The VRTrader.com VR Silver Newsletter - Monday 10/1/2007
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Copyright ©2007, All rights reserved.
Redistribution in any form is strictly prohibited.
LEIBOVIT FILES | by Mark Leibovit
Monday, October 01, 2007
The Stock Market Has True Friends
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Economic Data and other events scheduled for October 1-5:
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Monday, October 1:
2-Year Note Settlement
5-Year Note Settlement
ISM Mfg Index 10:00 ET
4-Week Bill Announcement 11:00ET
3-Month Bill Auction 1:00 ET
6-Month Bill Auction 1:00 ET
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Tuesday, October 2:
ICSC-UBS Store Sales 7:45 ET
Redbook 8:55 ET
Pending Home Sales Index 10:00 ET
4-Week Bill Auction 1:00 ET
Motor Vehicle Sales 4:00 ET
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Wednesday, October 3:
MBA Purchase Applications 7:00 ET
Challenger Job-Cut Report 7:30 ET
ADP Employment Report 8:15 ET
ISM Non-Mfg Survey 10:00 ET
EIA Petroleum Status Report 10:30 ET
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Thursday, October 4:
Weekly Bill Settlement
Monster Employment Index
BOE Announcement 7:00E T
ECB Announcement 7:4 5ET
Jobless Claims 8:30 ET
Factory Orders 10:00 ET
EIA Natural Gas Report 10:30 ET
3-Month Bill Announcement 11:00 ET
6-Month Bill Announcement 11:00 ET
Treasury STRIPS 3:00 ET
Money Supply 4:30 ET
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Friday, October 5:
Bond Market Assoc. recommended early close 2:00 ET
Employment Situation 8:30 ET
RBC CASH Index 9:00 ET
Consumer Credit 3:00 ET
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Little has changed since my Thursday morning commentary which bears repeating. Marketswere finding buyers at the of the month and we should see more buying come beginningtoday, Monday, as new 401(k) funds are put to work. September is behind use and the'stigma' of September was poppcock much as it was last year, but now we have to deal withOctober. My sense is that there is an air of cockiness that if the market couldn't breakin September and with Ben Bernanke accomodative to further interest rate cuts WallStreeters are not inclined to get bearish and fight the obvious momentum. A psychologicalshift from bearishness to bullishness has occurred which from a contrarian's point of viewmay be important, especially if you're a trader.
The TREND is up and, as I've reported, we've already seen new market highs in the NDX(Nasdaq 100) pretty much due to the weighting of best-performing Apple Computer (AAPL) inthat index. The QQQQ which mirrors the NDX has pushed into new highs as well. I fullyexpect to see new record highs in the Dow Jones Industrials between 14,700 and 15,400 andin the S&P 500 between 1600 and 1700 between now and the end of the first quarter of2008 - barring a 'Mideast' event that I've written about extensively herein.
Short term traders in my Platinum service took profits on September 19, re-entered onSeptember 26 and sold again on September 27 all profitably! We were looking to repurchaseon Friday on a more signifcant dip which did not occur and are I now on the sidelines.Ideally, we need to be looking for another long entry point under the market at this time.Longer-termers should hold, but be prepared for a possible quick shakeout.
In economic news on Friday, August personal consumption expenditures were up 0.6%. Thecore PCE deflator was up 0.1%, in line with expectations. Also, Chicago PMI came in at54.2 for September versus 53.8 in August. Consensus was for a reading of 53.0.
Gold was sharply higher reaching 744.90 and the US Dollar Index dipped to 77.66 - newbear market lows! A correction in both can occur at anytime, i.e., a rally in the Dollarback to 79.00-80.00 and Gold back to 699.00. Crude oil was higher, then reversed into theclose as long traders booked profits into quarter end. We saw a new bull market high of$84.10 in Crude Oil this past week. Gold still looks to be on track for 800.00, and it mayhappen sooner rather than later. I also believe 875.00 is a reasonable intermediate upsidetarget as well.
Climbing a Wall of Worry is never easy, but it's nice to know that the Federal Reservestands ready each day, to provide a safety net for fearless Dow Jones Industrialinvestors. Whenever bad news on the economy is reported before the opening bell, traderswait for the Fed to step into the market at its usual time of 9:45 AM EST, to providebadly needed liquidity, and steady the nerves of jittery investors. Nowadays, when the Fedbuys Treasury securities from Wall Street dealers, one can observe the Dow JonesIndustrial futures contract jumping 50-points within a few minutes.
In 2001, it is easy to get the impression the Fed tried to prop up the Nasdaq bubble byslashing the Fed Funds rate from
6.50% to as low as 1%, but instead, created a bubble in the housing sector. Now, Bernankeaims to cushion the decline in US homes prices by slashing the Fed Funds rate, but mightend up inflating a bubble in the commodities markets, led by the top-4 sectors in the DowJones Commodity Index.
The two biggest sources of global liquidity, the Fed's money pumping operations, and
the Bank of Japan's ultra-low interest rates, which supplies the oxygen for Yen 'carrytrade' are still inflating global markets worldwide. The large size of the Fed's recentrepo operations suggests that Bernanke will opt to slash the fed funds rate by ahalf-point to 4.25% in October, in an emergency meeting or certainly by the end of theyear.
It was the brutal unwinding of the Yen 'carry trade' that unleashed the severecorrection of the Dow Jones Industrial from July 19th thru August 16th. But so far, the USDollar hasn't recovered to its former levels of 121-yen or higher, which prevailed whenthe Dow last traded near 14,000. What's changed the dynamics behind the Dow JonesIndustrial market is that the Federal Reserve has stepped up its money pumping operationssince Sept 7th, when the US Labor department reported a loss of 4,000 jobs in August. TheFed has been pumping liquidity into the hands of Wall Street dealers at a furious pace,with daily injections ranging from $10 billion to $38 billion, without missing a singleday. On Sept 27th, the Fed injected a total of $38 billion of temporary reserves into thehands of its Wall Street agents through four separate repurchase operations. The totalamount matched the $38 billion of repos on August 10th, at the beginning of a crunch inthe credit markets, sparked by Bank Paribas's decision to freeze 2 billion euros ofcustomer assets. Previous to August 10th, the largest Fed injection of repos in a singleday was on Sept 19, 2001, when the Fed pumped $50.35 billion.
As I mentioned, whenever bad news on the economy hits the newswires, the Fed quicklypumps money into the markets, to calm a nervous crowd and prevent a bearish stampede fromexiting for the emergency doors. The Fed has a technology called a printing
press, and can pump the Dow Jones Industrial to any level that it desires. The Fed alsohas an ally - the Plunge Protection Team and Secretary of the Treasury Henry Paulson. Ofcourse, there is a price for this, namely sharply higher inflation, highlighted by aplunging US Dollar Index and soaring prices for crude oil, gold, and other commodities.The Fed's $38 billion repo on Sept 27th, came within minutes after the Commerce departmentreported that sales of new single-family US homes fell 8.3% in August to a 795,000 annualsales pace, its slowest rate in over seven years. In August, the median sales price of anew home fell 8.3% to $225,700, the lowest since January 2005. The 7.5% price drop from ayear ago was the sharpest since December 1970.
Between Ben Bernanke and Henry Paulson, the Dow Industrials (and other US markets) willmove higher and higher and higher as 'compensation' for sagging home prices and to someextent commercial real estate. As you know, real estate runs in long cycles if historyrepeats itself. Most recently, the lows of 1990 built the foundation for the highs of 2005- that's 15 years! Perhaps with an aggressive Federal Reserve, a turnaround can occurquicker this time around, but I suspect not. What I do envision, however, is perhaps theunfolding of a huge 'B' wave rally higher in the next year or two which will appear tohave all the makings of a new bull market. Once that wave completes itself which may ormay not see new highs in real estate (depending on markets and location, of course), wecould then see a 'C' wave lower which will define the ultimate bottom a year or two afterthe 'B' wave peak.
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TSE and TSE Venture Commentary for our Canadian Clients updated for Monday, October 1:
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The following commentary is provided courtesy of my friend, Gary Dorsch fromSirChartsalot.com:
Canada reported a bigger than expected C$13.8 billion budget surplus for fiscal2006-07, the second-straight surplus of more than C$13 billion, and Prime Minister StephenHarper is paying down the government's debt. A surge in natural gas futures provided aboost to energy stocks. But the big bounce came from US crude oil, which jumped to$83.30/barrel, as a weak US Dollar fueled gains. The soft US Dollar also lifted goldfutures, while several base metals touched multiple-month highs on expectations of tightsupplies and strong demand in the last quarter of the year. Barrick Gold ABX.TO chiefexecutive Greg Wilkins said Sept 26th, "I think before the end of the year we'll see$800 /oz for gold," he told the Denver Gold Forum. Metals and energy account for 45%of the TSX's market cap. Wilkins said supply will be pinched by several global goldprojects that may have more difficulty getting developed than the market thinks, lendingsupport to Canadian gold miners Goldcorp, Agnico Eagle, and Hecla Mining. Barrick is theworld's largest gold producer. With the scent of soaring crude oil and gold prices in theair, "yen carry" traders have restored their high risk operations, borrowing inyen at 1% or less to buy Canadian natural resource shares. While Japan's economy iscontracting at a -1.2% rate, Canada's economy is booming
at a +3.4% rate in Q'2, and Canada's M3 money supply is up +10.9% YoY.
The Canadian dollar has rebounded from 107-yen on Sept 9th to as high as 115.5-yen
this past week, fueling a wave of cheap capital from Tokyo to Toronto, in search ofinflation assets that can benefit from Ben Bernanke's current monetary policy. TheCanadian Petro-dollar enjoys a 4% interest rate advantage over the yen, and Bank of Canadachief David Dodge has ruled out rate cuts to slow down the CD$'s advance. Canada'sPetro-dollar reached parity with the US dollar for the first time since 1976 last week,because of higher demand for commodities such as oil, copper, gold and wheat from the USand emerging economies such as India and China. It gained 3.2% last week, the biggestweekly rally since November 1988, capping a 57% rise since 2002. Oil prices have risen 31%since mid-January. The Canadian dollar "has moved sharply above the range of 93 US-cents to 95.5 US cents that Canadian central bankers used as an assumption for their lastmajor economic forecast in July," said BoC chief Dodge on Sept 25th. "A 7%appreciation since the middle of the summer is creating is uncertainty about the extentand duration of the tightening of credit conditions in Canada," he said. Outlook forCanadian dollar, Trading in the Canadian dollar is averaging $59.8 billion a day,according to the Bank of Canada. The powerful rise of the CD$ above $1.00 rules out Bankof Canada rate hikes for the remainder of the year, but double digit money supply growthof 10.9% prohibits a round of easing, to slow the CD$'s advance. The CD$ reached GMT'starget of parity or $US1.00 last week, and could take a breather on profit taking at amoment's notice. However, a 10% rally for the DJ Commodity Index, led by a possible risein crude oil to $85 per barrel this winter, leaves the door open for a furtherappreciation of the CD$ to its al-time high of $1.06 vs the US dollar set in 1964.Pull-backs should be limited to 98 US-cents.
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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 forgood information! http://www.vrtrader.com/vr_forecaster/index.asp
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Please note: The VR Watchlist is currently now only available via the VRTrader.com websiteaccessed via your assigned username and password. Please email mark@vrsurvey.com if youmisplaced that information.
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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 the time being. There is no technical service on the planet that posts Positive andNegative VR! Why? Because they are proprietary to VRTrader.com! And, Platinum subscriberscan pull up VR 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.
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 as an indication of a change of direction. Use theVRs in conjunction with your other technical indicators and you've added a uniquetechnical tool to your arsenal.
List of Volume Reversals 9/28/07 - Sectors
*** Sectors Positive Volume Reversals ***
Health Services - Medical Laboratories & Research
BRLI - Bio-Reference Labs Inc
*** Sectors Negative Volume Reversals ***
Consumer Non-Durables - Cleaning Products
CLX - Clorox Co
Health Services - Health Care Plans
CI - Cigna Corp
HNT - Healthnet Inc
MOH - Molina Healthcare Inc
Leisure - Resorts & Casinos
LGN - Lodgian Inc
WYNN - Wynn Resorts Ltd
Manufacturing - Diversified Machinery
COGO - Comech Group Inc
IEX - Idex Corp
OVEN - TurboChef Technologies Inc
Media - Broadcasting - Radio
XMSR - XM Satellite Radio Hldgs
Specialty Retail - Apparel Stores
GPS - Gap Inc
HOTT - Hot Topic Inc
MW - Men's Wearhouse Inc
TLB - Talbots Inc
Transportation - Trucking
SAIA - SAIA Inc
Suggestions? Comments on the newsletter service? We would liketo hear from each and everyone of our subscribers. Our email is
Check out the current VR List:
http://www.vrtrader.com/vr_platinum/ViewVRList.asp
Check a current VR Chart:
http://www.vrtrader.com/vr_platinum/GetVRChart.asp
DISCLAIMER
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.
