STRONG US retail saies and WEAK US CPI could maintain the low interest rates mantra in Bernanke's upcoming speech today (14:00 GMT) at the expense of the US dollar. ALL traders will watch for this phrase in the speech. But EURUSD has yet to regain the $1.3685 resistance (76% retracement from Mar 17 high to Mar 25 low),a failure of which could see a retreat towards $1.3530. FX traders may grow suspicious of Greeces insistence to tap the bond markets, especially as questions remain about any additional conditions regarding the disbursement of the agreed-upon 30 billion euros from the EU
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By Nicholas Santiago on April 14th, 2010 10:39am Eastern Time
Today the market headlines were nothing more than sensational. Corporate earnings from Intel Corp. (NASDAQ:INTC), J.P. Morgan Chase & Co. (NYSE:JPM), and CSX Corp. (NYSE:CSX) were all better than analysts expected. Everything is great in the stock world again. Day after day the stock market climbs higher shaking off European concerns, housing troubles, and 16 year high office vacancies, to name a few negative problems.
One must ask, if everything is so wonderful why is the Federal Reserve Bank's fed funds rate still at zero percent? The Federal Reserve Bank stated in the minutes from the last FOMC meeting that they would leave rates at low levels for an extended period of time as long as there was not inflation. Many investors and traders know when a country has ten percent unemployment there is not going to be any inflation. Deflation is the problem.
Bank stocks have lead the rally since February 5th, 2010. Today J.P. Morgan Chase & Co. reported very good earnings. However, a huge amount of there money came from trading. This gives us insight on who is propping the markets up. The volume has been unusually light since the March 2009 bottom signaling that the retail investor is not participating in this bull rally. Currently the big banks can borrow from the Fed at zero and buy stocks and U.S. Treasuries to make money. This is one of the major reasons for this Bull Run over the last 13 months.
Is this type of action sustainable for the long term? The answer is simple; of course it is not. Former Federal Reserve Bank Chairman Alan Greenspan used the same technique in 2002 and 2003. Back then Greenspan lowered the fed funds rate to 1 percent and that created the greatest housing and credit bubble in 100 years. Now Fed Chairman Bernanke has lowered rates to zero percent. Rates have been down at this level for well over a year now. How much longer will the fed funds rate remain down here? Everyone knows that low rates lead to an asset bubble and inflation. We understand they would love inflation; however, can the markets survive the next bubble?
Nicholas Santiago
Chief Market Strategist
www.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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By ITMS News on April 14th, 2010 7:17am Eastern Time
J.P. Morgan Chase & Co (JPM) said its first-quarter net income was $3.3 billion, or 74 cents a share, compared to net income of $2.1 billion, or 40 cents a share, a year ago. Total net revenue was $27.7 billion. Analysts were expecting a profit of 65 cents a share and revenue of $25.9 billion.
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AUSSIE RETREATS as COPPER extends 1-week decline from its 20-month highs of +8,000/tonne. SEE CHART http://chart.ly/96k956 Fears that chinas copper purchases are increasingly used for stockpiling as well as the latest directive from Chinese regulators to rein in bank lending have triggered coppers sell-off. While care must be paid when shorting the Aussie, the emerging double top with the Nov 16 high (failing 0.94) suggests interim downside at 0.92, followed by 0.915. Considering our alerts with the peaking CRB (last week) and struggling oil prices, we may witness a case of energy prices leading metals on the downside.
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By Nicholas Santiago on April 13th, 2010 1:06pm Eastern Time
Everywhere we turn today we hear about the growth in China and India. These huge nations combined have nearly 2.4 billion people living in them. Therefore, as long as these countries continue to grow, their energy consumption should expand. These emerging countries have certainly been a major factor to the rising price in oil over the past year.
In July of 2008, spot crude hit a high of $147.00 a barrel. The catalyst for such a high price in oil was a weak U.S. Dollar along with global demand from China and India. Today crude is trading around $85.00 a barrel as China and India continue to grow and expand. Therefore, one must ask, why is oil so far below its 2008 high when the global markets have recovered so much and are back to 2008 levels?
The first reason for this move is the U.S. Dollar, PowerShares DB US Dollar Index Bullish (NYSE:UUP) . The dollar has gain in strength since late November, 2009. When the dollar is stronger most commodity and inflationary stocks will be kept in check. The second reason is the high amount of oil inventories that are in the marketplace. One can only wonder why in 2008 so many analysts and experts said we were near peak oil levels and today we are flooded with crude. Ah, what a difference a couple of years make. If global crude demand is truly picking up then oil should rise much further.
During the economic crisis we used to hear about alternative fuels and green shoots. Today we hear about more offshore drilling projects in the U.S., Brazil, and other nations. At the same time many people such as T. Boone Pickens and countless politicians made a case for natural gas to emerge as a new clean energy source. Natural gas can't seem to catch a bid as oil seems to be the energy of choice. What it really comes down to is simple, if oil is truly in demand it will rise. However, can the American and European consumer handle $90.00 oil prices? The answer to this question is, not for next few years.
Traders that want to play oil can use commodities contracts or Exchange Traded Funds. Traders can use the U.S Oil Fund (NYSE:USO) if they want to play the long side. For traders that want to double short oil can use the Proshares Ultrashort DJ-UBS Crude ETF (NYSE:SCO). If traders would like to play natural gas they can use the U.S. natural Gas Fund ETF (NYSE:UNG).
Nicholas Santiago
Chief Market Strategist
www.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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By Gareth Soloway on April 13th, 2010 12:19pm Eastern Time
International Business Machines Corp. (NYSE:IBM) is hitting a quad top level here at $129.00 on the intra day 10 minute chart. It is likely it will break out of that level. The next resistance would take IBM to the $129.30 area.
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By InTheMoneyStocks.com on April 13th, 2010 11:51am Eastern Time
The markets gapped slightly lower on the day as the earnings report from Alcoa Inc. (NYSE:AA) lagged expectations. While earnings were in line with what analysts had expected, revenue did come in light. With pricing increases over the quarter, this brings to mind weakness in demand as the culprit. This worried Wall Street and Alcoa Inc. is lower on the day by 2.06%.
All eyes now shift to Intel Corporation (NASDAQ:INTC) which reports after the close. Earnings expectations are for $0.38 per share while the whisper number is for $0.41. Intel Corp. has moved dramatically higher over the last few months and will need a stellar report to boost the stock price further. Margins as well as revenue numbers are going to be watched closely.
As a technical trader, the top play of the day was the hit of the 200ma, on the intra day 10 minute chart, on the SPDR S&P 500 ETF (NYSE:SPY). I gave this to my members as an optimal long play. Sure enough, the bounce came in beautifully. Profits were had by all. What is encouraging about today is the slight increase in volume. Yesterday, the SPY barely did 100 million in volume. Today, with the earnings news from Alcoa, we should push through that level easily. In addition, each day going forward, should see more volume as options expiration, earnings and economic news increase. Swing trading and day trading should be fantastic.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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By InTheMoneyStocks on April 13th, 2010 9:20am Eastern Time
The U.S. Dollar Index declined sharply since 5:00 am EST. The dollar index is down 0.21 cents this morning to 80.34. When the dollar is lower before the New York Stock Exchange opens the stock index futures will usually trade higher. However, once the stock market opens the overall indexes will usually trade inverse to the dollar. Therefore, if the U.S. Dollar declines expect stocks to catch a bid and the opposite to happen should the dollar rise.
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Greece successfully raised 1.2 billion euros of 6 and 12-month T bills today, with an interest rate at below 5%. While we mentioned $1.3780-00 as the resistance point, EURUSD may be facing a lower obstacle at $1.3720, 23% of the decline from the $1.5130 high to the $1.3276 low. US earnings season kicks off this week, with the simultaneous release of US retail sales, industrial production, Philly Fed and housing starts. GBPUSD regains $1.54 after a bigger than expected decline in UK Feb trade deficit. Cable to attempt retesting the $1.5450s, but do keep close watch on the last weeks shootingstar candle, which may imply emerging bearishness later this week.
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GBPUSD SHOOTING STAR on the daily candle is classic bearish pattern, which is illustrated on the Bloomberg terminal (based on 18:00 London --17:00 GMT closing). Despite a break above $1.5340 to $1.5480s, in Monday morning Asia (which was largely driven by Monday morning gap-ups in Asia) offers were heavy at $1.5420s, which markets the 38% retracement of the decline from the Jan 19 high to the Mar 25 low. The only caveat on this particular shooting start is that the body does not gap higher above the high of the previous day. The When using Reuters data, however, which is based on NY afternoon, the price pattern shows a large down day at the top of the prior candle. The possibility for sub $1.53 is suggested by cable, followed by $1.5170 later in week.
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