By Gareth Soloway on March 30th, 2010 12:04pm Eastern Time
The markets started the day with a small gap higher and quickly added to the gains on light volume. It seemed as if the DOW would make a run at the 11,000 level. Consumer Confidence was reported at 10:00am ET, showing a small positive increase. The index that measures the general publics opinion on the economy and how healthy they feel, rose to 52.5 in March from 46.4 in February. This was slightly ahead of expectations.
While this may have seemed like good news, the markets paid little attention. We are seeing good news not be a key driver of market gains. Rather, the gains of late are coming on rotation of money into stocks as money managers have chased the market into the quarter end, as well as extreme light volume issues. Today, the Consumer Confidence number gave the markets an initial thrust higher but quickly started to drop. The drop was sharp, but not because of the Consumer Confidence. Instead, it was because the dollar started to inch higher and yields moved towards 4.00%. These two factors triggered some solid selling volume and took the markets to the negative side.
The markets slammed into the lows from yesterday and have since bounced, as volume has stalled and the dollars rise has also stalled. Interest rates do seem to be on the forefront of the markets worry. Many still believe the DOW will be pushed to the 11,000 level by the end of the holiday shortened week. Volume will continue to get lighter and it will not be hard to hold the markets up or push them higher. The markets will await the Jobs Report on Friday, even though the markets are closed.
Apple Inc. (NASDAQ:AAPL) surged yesterday after hours on a report that they may have a new Iphone coming out with Verizon. The stock traded over $238 yesterday after hours but today is having trouble holding those gains. It is trading near the $236 level up 1.60%. The interesting thing about Apple Inc. from a technical standpoint is the inability in the last two trading days to hold gains. Yesterday, Apple gapped higher and closed near the lows of the day and again today, we are seeing the same price action. This is worth watching in the coming days and weeks.
Financial stocks are getting hit today as renewed fears of financial regulation are hitting the markets. Goldman Sachs Group, Inc. (NYSE:GS) fell off a cliff after being slightly positive just after the open. It dropped over $3 to a low of $170.70. Since that move, it has bounced along with the markets. Volume is getting extremely light. JPMorgan Chase & Co. (NYSE:JPM) is also lower on the day.
After a big move higher yesterday, Exxon Mobil Corporation (NYSE:XOM) is dropping slightly as the strength in the dollar is putting pressure on oil. A drop in oil is usually a negative for Exxon Mobil Corp.
The markets continue to trade just slightly negative on the day. Volume is getting lighter and lighter. The dollar is slightly higher but now off its highs. To get more hardcore analysis, trades, guidance on the markets and education, join the Research Center at InTheMoneyStocks. Just yesterday, a trade ran 25% for our members. Enjoy the profits!
Gareth Soloway
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InTheMoneyStocks.com
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By Nicholas Santiago on March 29th, 2010 1:17pm Eastern Time
Simply put, the Federal Reserve Bank has been masterful since the stock market crash in 2008. They have flooded the market with liquidity by coordinating a global stimulus program. They have kept the Fed funds rate, which is the overnight lending rate to the large major banks at zero percent. Therefore, the bank stocks have done exceptionally well despite the lack of lending that they do. Banks can simply borrow from the Federal Reserve Bank at zero percent and buy United States Treasuries which currently give them a yield around 3.80% – 4.80%, depending on the length of maturity. When you think about it this is a genius plan. Since the March 2009 stock market low, the SPDR Dow Jones Industrial Average ETF (NYSE:DIA) has rallied nearly 45 points. If you convert that to the Dow Jones Industrial Average that is a gain of nearly 4500 points. This is a very impressive rally by all standards.
As it seems, the skies are all clear for the markets and business as usual is taking place. However, there is one problem in the Federal Reserve plan. The problem is yields on the long bonds. The 10 and 30 Year T-Note interest rate must stay low in order for the Federal Reserve Bank and the U.S. Treasury to continue the inflation trade and get the U.S. consumer back to spending. It seems as if the 10 Year T-Note interest rate must stay below 3.90% - and above 3.25%. This range is somewhat of a comfort zone that seems to keep the stock market happy. The administration can modify mortgages at this level and anyone looking to buy up any of the excess inventory of troubled homes can get a low rate. The housing market still seems to be the missing link and a big negative to the Federal Reserve and the U.S. governments plan.
This past week the United States Treasury auctions did not seem to go well. Yields spiked on all long bonds and somewhat spooked the stock indexes last week from their intra-day highs. The Dow Jones Industrial Average reversed an early 120 point rally on Thursday March 25th. The following day the DJIA reversed a 50 point rally as yields traded higher. If you would look at a daily 10 Year T-Note Interest rate chart they would clearly see that the only two stock market corrections came in June 2009 and January 2010. This was when the yields on the 10 year bond moved above 4.00 percent in June 2009 and then traded close to that level in January 2010. When the bond market speaks traders listen.
Could this weak Treasury auction be caused by the Chinese? Recently, Google Inc (NYSE:GOOG) pulled out of China over a censorship technology dispute. There has also been a strong push by many U.S. politicians to get China to float their currency called the Yuan. Currently the Yuan is pegged to the U.S. Dollar. What will happen if China unwinds some of its current U.S. debt holdings? It is said that they are holding over a ½ trillion dollars in U.S. debt. They sure do own a lot of America, therefore, if China starts to sell U.S. debt it could get really ugly very quickly for the U.S. markets. Should this ever take place it would put the Federal Reserve Bank and the U.S. government in a very tough position.
If the yields in the U.S. spike above 4.00 percent, the interest on the U.S. debt could be too much for the United States to handle. The U.S. debt is now in the trillions and growing everyday. This is going to be very interesting as the U.S. Treasury walks a tightrope.
Traders that are looking to trade the yields to the long side or short bond prices can trade the ProShares UltraShort 20+ Year Treasury ETF (NYSE:TBT). This is an ultra fund which means that it is two times short the bond prices. If traders and investors would like to trade bonds prices to the long side they can use the iShares Lehman 20+ Year Treasury Bond ETF (NYSE:TLT).
By InTheMoneyStocks.com on March 29th, 2010 12:11pm Eastern Time
There are many factors contributing to the small upswing in the markets today. The markets are hoving up about half a percent. The interesting thing about the float higher today is that it could last for the entire week. All the factors today, are factors that could show up for the rest of the week in the markets. The biggest ones revolve around light volume, based on the Passover Holiday and Good Friday. This will keep some traders on the sidelines and volume low. Another factor that could last all week is the pump up into Jobs Report expected out on Friday. It is likely the markets will slowly inch higher into that report, especially with the help of holiday, light volume. Dow 11,000 is not far away and the "powers" that be could push it there by Friday. It is about 100 points away.
The weak dollar is adding fuel to the fire. Europe seems to have recovered from the Greece scare. In addition, no new major countries seem to be talking about default. The dollar has moved lower, markets slightly higher.
Leaders continue to be those that have charged higher all quarter. With just three days left in the first quarter of 2010, these companies continue to inch higher. Apple Inc. (NASDAQ:AAPL) is higher by 1% on the day. Reports over the weekend that the IPAD has sold out in the short term continue to ripple through Apple world. Instead of getting the IPAD by early April, it will now be closer to mid April for most that order today or after.
One financial stock that is taking a break is JPMorgan Chase & Co. (NYSE:JPM). The stock has been ripping lately but today, while most other things are higher, JPM is pulling back. Others leading stocks are Chevron Corporation (NYSE:CVX) and Exxon Mobil Corporation (NYSE:XOM). XOM ripped higher from the open ran until late morning. It has now paused but is consolidating in a bullish manner.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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By InTheMoneyStocks on March 29th, 2010 9:21am Eastern Time
The U.S. Dollar has traded back to the positive side at 9:00 am EST. The U.S. Dollar index sold off sharply in overnight trading and has now bounced off the lows. This decline overnight gave the stock markets a move higher as most commodities caught a bid.
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By ITMS News on March 28th, 2010 6:02pm Eastern Time
The S&P 500, SPDR S&P 500 ETF (NYSE:SPY) index continued to climb higher, gaining nearly 7 points for the week. The index remains in a strong technical uptrend from the March 2009 highs. Next week is the start of many religious holidays. The U.S market will be closed on Friday April 2, 2010 . Therefore, trading volume should be light throughout the week. This usually makes for a sideways to slightly higher trading market. However, geopolitical events can always cause a reaction that is unexpected. Problems in the European Union continue, despite the countless times that we have heard that Greece will be bailed out. Many of the other PIIGS nations such as Spain, Italy, and Ireland are all facing major debt problems. On Friday, Mach 26, 2010 reports out of Asia mentioned tensions building between North and South Korea. A South Korean ship was sunk in the disputed Yellow Sea Area. New reports have mentioned that North Korea was not involved. The next major resistance levels on the weekly S&P 500 chart are 1200.00 and 1225.00. There will be weekly support at the 1150.00 and 1115.00 levels.
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March 29, 2010 08:56 ET: YEN IS WEAKEST CURRENCY of the day, while AUD IS STRONGEST after more hawkish rhetoric from RBA Chief Stevens making the case for an April tightening when he warned the nation over the prolonged overheating in housing. RBA is now expected to hike by 25-bps to 4.25%. AUDUSD eyeing the interim resistance at 85.00 while AUDUSD soars nearly a cent since Asia Monday but must close above 0.9200 to convince the market of a successful breach of its 2-week down trend. CADJPY eyeing 90.80, but as was seen last week, a close above 91 will be needed to sustain this recovery. Medium term resistance stands at 92.2061.8% retracement of the 107.04-68.51 move. LOW US INFLATION and STEADY SPENDING will support the case for both the doves and hawks at the Fed as US Feb core PCE price index (Fed's preferred inflation indicator) slowed to 1.3% y/y from 1.8%, while pers. spending slowed as expected to 0.3% from 0.5%. GOLD capped at 1119.
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By Gareth Soloway on March 28th, 2010 10:25am Eastern Time
With the meteoric rise in the markets of late, many are wondering if it can continue. Problems are looming but in the last two months, the markets have ignored them all, having only a handful of minor down days. Can it continue? Here is a possible reason to say yes!
Volume next week should be muted due to three factors. The first is Passover, a Jewish holiday which begins Monday night. Holidays can always cause light trading. In addition to Passover, the second issue that could keep volume light is Good Friday This makes it a four day week and means more traders are likely to take it slow or off completely. The last reason the markets could continue their run is based off the Jobs Report due out Friday. It is possible to see continued upside as Wall Street anticipates a extremely positive report with jobs gains. Add that to the light volume, based off multiple holidays and it could be a recipe for higher markets.
Dow 11,000 is not far away. It is also possible the powers that be, Treasury, Administration, Federal Reserve will want to make headlines in the news, going into a holiday weekend by slamming the DOW through 11,000. A close above 11,000 could very well be in the cards purely based on the manipulation factor.
The light volume is a true catalyst for upside. It enables the markets to float higher and get small buy programs that create big pops. I have discussed in depth how light volume has been one of the major driving forces behind the recent jump in stock prices. If you look at the SPDR S&P 500 ETF (NYSE:SPY), anytime it trades less than 200 million, the markets are flat or higher. Anytime it trades higher than 200 million, the SPY is lower. The volume factors can also be noted on the PowerShares QQQ Trust, Series 1 (NASDAQ:QQQQ). Keep an eye on key stocks like Apple Inc. (NASDAQ:AAPL) and JPMorgan Chase & Co. (NYSE:JPM). Also, watch Research In Motion Limited (NASDAQ:RIMM) as they are set to report earnings Wednesday, March 31st, after the markets close.
Listed above are the reasons that the market could continue the rally next week. There are just as many reasons for the markets to fall. The key overall will be volume. Decent volume, the markets most likely fall. Light holiday volume, the markets should hold up. To get more information, guidance, trades and education, join the Research Center at InTheMoneyStocks.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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By Gareth Soloway on March 27th, 2010 9:10pm Eastern Time
There is something the markets are paying little attention to at this point. It has been mentioned in the media but kept relatively quiet. It has been reported by a few companies thus far but the market, being in its super bull mode, had ignored it for the most part.
Ultimately, what is going on right now, because of healthcare reform will raise the overall P/E for the S&P 500 by lowering the profits of almost all the companies listed. For instance, instead of a company making $1.00 in profits for 2010, a company may only report $0.85. Overall, this creates a higher P/E for the S&P500, creating a valuation issue. With stocks priced near perfection, it is possible this could be a driver for correction in the markets.
The issue with healthcare reform is the loss of the ability, to subtract from their taxes, the subsidies paid by the U.S Government for those who have retired. This may not sound big but many companies have thousands of retirees. These dollar amounts are well into the tens of millions and even some over one-billion. These charges will be taken in 2010.
Companies that have already reported that they will have these charges are mounting. Deere & Company (NYSE:DE) reported that they will take a $150 million charge. AT&T Inc. (NYSE:T) will take a huge $1 billion charge. Caterpillar Inc. (NYSE:CAT) will take a $100 million charge. 3M Company (NYSE:MMM) will take a $90 million charge or $0.12 per share.
Other companies that have announced charges for 2010 are Honeywell International Inc. (NYSE:HON), AK Steel Holding Corporation (NYSE:AKS) and Valero Energy Corporation (NYSE:VLO). More companies will be alerting investors to this in the coming weeks. There are very few companies that will escape taking a sizable charge.
The markets have had a beautiful almost two month run on light volume. They can remain irrational for long periods. Even with these significant charges, so far the market has had little reaction. Next week it is possible they will continue to have little reaction. While the markets seem to be near correction levels, holiday volume may be enough to keep them up. It is possible reality may wait to set in until earnings begin in April.
For further hardcore analysis that the hedge funds and money managers pay millions for, join the Research Center for just $49.99 per month. Get nightly videos of over forty minutes in length, daily master levels, guidance, swing trades, education and more. Discover the keys to the market at InTheMoneyStocks.com.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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