The VRTrader.com VR Silver Newsletter - Monday10/29/2007
"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 29, 2007
TRICK OR TRICK COME WEDNESDAY?
Economic Data and other events scheduled for October 29 - November 2:
---------------------------------------------
MONDAY, October 29:
Treasury auctions 3 & 6-month bills (1 pm ET)
---------------------------------------------
TUESDAY, October 30:
Weekly Chain Store Sales (8:55 am ET)
Consumer Confidence Index for October (10 am ET)
2-day FOMC Meeting begins (2:30 pm ET)
---------------------------------------------
WEDNESDAY, October 31:
TRICK OR TREAT!
Gross Domestic Product (GDP) for Q3 (8:30 am ET)
Employment Cost Index for Q3 (8:30 am ET)
Treasury announces 10 & 30-year auctions (9 am ET)
Chicago PMI for October (9:45 am ET)
Construction Spending for September (10 am ET)
EIA Petroleum Status Report (10:30 am ET)
FOMC Meeting - policy statement (2:15 pm ET)
---------------------------------------------
THURSDAY, November 1:
Personal Income & Consumption Exp. for September (8:30 am ET)
Weekly Initial Jobless Claims (8:30 am ET)
ISM Index for October (10 am ET)
Pending Home Sales for September (10 am ET)
Auto Sales for October
Weekly Money Supply (4:30 pm ET)
---------------------------------------------
FRIDAY, November 2:
Employment Report for October (10 am ET)
Factory Orders for Septebmer (8:30 am ET)
---------------------------------------------
As I told you last week, though we have internal problems in our economy due to housingand a credit crunch, but we also have a very proactive Federal Reserve Chairman, BenBernanke, who is a student of the stock market crash of 1929 and the Great Depression andhas vowed that it will never happen again. As a result, he and Henry Paulson through thepower of Goldman Sachs, the US Treasury's Plunge Protection Team, and allies at the Bankof Japan have created a 'financial engineering' scheme to support the US and world marketsthat follow us. Lower interest rates, a M3 money supply growth rate at record levels(15%), repo operations, and the 'Yen Carry' trade are all contributing factors in thissupport process.
Why should anybody care about what happened in the stock market 20-years ago? It shouldmake no difference that a week ago Friday marked the 20th anniversary of the 1987 stockmarket crash, which wiped 23% off the Dow Jones Industrials in its worst ever day. InOctober 1987 - by the end of the month, the Australian market was 42% lower, Hong Kong was46% down, before shutting its doors for several days, and the London Footsie-100 Index wasoff 26%, after the average price-to-earnings ratio of shares in the FTSE-100 had doubledin the previous five years.
Markets do have memories, though. They are measured by chart patterns, which are thescore-keeper of mass psychology, distilling into a single number the accumulated greed andfear of every investor in the world. The uncanny tendency of markets to bounce offresistance and support levels shows that, at some as yet unfathomed depth of the investingbrain, history matters. The cause of the 1987 crash was blamed on computerized programtrading, after S&P 500 futures contracts gapped 36-points lower. That would be theequivalent of a 300-point lower opening today. Arbitrageurs betting on differences betweenthe cash market in New York and futures in Chicago exacerbated the scale of the carnageonce it had begun. The US dollar had been falling all year and comments from TreasurySecretary Jim Baker, in the wake of a rise in German interest rates, suggested the declinemight turn into a rout. In addition, Alan Greenspan saw fit not to cut interest ratesmaking his debut as Federal Reserve chairman a mockery of the position.
However, Ben Bernanke is a student of history and swore never to let the 1929 (orsimilar) crash ever unfold again.
And, Henry Paulson is a close ally. The PPT is busy at work, injecting huge sums ofcash into the hands of Wall Street agents, who are authorized to buy DJI-30 stock indexfutures after sharp market sell-offs. The PPT rescued the DJI-30 from a 200-point loss onOctober 24th, following news that US home sales plunged 8% in September to a record low,and the national median existing home price for both single-family and condos dropped 4.2%from a year ago to $211,700.
We are now in a seasonally strong market period and the result will be higher stockprices. This week also hosts end of the month 'window dressing' and the infusion of new401(k) funds come November 1. Beyond that, it has been determined by the 'powers that be'above that a strong stock market is necessary to instill investor confidence in thefinancial markets and to help offset declines in housing prices. I have previously toldyou there is no reasonable limit to how high prices will be taken to accomplish this goal.In fact, they may 'take it to the limit'. Will a Dow Industrials at 16,000, 17,000, or20,000 be sufficient? I suspect all are possible in 2008 - the last year of a Presidentialadministration - one that is traditionally strong!
As you know, next Wednesday the FOMC announces its interest rate decision. Will it beTRICK OR TREAT? A 50 bps cut is warranted because the term structure is still quiteinverted at the short end, with the Funds target at 4.75%. But the 3 month bill at 3.94%and the two year at a new 2+ year low of 3.77%. To flatten the curve, the Fed must movethe target rate down to 4%, a 75 bp cut - a possibility by year-end - though it may comein stages.
Further interest rate cuts will clearly help precious metals along with the weakeningDollar. We may see gold enter the $800 to $825 range in the next few weeks. And, aweakening Dollar should provide a wind at the back for US equities as well. Remember, thestock market loves a weak Dollar, even though government officials jawbone just theopposite viewpoint to sound patriotic.
I remain on my TIMER DIGEST 'Buy' Signal and for those of you who have been tracking mysignals this past year or two, it is clear these timing calls have been near bullseye -way in front of any other market analyst, firm or commentary. Will we stay in the #1Position forever? Of course not, but I promise to give the competition something to worryabout.
Talk of the US economy sliding into recession is at the top of the discussion list. Theunwinding of the leverage subprime housing market, a downturn in residential housing, acoincident reduction in consumer spending, accelerating inflation as the FOMC cutsinterest rates along with the decline in the Dollar are all expressed as concerns. Why doI not share those concerns? It's simple. It's called 'Financial Engineering', a phrase Icoined and have used extensively in these commentaries.
Inclusive therein is the role of the Bank of Japan. On Oct 11th, Bank of Japan chiefGovernor Toshihiko Fukui said nervous global
financial markets and problems in the US housing sector were delaying his push to raiseJapan's ultra low rates towards more normal levels. "Conditions in the US andEuropean markets have improved, but they are still unstable. We would like to continuemonitoring the condition of both in a timely manner," he said. On Oct 4th, BoJ deputyKazumasa Iwata, stressed downside risks for Japan's export-driven economic growth, amongthem the increased chance of a further US economic slowdown and still jittery financialmarkets. "We need to be aware that stock price falls and the yen's rise, ifsustained, could have a negative effect on Japan's economic outlook," Iwata said.Soon after Iwata's warning, the US dollar tumbled by 3-yen to 114-yen, which subtractsfrom earnings of Japanese exporters, knocking the Nikkei-225 index 1,000-points lower tothe 16,200 level. The Nikkei was also hit by a double whammy, with crude oil soaring above10,000-yen per barrel, for the first time in history.
Ironically, the Bank of Japan's ultra-low interest rate is fueling global inflation,and the historic rise in crude oil prices. Global speculators can borrow funds in Japaneseyen at 1% to buy commodities and stocks around the world. Yet nobody is holding theirbreathe waiting for the Bank of Japan to hike its ultra-low interest rate.
Famed commodity trader, Jim Rogers, said on Oct 23rd, he is shifting all his assets outof the dollar and buying Chinese yuan. "I'm in the process of getting all of myassets out of US dollars," said Rogers, who correctly predicted the commodities rallyin 1999. "I'm that pessimistic about what's happening in the US. The US economy isundoubtedly in recession," It's the official policy of the Federal Reserve and the USTreasury to debase the US currency." "That's in the process of changing. Thepound sterling, which used to be the world's
reserve currency, lost 80% of its value, from top to bottom, as it went through the wholeperiod of losing its status as the world's reserve currency. The Chinese yuan, is the bestcurrency to buy right now. I don't see how one can really lose on the yuan in the nextdecade or so. It's gotta quadruple."
Folks, you can take these words to the bank!
---------------------------------------------
--------------------------------------------
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!
---------------------------------------------
VR TRADER.COM WATCHLISTS: Please note: The VR Watchlist is currently now onlyavailable via the VRTrader.com website accessed via your assigned username and password.Please email mark@vrsurvey.com if you misplaced that 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 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 10/26/07 - Sectors
*** Sectors Positive Volume Reversals ***
Electronics - Semiconductor - Memory Chips
MIPS - Mips technologies Inc
MU - Micron Technologies Inc
Real Estate - Mortgage Investment
CBF - CBRE Realty Finance Inc
CFC - Countrywide Financial
RWT - Redwood Trust Inc
Wholesale - Computers
IM - Ingram Micro Inc
PMRY - Pomeroy IT Solutions 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.
Copyright © 2007 VRTrader.com.
Do not duplicate or redistribute in any form.
