or completeness. VRTrader.com staff makes everyeffort to provide timely information to its subscribers but cannot guarantee specificdelivery times due to factors beyond our control.
