By Nicholas Santiago on May 4th, 2010 3:22pm Eastern Time
Yesterday the Dow Jones Transportation Index made a new 52 week high. Many traders and investors will often key off the transportation index as a leading indicator for the health of the economy. Today the Dow Jones Transports Index ETF (NYSE:IYT) has declined by more than 4.00 percent. Today's sharp move lower on the index has now engulfed the prior 13 trading days on the daily chart to the downside. This is a bearish signal for the markets anyway you slice it or dice it.
Major leading air cargo transport stocks such such as Federal Express Corp (NYSE:FDX), United Parcel Service Inc (NYSE:UPS) are sharply by more than 3.00 percent. When these leading stocks decline, traders listen.
Rail road stocks such as Norfolk Southern Corp (NYSE:NSC) is another major transport name that has dropped today by more than 2.00 percent. Meanwhile, Ryder System Inc (NYSE:R) is a major trucking company that is trading lower by nearly 4.00 percent.
It is always important to follow the transportation average. When this index declines traders and investors will listen and pay attention. Transports have long been know as a leading indicator for the health of the economy. When the transports decline watch out below and trade with caution.
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2010.05.04
By Ashraf Laidi
The dollar index is set to start its longest MONTHLY winning streak since Jan-June 1999, a year when the USD bullishness and euro gloom was at its maximum
Note: This article contains image(s)
Starting the month on a high note, the US dollar index could be in for the 6th consecutive monthly gain, which was last seen in Jan-June 1999. Similar to today, 1999 was characterized by contrasting growth prospects between the US and Eurozone as well as escalating doubts with an overvalued euro, high ECB interest rates, and a Germany still reeling from the Asian crisis. (see chart below)
Read the rest of this article at AshrafLaidi.com.
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By Gareth Soloway on May 4th, 2010 12:02pm Eastern Time
The writing was on the wall and most of my previous articles over the last week told the Street this was the case. In recent days, I talked about the metal stocks like AK Steel Holding Corporation (NYSE:AKS), Southern Copper Corporation (NYSE:SCCO) and United States Steel Corporation (NYSE:X) being a leading indicator for this market. These metal stocks dropped sharply in recent weeks. When the metal stocks rally, it shows economic activity, in fact, it is one of the best signals of economic activity. The fact that these stocks have been crushed in recent weeks was a tell tale sign the market was near a dramatic fall.
In addition, I noted this same signal on the agriculture stocks like Monsanto Company (NYSE:MON), The Mosaic Company (NYSE:MOS) and Potash Corp. (NYSE:POT). These again are major leading indicators of economic activity. The key about the metal and agriculture stocks is not that there is no economic activity out there, it is more the organic growth that is missing. The economy has recovered somewhat based purely on massive government stimulus spending. Again, the problem with that is that it is not sustainable and the metal and agriculture stocks have been telling us this.
The best signal of all came last Tuesday. Last Tuesday the InTheMoneyStocks confirmation signal was triggered to the downside. Ever since then, the market was shortable on every bounce. It has worked like a charm. Understanding the technical signals is number one in this market along with reading the the metal and agriculture stocks.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
To get more in-depth analysis, along with exact entries/exits, swing trades, and scalp trades, join our Research Center or Intra Day Stock Chat NOW and join the ranks of the Pros!
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GOLD HITS NEW RECORD vs. JPY at 112,670 yen, breaking the old December high as the yellow metal SHRUGS FALLING COMMODITIES due to ongoing sovereign uncertainty. The last time GOLD touched a new record in YEN TERMS was in 1st week of December when it was followed by pullback later that week on stronger than expected US Nov jobs. But this time GOLD vs USD may be supported due to ongoing uncertainty with Eurozone sovereign paper but do keep a close watch. GOLD vs. AUD hits AUD 1,300, which is AUD15 away from the Nov high. A break above it, would call up the highs from March 2009. GOLD/SILVER ratio eyes 64. EURUSD eyes 1.3015 but more downside seen in AUDJPY, NZDJPY as per the tweets http://twitter.com/alaidi **** Latest HOTCHART on AUDUSD is now up *** http://bit.ly/bsVQuYRead more…
By Gareth Soloway on May 3rd, 2010 11:46am Eastern Time
The markets are bouncing back today after a $145 billion bailout of Greece and no further negative news on Goldman Sachs Group, Inc. (NYSE:GS). The dollar has surged all morning as most economists and traders expect Greece to just be the tip of the iceberg. Portugal and Spain are next on the list of countries in Europe that may need a bailout. The list can go on and on. Many are comparing Greece to Bear Sterns in the financial meltdown. If that is the case, then who is going to be the Lehman Brothers of the debacle.
Goldman Sachs is bouncing today, solid backing from Warren Buffet over the weekend has helped quiet the fears. Buffet continues to think Goldman Sachs did nothing wrong. Financial companies are strong today as the fear is subsiding. JPMorgan Chase & Co. (NYSE:JPM) is higher by 2% while Wells Fargo & Company (NYSE:WFC) is up 1.5%.
The metal stocks continue to be under an insane amount of pressure. Even with the market higher, United States Steel Corporation (NYSE:X) is down over 3%, AK Steel Holding Corporation (NYSE:AKS) is lower by 2.5% and Southern Copper Corporation (NYSE:SCCO) is down a whopping 4.25%. Part of this is the strength in the U.S. Dollar as the PowerShares DB US Dollar Index Bullish (NYSE:UUP) is up 0.71% but the other worry is that these stocks are telling us the recovery is not all it is cracked up to be. I have written several articles about the metal stocks lately, prior to the markets fall. In them, I discussed how they were falling and it was a leading indicator or the market. The analysis looks to have been dead on. AK Steel has solid support at $16.25 and then $15.00. U.S Steel has good support at $53.00 and $50.50 and Southern Copper has good support at $29.30 and $28.00. Keep an eye on these levels to find a short term bouncing opportunity.
The markets continue to hold slightly to the upside. Volume has returned to the light side which helps keep the markets floating. Watch the financial stocks for a short term market bias and the metal stocks for a longer term bias.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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By Gareth Soloway on May 3rd, 2010 12:20pm Eastern Time
While the markets are posting a solid day of gains, agriculture stocks continue to be weak. These stocks, along with the metal stocks have shown significant weakness in the last couple months. This is counter intuitive as supposedly the economy is roaring again. Part of the issue is the dollar, the other portion is most likely a leading indicator that the economy, minus government massive spending, is not as strong as Wall Street believes.
Potash Corp. (NYSE:POT) is down in the last two months from a 52 week high of $128.42, now trading at $108.23. It is trading down 2.05% today. The Mosaic Company (NYSE:MOS) has not seen its 52 week highs since January, even though the markets have soared to new highs since then. The stock is trading at $50.50, down from a January high of $68.28. Lastly, Monsanto Company (NYSE:MON) is a sight to see. Truly an ugly chart, well off the January highs of 87.06, now trading at $63.00. It has had only a handful of up days since January and the monthly and weekly charts look like a breakdown is in play.
While the downside move in the agriculture plays is obvious, the real key here is to understand what this is telling us about the future. The dollar continues to be strong and that is a negative for these stocks, however, the bigger picture revolves around the tell tale signs on the economy. If these stocks cannot rally, demand is slowing. If demand is slowing, eventually Wall Street may see this and a fall could occur.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
To get more in-depth analysis, along with exact entries/exits, swing trades, and scalp trades, join our Research Center or Intra Day Stock Chat NOW and join the ranks of the Pros!
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ECB SPURNS CREDIT RATING AGENCIES BY ACCEPTING JUNK status bonds from Greece after suspending the minimum credit rating required for Greek government-backed assets used in ECB liquidity-providing operations. Until today, the ECB had required that Greek (and other) Eurozone govt debt to have an investment grade rating by at least one of the 3 major credit agencies. With S&P having downgraded Greek debt to junk status last week, the ECB will not run the risk of seeing Moodys and Fitch doing the same and rendering Greek debt ineligible for ECB collateral. The decision constitutes an ECB EASING and a vocal rebuff to the agencies, especially after several bank officials criticized the timing of S&Ps junk downgrade. The final EU/IMF aid package is EUR 110 bln (not EUR 135 bln). EURUSD briefly broke above the Apr 15 trend line but quickly reverts to $1.3230. Pair is vulnerable to $1.3170, followed by $1.3120. Rebounds will be increasingly short-lived, especially as markets expect renewed ECB dovishness in Thursday's press conference. $1.3390 and $1.3530 remain the major resistance levels.
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CHINA RAISED RESERVE REQUIREMENT on May Day Weekend by 50-bps to 17%, making its third tightening of the year. The last tightening was announced on February 19, on the eve of the Lunar Year Holiday. Although most Asian markets are closed for May Day holiday, JPY did spike higher across the board before later stabilizing. With Europe set to close on Monday, US markets will show their own reaction to the EU and China moves. 135 bln is the latest figure of the emergency aid in loans to Greece over 3 years, 80 bln of which will be given by Eurozone nations and the remaining 55 bln from the IMF. But markets are focusing on whether Greece can survive the severe austerity policies imposed on it (8% cut in public sector salaries, 2% rise in VAT to 23%. EURUSD extended bounce to $1.3360, but $1.3380 remains the interim ceiling. USDJPY may add to gains towards 94.50 but AUDJPY recovery seen capped at 87.30 before gradual retreat towards 85.50s.
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