The VRTrader.com VR Silver Newsletter - Monday10/8/2007
"Tools for the High Performance Trader"
Copyright ©2007, All rights reserved.
Redistribution in any form is strictly prohibited
Leibovit Files by Mark Leibovit
Monday, October 08, 2007
Not A Good Time To Chase Stocks
Economic Data and other events scheduled for October 8-12:
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Monday, October 8:
US Holiday: Columbus Day
Stocks and Futures Markets Open
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Tuesday, October 9:
'Turnaround Tuesday'
ICSC-UBS Store Sales 7:45 AM ET
Redbook 8:55 AM ET
FOMC Minutes 2:00 PM ET
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Wednesday, October 10:
'Weird Wally Wednesday'
Bank Reserve Settlement
MBA Purchase Applications 7:00 AM ET
Wholesale Trade 10:00 AM ET
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Thursday, October 11:
Weekly Bill Settlement
Import and Export Prices 8:30 AM ET
International Trade 8:30 AM ET
Jobless Claims 8:30 AM ET
EIA Petroleum Status Report 10:30 AM ET
Money Supply 4:30 AM ET
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Friday, October 11:
PPI 8:30 AM ET
Retail Sales 8:30 AM ET
Business Inv entories 10:00 AM ET
Consumer Sentiment (p) 10:00 AM ET
EIA Natural Gas Report 10:30 AM ET
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Stocks are schizophrenic, i.e., they are hallucinating about reality form one day tothe next. Or is it simply the Plunge Protection Team at work? Is a gain in jobs good forthe economy and good for an interest rate cut or vice versa? We can twist the story anywhich way you want and the market will interpret it a different way on a different day. OnFriday, the news should have been bearish for stocks, but the UP-TREND is apparently verymuch intact. The report actually showed a revision from the data from previous months - sothe economy is really getting stronger? The unemployment rate edged higher to 4.7 percentfrom 4.6 percent in August. Nonfarm payrolls rose 110,000 vs. consensus of +100,000.
Forewarned is forewarned. Optimism is runnng rampant now and OVERALL things areprobably just fine, but there is SOMETHING COMING and when it does, we're going to see oneheck of a nosedive. Safe strategy? Wait until substantial downside volume appears or a'key reversal' occurs in the market before jumping on the short-side! I may be a weekearly, but I am not on a TIMER DIGEST 'Sell' signal!
One major news item that hasn't received much attention is the explosive growth of theworld's foreign exchange market, the first port of call, where capital is shipped overseasfor investment opportunities. Trade on global currency markets has jumped 71% ver the pastthree years and is now worth more than $3.2 trillion a day -- roughly equal to the entireannual economic output of the German economy.
What this all means, is that the rapid expansion of the global money supply isinflating commodity and stock markets, and the volatility of price swings will reach morefrightening proportions. Many years ago, gold and stock markets were inversely correlated,moving in opposite directions, because signs of inflation in the gold market led torestrictive monetary policies, which hurt the stock market. But nowadays, gold and globalstock markets are both moving upward, with rapid growth of the money supply lifting allboats. Since 2003, the price of gold and the Morgan Stanley All World stock index havemore than doubled in value, leaving fixed income bondholders in the dust.
The ratio of financial assets to physical gold is at the low end of a historical range.If you were to mark all the gold to market that has ever been mined, which is a veryconservative approach, and then take the valuation of all the global stock markets and allthe global bond markets, gold represents about 3%, compared with a figure in the mid-20%range in 1980, which was the top of the bull market in gold and the beginning of the bullmarket in financial assets Gold's bubble lies ahead. It has got a long way to inflate. Somuch about gold has very little to do with gold. It is more about capital-marketspsychology. If we are entering a period of difficult markets, it is going to changepsychology, and that will open the door for more people thinking about gold. What wasneeded to put gold in overdrive was the scent of fear.
That gets us to the magic number of $1,000 an ounce. I don't think it will take much. In1980 dollars, gold is less than half of its nominal price today. If you look at the lastfour to five weeks, gold has definitely taken off because of concerns about the relaxationof the Fed's monetary policy and the expectation there will be more of that. Of course,we've seen that not just in the gold price, but in the breakdown of the dollar on atrade-weighted basis. Gold's last major parabolic move to the upside occurred in April2006. That led to a meeting of the top-20 central banks in Basel, Switzerland in May 2006,where a concerted tightening campaign was declared. The threat of higher interest ratestriggered panic in the gold market, and the big gains in April were quickly wiped out thenext month. But the G-20 central bankers never raised interest rates high enough to slowdown the explosive growth of their money supplies, which eventually allowed gold to recoupits gains. It took awhile for gold traders to see through the G-20 central banker's gameof deception - "Smoke and Mirrors" where banks raise interest rates in babysteps, but never fast enough or high enough to slow down the velocity of money, i.e,borrowing, and therefore, never slowed down the growth rate of the money supply.
On the surface, the mainstream media reports on central bank tightening of interestrates. But below the surface, mainstream reporters have been silent about the accelerationof the money supply growth. Fed injections of cash into the banking system must also bemeasured against the amount of deposits or withdrawals by the US Treasury in its Tax andLoan accounts. Large size Fed money injections usually trigger big rallies for gold andthe DJI-30, and small repos lead to selling. In order for the Dow Jones Industrials toshrug-off signs of an impending recession, larger injections of cash are required to keepprices elevated in the stratosphere. Without hefty injections of cash, the liquidityaddicted markets begin to exhibit symptoms of withdrawal, and selling sets in to lock inpaper profits. European finance officials have little hope that "Plunge ProtectionTeam" commander in chief Henry Paulson, will agree to a stronger dollar against theEuro at the next G-7 meeting on October 19th.
THE PPT IS ENGINEERING AN ORDERLY OLLAR DEVALUATION TO BOOST THE EARNINGS OF S&P500 MULTINATIONALS THAT RECEIVE 44% OF THEIR REVENUE FROM OVERSEAS, MOSTLY EUROPE.
Still, the Fed can tweak the US$ market, by simply reducing the size of its daily repoinjections, to force a small round of short covering in the dollar, to maintain a two-waymarket, instead of a one-way market. This way, the New York Fed aims to engineer anorderly US dollar devaluation, and avoid a speculative rout. But the dollar's overalltrend remains bearish, while the Fed remains on course to lower the fed funds rate. Thereis a good shot that Bernanke Fed will lower the fed funds rate on Oct 31st and inNovember. A further Fed rate cut to 4.00% by December, would lift the gold market to $800an ounce.
On July 23, as the US Dollar Index tumbled to the psychological 80-level, Treasury chiefHenry Paulson tried to jawbone the dollar higher. "We feel very strongly that astrong dollar is in our nation's interest and the dollar's value should be determined in acompetitive marketplace based on economic fundamentals." Two months later, after theUS$ Index fell to the 78-level, Paulson repeated the same exact message. We see from thechart above, that a weaker US$ Index leads to a stronger DJI-30.
Strangely enough, the US Dollar is only holding steady against the Japanese yen, whilefalling against all other major and emerging currencies. Tokyo co-conspirators havemanaged to steady the dollar in a range between 114-yen and 116.5-yen, encouraging Yen'carry trade' to jump back into the Dow Jones Industrials. Thus, the DJI-30 gets liquidityinjections from two sources, the Fed and the Bank of Japan,a very favorable arrangement.
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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 #2 spot for 2007!
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VR TRADER.COM WATCHLISTS:
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.
http://www.volumereversaltrader.com/vr_pla.../GetVRChart.asp
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 10/05/07 - Sectors
*** Sectors Positive Volume Reversals ***
Automotive - Auto Parts
ATAC - Aftermarket Tech Corp
AXL - American Axle & Manufacturing
LEA - Lear Corp
SMP - Standard Motor Products
TEN - Tenneco Inc
Electronics - Semiconductor - Broadline
CY - Cypress Semiconductor Cp
INTC - Intel Corp
STM - STMicroelectronics NV
Electronics - Semiconductor Equipment & Materials
AMAT - Applied Materials Inc
CYMI - Cymer Inc
ENTG - Entegris Inc
IMOS - Chipmos Technologies Bermuda
MSPD - Mindspeed Technologies Inc
SPIL - Siliconware Precision Industries Inc
VRGY - Verigy Ltd
Electronics - Semiconductor - Specialized
ASTI - Ascent Solar technologies
CSIQ - Canadian Solar Inc
DSTI - Daystar Technologies Inc
UCTT - Ultra Clean Holdings
Leisure - Restaurants
BOBE - Bob Evans Farms Inc
CKR - CKE REstaurants Inc
JBX - Jack In The Box Inc
PZZA - Papa Johns International Inc
YUM - Yum! Brands Inc
Manufacturing - Farm & Construction Machinery
CAE - Cascade Corp
CAT - Caterpillar Inc
CMCO - Columbus McKinnon
GEHL - Gehl Co
MTW - Manitowac Co Inc
TEX - Terex Corp
Materials & Construction - Cement
TXI - Texas Industries Inc
Materials & Construction - Manufactured Housing
CHB - Champion Enterprises Inc
Materials & Construction - Waste Management
PESI - Perma-Fix Environ Svc
WWIN - Waste Industries USA Inc
Real Estate - REIT - Hotel/Motel
AHT - Ashford Hospitality Tr Inc
HST - Host Hotels & Resorts
Telecommunications - Wireless Communications
AMX - America Movil
ANEN - Anaren Inc
ANET - Authorize Net Hldgs Inc
CHU - China Unicom Ltd ADS
FTWR - Fibertower Corp
KNOL - Knology Inc
TDS - Telephone & Data Sys
USMO - USA Mobility Inc
Transportation - Railroads
CNI - Canadian National Railway
CP - Canadian Pacific Railway Ltd
GBX - Greenbrier Companies Inc
GSH - Guanshen Railway Inc
KSU - Kansas City Southern
RAIL - Freight Car America
UNP - Union Pacific Corp
WAB - Wabtec Westinghouse Air Brake
Transportation - Trucking
CNW - Con-Way Inc
FWRD - Forward Air Corporation
HTLD - Heartland Express Inc
KNX - Knight Transportation
LSTR - Landstar System Inc
ODFL - Old Dominion Freight Line
SAIA - SAIA Inc
WERN - Werner Enterprises Inc
YRCW - YRC Worldwide Inc
*** Sectors Negative Volume Reversals ***
**** NONE ****
Suggestions? Comments? on the newsletter service. We would like to hear from each andeveryone of our subscribers. Our email is mark@vrsurvey.com.
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.
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Do not duplicate or redistribute in any form
