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Presented by Nick Santiago February 01, 2013 10:28AM
Last week, the S&P 500 Index reached and breached the psychological 1500.00 level. Today, the Dow Jones Industrial Average (DJIA) is trading higher into the important 14,000.00 level. The DJIA is the level that the public will follow most closely. Remember, the average person that works a nine to five job will turn on the evening news and hear what the stock market is doing in terms of the DJIA. If you ask most people in the public what the Russell 2000 Index is they will most likely not have a clue what it is.
This coming Sunday is the National Football League's Superbowl Sunday. This day has almost become a national holiday in the United States. What better way to get people to spend money than to have the DJIA close at or above the 14,000 level by the end of the trading session. It is important to note, if this entire money printing stimulus by the central banks is going to work for a while it will need the U.S. consumer to spend money. Consumer spending accounts for roughly 70.0 percent of the gross domestic product in the United States.
Right now, the stock markets seem to be somewhat euphoric. Bad economic news is now good news and good news is now great news. The major stock indexes are all overbought at this time, however that does not mean that they cannot climb higher. Usually, when public gets back involved in stocks it is when a major correction will take place. After all, the large financial institutions need to have someone to sell to.
Some leading index funds that are rallying higher today include the ProShares Ultra S&P500 (ETF) (NYSEARCA:SSO), ProShares Ultra QQQ (ETF) (NYSEARCA:QLD), ProShares Ultra Russell2000 (ETF) (NYSEARCA:UWM), and the ProShares Ultra Dow30 (ETF) (NYSEARCA:DDM). Watch for Dow Jones Industrial Average to reach that psychological 14,000 level by the closing bell. The last time the DJIA traded this high was in late 2007.
Nick Santiago
www.InTheMoneyStocks.com
This coming Sunday is the National Football League's Superbowl Sunday. This day has almost become a national holiday in the United States. What better way to get people to spend money than to have the DJIA close at or above the 14,000 level by the end of the trading session. It is important to note, if this entire money printing stimulus by the central banks is going to work for a while it will need the U.S. consumer to spend money. Consumer spending accounts for roughly 70.0 percent of the gross domestic product in the United States.
Right now, the stock markets seem to be somewhat euphoric. Bad economic news is now good news and good news is now great news. The major stock indexes are all overbought at this time, however that does not mean that they cannot climb higher. Usually, when public gets back involved in stocks it is when a major correction will take place. After all, the large financial institutions need to have someone to sell to.
Some leading index funds that are rallying higher today include the ProShares Ultra S&P500 (ETF) (NYSEARCA:SSO), ProShares Ultra QQQ (ETF) (NYSEARCA:QLD), ProShares Ultra Russell2000 (ETF) (NYSEARCA:UWM), and the ProShares Ultra Dow30 (ETF) (NYSEARCA:DDM). Watch for Dow Jones Industrial Average to reach that psychological 14,000 level by the closing bell. The last time the DJIA traded this high was in late 2007.
Nick Santiago
www.InTheMoneyStocks.com
Stocks are trading flat to slightly lower on extremely light volume today. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is trading at $149.92, -0.16 (-0.11%). At this stage of the day, markets are in a floating pattern until tomorrow when the Non Farm Payrolls and Unemployment Report will be released. This will happen at 8:30AM ET. The markets are looking for further guidance after yesterday's GDP Report came in weaker than expected. Most analysts chalked the weak GDP number, up to the Fiscal Cliff worry and other things. Tomorrow will enlighten the markets even more.
Facebook Inc (NASDAQ:FB) opened lower today at $29.15, down over $2.00 from the close yesterday. Fourth quarter earnings were released and initially disappointed investors. However, the market continues to see bidders rushing for any name brand stock. Facebook has climbed all the way back to the flat line on the day. It is trading at $31.16, -0.08 (-0.26%).
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
As everyone can see, the stock markets around the world have exploded higher. It really does not matter if you look at the London FTSE 100, German DAX, Shanghai Index, Nikkei 225 Index, Dow Jones Industrial Average, or even the Athens Stock Exchange (ASE), they are all surging higher. What is the one factor that all of these economies have in common? It is simply money printing. All of the central banks that control the currencies of these nations are printing money like never before.
The Federal Reserve made this popular many years ago, however, they took money printing to new all-time levels since the credit crisis began in 2007. Since that time, the Bank of London, People's Bank of China, Bank of Japan, Swiss National Bank, European Central Bank, and others have continued to inflate their equity markets by implementing easy money policies (essentially money printing). Can central bankers simply print money forever? The answer to this question is no, but at this time it seems that they will continue to print money into the foreseeable future.
The Federal Reserve made this popular many years ago, however, they took money printing to new all-time levels since the credit crisis began in 2007. Since that time, the Bank of London, People's Bank of China, Bank of Japan, Swiss National Bank, European Central Bank, and others have continued to inflate their equity markets by implementing easy money policies (essentially money printing). Can central bankers simply print money forever? The answer to this question is no, but at this time it seems that they will continue to print money into the foreseeable future.
Obviously, we all know that there is a price to pay when a currency is artificially deflated. The usual and most common effect will be inflation. Inflation will help to lift the value of asset prices, so many investors may think that is good. The downside is that it will make the price of goods that people need to survive more expensive. Food, oil, gasoline, heating oil, jet fuel, and other energy products will increase. Commodities such as copper, iron ore, and building materials will also inflate in price making products more expensive for everyone.
The other negative that will occur when there is this much monetary easing taking place around the world is another global stock bubble. Generally, the bigger the bubble is when it is being created the bigger the decline will be when the bubble pops. For example, just look at the bubble that was created in the late 1980's in Japan. In January 1990, the Nikkei 225 Index traded as high as 39,922.00. Today, the Nikkei 225 Index trades around the 11,100.00 level. It is safe to say that the Japanese markets have faced deflationary pressures for over 20 years. Now, the Japanese are trying to inflate their stock markets on a daily basis. They are doing this to try and boost their exports as goods become cheaper outside of their own country. Almost every country on the Earth that has a central bank is trying that same method right now. In the short term, it will boost the markets, but in the long term there will always be a price to pay. Unfortunately, the price could be a long twenty plus year sluggish economy.
Another negative for all of this money printing could just be a lack of faith in a nation's currency. Once that happens hyper-inflation can occur and that is when goods and products will explode higher in price. According to Wikipedia, hyperinflation occurs when a country experiences very high, accelerating, and perceptibly "unstoppable" rates of inflation. Many countries have experienced this in the past. Some notable countries that have experienced hyper-inflation are Germany, Argentina, and recently Zimbabwe. It is not fun when you need a month's worth of wages to buy a loaf of bread.
The United States is the world's reserve currency. This means if you are Japan, China, Russia, or any other country that does not use U.S. Dollars for trade you will need to convert that capital into U.S. Dollars in order to buy oil, gold, copper, wheat, or any other commodity. If other nations ever lose faith in the U.S. Dollar there could be serious problems around the world. Already, there are countries such as China and Brazil initiating trade deals with each other, so there could always be a problem brewing in the future.
Gold and precious metals have exploded higher over the past thirteen years. In 1999, gold was trading around the $250.00 level. Today, gold trades around the $1600.00 level after reaching a high of $1923.70 an ounce on September 6, 2011. What is gold telling us? Gold is telling us that many smart people are losing faith in fiat currencies such as the U.S. Dollar and all other printed money. You see, you cannot print gold, it must be taken from the earth and it is very difficult to get. Recently, Germany has asked for some of its gold deposits back from the New York Federal Reserve. Could this be a sign of things to come? Perhaps, but in the meantime the central bankers are printing a lot of money.
There is a preliminary head and shoulder pattern on the PowerShares DB US Dollar Index Bullish (NYSEARCA:UUP). This is the Dollar tracking ETF and I use it because most average investors can view this chart easily. A head and shoulder pattern is a bearish pattern that triggers when the neck-line is broken to the downside. Because the Dollar and markets are inverse, this may suggest, should it trigger, the markets have another leg higher. Please note, it has not triggered. In addition, one of the intriguing catches to head and shoulder patterns is that they can fail very easily, when they are at the lows of the chart. This head and shoulder pattern is at a low. Should a head and shoulder pattern fail, look for a strong reversal in the Dollar.
The markets and the Dollar trade inverse to each other. The Dollar leads the markets. Therefore, this pattern is extremely important to watch as it controls the future of the markets.
As a Chief Market Strategist, I pride myself on being able to nail every major and minor market move. As I study the charts I find myself not trusting this bearish Dollar pattern for multiple reasons. Even if the head and shoulder pattern triggers to the downside (which implies huge upside in the market) I would wager it will fail. Often times the most obvious patterns fail because the average investor is alerted to them. As we have learned time and time again, the average investor is screwed by the institutions.
I will continue to watch the pattern closely to see if it triggers. Even if it triggers it must be watched extremely carefully to see if it fails. Failure means a big multi week/month pop in the Dollar and downside in the markets. Please note that failure would occur if the neck-line is closed back above on the daily chart after it triggers with a close below.
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Related: CurrencyShares Euro Trust (NYSEARCA:FXE), CurrencyShares Japanese Yen Trust (NYSEARCA:FXY).
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
This coming Friday is the monthly options expiration for January. Often, many traders will experience a lot of volatility during the four trading sessions before expiration. These trading sessions will be filled with rumors, and countless upgrades and downgrades. Some of the rumors might be true, however, most will not. This is simply just one of the ways the large institutions can move stocks in their favor.
Why would they do this? It is simple, the large market moving institutions know that most retail options traders are simply buying call and put options on the near term expiration. The retail options trader does this because the options are cheap. You see, the further out the option is in time the more expensive it is for the trader. On the flip side, the closer the option is to the expiration date the cheaper it is. So, the institutional traders will try and figure out the imbalances in the near term expiration and move the equity in the opposite direction of the majority small retail options traders. For example, if there are a lot of call options bought in a particular stock by a large amount of retail traders, the large institutions will drive stocks in the opposite direction and make those options expire worthless or out of the money. This type of action happens every month during the third week of the month.
How do the institutions know what the small retail options trader is betting on?
Simple, the institutions watch the options chain with sophisticated computer programs and see where the small number of contracts are bought. Large institutions buy thousands of contracts at a time, meanwhile the small retail options trader buys between one and twenty contracts. Believe it or not, this is not really difficult for them to do. Once they see a large imbalance in a particular equity they will take that stock in the opposite direction. Just look at how many bullish call options there were when Apple Inc (NASDAQ:AAPL) was trading just over $700.00 a share. Soon after that high print in Apple Inc stock it rolled over by more than 200.0 points to $505.00 a share. It is safe to say that those call options expired worthless.
Rumors will notoriously occur this week. Today, there have been rumors about Apple Inc, Dell Inc (NASDAQ:DELL), and Hewlett-Packard Company (NYSE:HPQ) just to name a few. Some other leading equities that will usually be very volatile during the week of options expiration will be First Solar Inc (NASDAQ:FSLR), Green Mountain Coffee Roasters Inc (NASDAQ:GMCR), and Netflix, Inc (NASDAQ:NFLX).
Traders should also watch for upgrades at highs and downgrades at lows by major banks and brokerage firms. This is another common way that the large institutions can move stocks in the direction that they are betting. Traders should always be on guard this week as options expiration approaches.
Nick Santiago
www.InTheMoneyStocks.com
Presented by Gareth Soloway January 13, 2013 12:02PM
This past week saw the biggest capital inflows into mutual funds in 11 years. Mutual funds are the most commonly used investment vehicles of the average investor. Unfortunately, the average hard working Americans are the ones that buy near highs and sell near lows. This means that smarter, well informed investors and traders should take note, if this is a trend. The markets may not move higher for long.
The average investor gets swept up in the hype of Wall Street. They are ruled by emotion and are always late to the party. Buying at highs and selling at lows is an emotional response, never a smart logical one. The markets are coming off a five-percent rally the previous week as the tax side of the Fiscal Cliff was solved. In addition, markets are trading just a few percent from their 52 week highs. This would not be considered a 'on sale'.
Use this example to draw the comparison: The average investor goes to Macy's to do some clothes shopping. Instead of looking for jeans on sale at 50% off, they buy the jeans that were just raised 50%. Another example would be buying milk at the grocery store. The average investors mentality is to be happy paying $9.99 for a gallon of milk yet not buy milk when it is on sale for $1.99. It makes little sense but emotion seldom does.
The massive inflows into mutual funds should continue for a few more weeks. This may keep the markets up into the end of January, through earnings season. However, the bad timing and inability to grasp buying at lows has most likely doomed the average investor again. Once the middle class money is in, the markets will head down until they run for the safety of cash. This is the classic transfer of wealth the media never speaks about.
Gareth Soloway
Chief Market Strategist
www.InThMoneyStocks.com
The average investor gets swept up in the hype of Wall Street. They are ruled by emotion and are always late to the party. Buying at highs and selling at lows is an emotional response, never a smart logical one. The markets are coming off a five-percent rally the previous week as the tax side of the Fiscal Cliff was solved. In addition, markets are trading just a few percent from their 52 week highs. This would not be considered a 'on sale'.
Use this example to draw the comparison: The average investor goes to Macy's to do some clothes shopping. Instead of looking for jeans on sale at 50% off, they buy the jeans that were just raised 50%. Another example would be buying milk at the grocery store. The average investors mentality is to be happy paying $9.99 for a gallon of milk yet not buy milk when it is on sale for $1.99. It makes little sense but emotion seldom does.
The massive inflows into mutual funds should continue for a few more weeks. This may keep the markets up into the end of January, through earnings season. However, the bad timing and inability to grasp buying at lows has most likely doomed the average investor again. Once the middle class money is in, the markets will head down until they run for the safety of cash. This is the classic transfer of wealth the media never speaks about.
Gareth Soloway
Chief Market Strategist
www.InThMoneyStocks.com
