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The Financials Pit Review

This report has been deactivated

For the week of November 3rd, 2008

Tue, Nov 4 2008, 05:40 GMT
by Kalvin O'Brian

U.S. Economy

Tuesday is almost here and after posting a 17% loss in the S&P for the month, the ½ point cut just implemented by the Fed last week has done its job; at least so far. This could be the first chapter in a long turnaround for the stock market. However, with rates at this level as recovery begins, inflation could become an issue especially if oil prices climb from these levels. Some noteworthy reports and data posted a positive change. These could be early indicators that we hit a bottom. The University of Michigan's consumer sentiment index increased to 57.6, up from a reading of 57.5 earlier this month. There was also a change in the core rate of personal consumption which increased 2.4% in September from a year ago. This does not mean that we are going to climb at a 45 degree angle from here though. This data supports the idea that many ordinary investors believe the election will change everything. I do not believe that but I do believe that confidence will come back into the market as we go into the New Year if crude stays at these levels. I will be long the market keeping close stops. I do expect a rally to continue this week.

Currencies

Last week’s rate cut launched all the dollar’s counterparts - the Canadian included. GDP in Canada was overall better than expected - it was down .3% in August but up .6% from a year ago. The hardest hit sectors were the majors in that area manufacturing, mining and energy. I expect the rally to continue through this week. Unemployment in the Euro area remained the same at 7.5% in September. I remain bullish this currency this week as well.

The Bank of Japan lowered its interest rate from .50% to .30%. This was a clear cut effort to help stimulate its economy. Consumer prices there increased 2.1% in September. Since September 12th the yen has increased almost 9% against the greenback. I do expect this to continue. It also is expected that the next in line to cut rates will be the Reserve Bank of Australia.

Published on Tue, Nov 4 2008, 05:40 GMT

For the week of October 27th, 2008

Tue, Oct 28 2008, 06:38 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

This week is all about the Federal Reserve and the election. Throw everything else out and just focus on the core element of what is going on in the stock market. It is fund selling versus buyers of unknown origin. The bottom in this market has essentially been tested three times now and there is little argument in my mind as to what will force substantially lower prices. One could argue the election results going Obama’s way would be bearish for the market, but I counter that logic with the idea that an Obama win is already priced in and that there is a “sell the rumor, buy the fact” effect about to happen here. Moreover, there is about an ugly of an employment situation out there as one could expect given the current financial climate – one could suggest that it can always get worse and that I would not disagree with. However, when it comes to bear market bottoms two things have repeated throughout history: one, the bottom always happens ahead of the fundamental change; and two, it happens quick and most people miss the move. The volume pendulum will swing to the bull side and upside volatility will be tremendous.

Currencies

Expect the strong stock market rally to pressure bond prices and the U.S. dollar. The Canadian dollar, Aussie dollar and Japanese yen are most susceptible to market reversals. The concern over European economics may delay that price reversal in some European currencies. When the Fed moves this week the rest of the world will follow suit. Look for a global 50 basis point cut and the dollar to fold after the announcement.

Published on Tue, Oct 28 2008, 06:38 GMT

For the week of October 20th, 2008

Tue, Oct 21 2008, 05:51 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

It is starting to feel like we are repeating the same week over and over and it is hard to call a bottom in the markets. However, according to a quote in the New York Times, Warren Buffet is announcing that now is the time to buy US stocks. I do believe that there are some value plays available at this time but I do not believe that everyone is comfortable enough to jump right in. There are still some concerns about the bailout; it is apparent early-on that no one really understands how the bailout will exactly work. Time will tell how things end up, but it appears that there is a trickle-down effect that may hurt smaller banks. Community banks that Federal Reserve Chairman Ben Bernanke calls a key link between financial markets and the U.S. economy face a longer wait for government aid than their bigger competitors. No new news in housing; starts were down 6.3% from August pace marking the slowest month in over 15 years. Housing starts overall are down 31% from a year ago. Consumer sentiment is also unsurprisingly lower. The University of Michigan’s index fell from 70.3 to 57.5 in October, the biggest monthly drop since the survey began. There appears to be another big week ahead for day traders; I would not be surprised to see 50 to 100 point days in the S&P this week.

Currencies

The other day Canada changed the accounting rules for banks in an effort to provide them more time to offset troubled assets before having to post them as losses. This was done to help stop a mass liquidation in the short term. This may cause some long term problems though, if it allows for the banks to ignore the losses. I do not see any reason to be bullish the Canadian, especially as the Bank of Canada may be poised to lower interest rates another half a point in an attempt to jump start the economy. The manufacturing sector has been faring poorly as the global slowdown continues and this will put pressure on the exporting nation and cause another round of selling in their currency.

The euro zone is also facing a struggle as the economic conditions for the European Union face the same hurdles as Canada does. A slip in manufacturing and consumer confidence will bring more pressure to the central bank to cut rates, especially as fuel costs fall and the possible easing of inflation turns the focus back to economic stimulation. The euro will continue to trade lower.

Published on Tue, Oct 21 2008, 05:51 GMT

For the week of October 6th, 2008

Tue, Oct 7 2008, 07:14 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

After rejecting the earlier proposal, the House approved the $700 Billion financial rescue plan by a vote of 263-171 and it was quickly signed into law by President Bush. Although the initial reaction was positive, the stock market heads lower to start the week as the potential global slowdown sends investors packing. Bailout or not, at home the evidence of deepening credit concerns and employment meltdown is mounting. It was announced Friday that there was no immediate change to the unemployment rate which remained at 6.1% in September.
However, underneath the surface the real story is non-farm payrolls were down 159,000, marking the largest job loss in over five years. In August, non-farm payrolls were revised higher from a loss of 84,000 jobs to a loss of 73,000. Add to that the banking situation and the concerns that more institutions may fail and we start to see early speculation that the Fed might seriously consider another rate cut. This would create some waves depending if and when they decide to do so. The main focus will be on the world stage and the resolutions – if any – that may come from the Euro zone. Credit issues are widespread and until we have a clear picture of the overall damage, the downside is the path of least resistance.

Currencies

There is a growing concern across the Atlantic that economic issues have extended rapidly beyond the housing market. A service index in the UK dropped from 49.2 to 46.0 in September. This marks the lowest since they began keeping records 12 years ago. The Bank of England Governor King is prepared to take all actions necessary to ensure the banking system has access to sufficient liquidity. The expectation for a rate cut is back and the pound is testing fresh lows because of it.

The Canadian dollar has taken a historic dive. The Canadian had the largest weekly drop off in over 35 years. The declining price of commodities due to the US dollar rally after the bailout appears to be the clear-cut cause but economic slowdown in the US and lowered expectations for US consumer demand will cut deeply into our northern neighbor’s revenue. Like the Euro and Pound, the Canadian dollar will continue to falter this week.

Keeping an eye on the Fed minutes release is important though; the same suspicions of a rate cut from the Federal Reserve could feed losses in the US dollar and turn the tables again.

Published on Tue, Oct 7 2008, 07:14 GMT

For the week of September 29th, 2008

Tue, Sep 30 2008, 06:08 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

It appears that today will be decision day on the $700 billion bailout package and it will be interesting to see how long the House takes to vote. Bush’s speech the other day indicated that the agreement would give Treasury Secretary Paulson an immediate $250 billion to buy bad loans from financial companies, with the rest to be divvied out in stages. This new agreement also changes the Bush administrations original request for unrestricted authority to purchase troubled debt securities from financial companies hurting from the exorbitant amount of home foreclosures. While that issue continues to play out, Citibank scooped up Wachovia in the latest bank upset story to hit the airwaves. Federal regulators took control of Washington Mutual, the largest U.S. savings and loan, and sold most of it to J.P. Morgan Chase for $1.9 billion. The word to depositors was not to worry they were protected while news stories called it the largest bank failure in our history. I believe still that the markets are waiting for an agreement to rally. Short term I will be on board after the agreement is passed. However, it will be a quick rally. The long term effects to the consumer and their interests will be felt long after and there is still more potential to the downside.

Currencies

The Statistics Bureau in Japan announced that consumer prices increased. They were up 2.1% in August from a year ago, down from a 2.3% gain in July. In Tokyo, prices were up 1.4% in September from a year ago. The Yen was up slightly on the news but everything will continue to hinge on the news coming out of the US. Across the pond it appears to be more of the same. The housing and credit crisis is just as severe and the pound is down because of it. Bradford & Bingley is Britain's biggest lender to landlords. They should be taken over by another bank or nationalized soon under a U.K. government-backed plan to protect 21 billion pounds ($39 billion) of customer deposits. Ultimately, foreign currencies will take their cue from the strength in the US dollar as it continues its recent gains.

Published on Tue, Sep 30 2008, 06:08 GMT

For the week of September 22nd, 2008

Tue, Sep 23 2008, 06:21 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

Last week was historic to say the least. Early in the week the S&P plummeted coming off the Lehman bankruptcy, Merrill Lynch takeover, and the government seizing AIG. This created a drop similar to the terrorist attacks back on 9/11/01. The second part of the week was very different as the government took action and tried to directly infuse the markets taking on $700 billion in bad mortgage investment from financial companies. This plan was created to dodge a credit freeze which would paralyze the financial system and the world’s largest economy. Through the new plan, Secretary Paulson will have the authority to buy home loans, mortgage-backed securities, commercial mortgage-related assets and any other assets, as deemed necessary to effectively stabilize financial markets. The bill would also prevent courts from reviewing actions taken under its authority. This seems to me like it is way more power than one should have. This plan obviously adds to an already huge national debt. This bill alone spends as much as the Department of Education, Defense, and Health and Human Services combined. The Securities Exchange Commission has also banned the short selling of financial stocks through October 2nd and the U.S. Treasury said that it will insure eligible money market funds for a year, announcing that the move is essential to protecting the integrity of the global financial system. I understand that time will tell how this plays out but I can’t believe that that much should be removed from the private sector. This intervention is not an intervention; it appears to be an all-out takeover. I would expect severe volatility as this plays out.

Currencies

The Swiss franc dropped the most in five months against the dollar after the U.S. government proposed measures to move tarnished assets from bank balance sheets, encouraging investors to buy higher-yielding assets. The Swiss National Bank kept its benchmark rate on hold yesterday and joined other central banks in pumping money into financial markets to restore confidence. The Euro and the Pound increased due to investors’ interest for high yielding, export-backed currencies. Right now, low interest rates are less appealing. I expect the gains in both currencies to continue through this week.

Published on Tue, Sep 23 2008, 06:21 GMT

For the week of September 15th, 2008

Tue, Sep 16 2008, 05:48 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

Without a doubt, the big news is the fourth largest securities firm going bankrupt. It appears that when Fed chairman Ben Bernanke said in April, “the financing we did for Bear Stearns is a one-time event,” he meant it. Taking this stance, U.S. regulators are betting that the financial system will be able to endure the failure of a large institution without severe disruptions to an already fragile economy. This is an interesting but important decision. Central banks across the globe have scrambled to dole out credit to keep everyone afloat. Bank of America has picked up Merrill Lynch and now everyone will be wondering who is next – AIG or Washington Mutual? The big question is going to be, who will be left standing? This market is still facing some big problems and Lehman is just another victim. I do not expect this bear market to end quickly. The Fed meeting tomorrow should be interesting and may give a glimmer of hope, but the deeper we go the harder the climb back will be.

Currencies

The US dollar has shown amazing strength over the last 2 months. The dollar has gained over 11% since hitting the all time low vs. the euro on July 15th. I believe that the dollar will continue to pull back in the short term as the interest rate hike people were so sure of will probably fail to materialize.

The Canadian dollar climbed for the first time in a week, the largest increase in 3 weeks. Unfortunately, the pullback in crude prices after Ike will take a toll. Selling pressure will also come as Canada sits too close to the US to not reap some of the same financial upset that we saw this weekend. The US is the main export destination for Canadian goods; therefore, a weak economy to the south should provide a catalyst for a lower move in the Canadian dollar.

The euro has the chance to come back after an extended slide but the economic crisis is global – not local – and trouble in the markets will affect economic stability and growth in the euro zone as well.

Published on Tue, Sep 16 2008, 05:48 GMT

For the week of September 8th, 2008

Tue, Sep 9 2008, 05:19 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

The government takeover of Fannie and Freddie has now become a reality. This is clearly the largest step the US government has taken to thwart the largest surge in mortgage defaults in almost 30 years and the more than $500 billion of losses and write downs it has created. It was clear six months ago that the government was more than willing to step in after the Federal Reserve provided $29 billion of financing to prevent Bear Stearns’ collapse. Under this latest plan, the treasury receives $1 billion of senior preferred stock, with warrants representing ownership stakes of 79.9% of Fannie and Freddie. They will also receive annual interest of 10% on the initial investments. I would look for this market to be favorable towards the move but this doesn’t fix the problem it just transfers it. Some partially good news for the auto industry, the annual selling rate for autos in the US increased to 13.7 million in August up from a 16 year low. However, this acceleration was partially attributed to the heavy discounts and incentives dealerships have been offering. So we have the now routine mix of good news, bad outlook that we have been seeing these several months past. Look for the initial high to come smacking down to earth towards the end of the week.

Currencies

The euro has continued its slide against the dollar for seven of the past eight weeks. The growth outlook has changed since the central bank held the main refinancing rate at a seven year high of 4.25. The euro has fallen more than 10% from the all time high set on July 15th. I expect the decline in the euro to continue as the situation overseas continues to feel the impact of the credit and housing issues that plagued the US. The yen has been just the opposite, gaining against the dollar for a third week. It also climbed to a one-year high versus the euro as the U.S. lost jobs for an eighth month and investors sold higher-yielding assets funded in Japan. Statistics Canada said that the unemployment rate remained at 6.1% in August with a gain of 15,200 jobs, more than expected. So far in 2008, the economy has added 87,000 jobs. The September Canadian dollar finished up a little higher on Friday and will be steady to higher through the week.

Published on Tue, Sep 9 2008, 05:19 GMT

For the week of August 25th, 2008

Tue, Aug 26 2008, 06:16 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

The S&P is going to have trouble breaking the 1300 mark. Bernanke spoke last week and the main message was the “FOMC is committed to achieving medium-term price stability and will act as necessary to attain that objective." Time will tell if this anti inflation rhetoric will have any substance. I found his comments un-electrifying at best. Typically, going into a holiday weekend, the markets are benign. However, I would not expect that to be the case this week. Crude oil is more active than the weather in Florida. The automobile situation in the U.S. is horrible and the big 3’s stock prices reflect it. However a small rally could ensue if the market believes Congress will support funding up to $50 billion in low-interest loans over three years to help them modernize their assembly plants and develop next-generation fuel-efficient vehicles. I will change my opinion of this market and go long if it breaks 1300. Until then I will be short during an unusually active week heading into the holiday.

Currencies

The dollar has continued to show strength vs. the euro based on beliefs that a drop in crude prices will support growth in the world's largest consumer of the fuel. Crude extended its biggest percentage decline in over three years. The greenback looks like it might have continued strength with lower crude showing it the way. The euro dropped against the yen before data expected to show business confidence in Germany, Europe's largest economy, fell to the lowest in almost three years. This could discourage the European Central Bank from raising interest rates. The U.K.'s Office for National Statistics revised its estimate lower to show zero growth of real GDP in the second quarter. From a year ago, GDP was up 1.4%. The September British pound continued its downturn. The Canadian dollar, which relies on commodities for about half its export revenue, appreciated 1.2 percent since Aug. 15 against its U.S. counterpart. A continued major sell off in crude could change that story so I continue to look for opportunities to be short the Canadian.

Published on Tue, Aug 26 2008, 06:16 GMT

For the week of August 18th, 2008

Tue, Aug 19 2008, 06:35 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

It is pretty clear to see why the markets have not tested 1250 lately. The greenback has been on the rise and crude oil is falling back to earth at a solid pace. Along with the obvious, there has also been additional bullish news. According to Federal Reserve industrial production was up .2% in July. This was better than expected compared to a .4% gain in June. The New York Federal Reserve's regional index of manufacturing was also better than expected, increasing 2.77 to 4.92 in August. What does this mean? Well, this could be an amazingly bullish turn for the markets. However, there are still issues this market has to deal with. For example, in July US builders will begin working on the fewest houses in 17 years. Housing starts plunged 9.9 % to an annual rate of 960,000 according to a survey ahead of the Commerce Department report in August. Rising borrowing costs, record foreclosures, stricter lending rules and falling property values should further depress home sales throughout the rest of the year and into 2009. If that is the case, this market will have a two steps forward, one step back kind of action to look forward to.

Currencies

The strength in the dollar has taken it to an almost 6 month high against the Euro. Crude oil has taken its toll on the European and Japanese economies. The greenback has gained now for a fifth week against the Euro. As other countries continue to realize the effects they face from weaker economies, I would expect the dollar to continue to rally. There will be pullbacks along the way but I don’t think it’s a stretch for the US dollar to break 80.00 by December.

Our neighbor to the north has felt the effects of the lowering prices in crude oil and the meltdown in gold. Statistics Canada announced that manufacturing sales were up 2.1% in June, marking the fifth increase in the last six months. Looking ahead, this country will be hard pressed to even maintain its current position vs. the US dollar. I will take short positions in the Canadian.

Published on Tue, Aug 19 2008, 06:35 GMT

For the week of August 11th, 2008

Tue, Aug 12 2008, 06:38 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

Last week was crazy! However I am not. I do not believe that this market is going to stay bullish. I have heard some optimists say the almost 7 year bear market in the greenback is finally over. I don’t believe that this market has found a way to deal with the same problems it faced when the market was down. As far as I know America did not get rid of unemployment issues, falling property values or still elevated fuel costs last week. Oil is selling off but it is still overpriced in my opinion. The market showed strength but it looks more like a sprint than a distance run. The U.S Labor Department reported worker productivity was up an annual rate of 2.2% in the second quarter, slightly under expectations. The U.S Census Bureau released positive news wholesale sales were up 2.8% in June while inventories were up 1.1%. This did mark the largest increase in sales in almost 5 years. The positive greenback was the story fueling the market last week but this environment can change very quickly. I just want to remind my readers the U.S. budget deficit, which totaled $163 billion for 2007, is forecast by the administration to widen to a record $482 billion for 2009. I do not feel we are out of the woods yet.

Currencies

I believe it would be appropriate to start this week’s currency commentary on the dollar. Even though the dollar reached its biggest gain vs. the Euro in over 7 years it does not mean that it has escaped the shadows of the nation’s slowing economy, widening budget and trade deficits with negative inflation-adjusted interest rates. The war between Russia and Georgia spreading to a second region coupling with a major sell off in crude undoubtedly helped drive the Euro down. I believe that the dollar rallied also because the other currencies are facing problems in their own countries. Their problems are now starting to take a toll on their home currencies. It almost seems like it’s a battle for the best of the worst. I am interested in seeing how this week plays out.

With our neighbor to the north, Statistics Canada reported that the unemployment rate improved from 6.2% to 6.1% in July, but with an unexpected loss of 55,200 jobs. Continued sell off in crude and gold and I would grab a parachute, eh?

Published on Tue, Aug 12 2008, 06:38 GMT

For the week of August 4th, 2008

Tue, Aug 5 2008, 06:40 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

It is the first full week of trading for the month of August and it appears we will be starting it with the markets down. U.S. stock index futures fell, following declines in Europe and Asia even though this morning’s June report on personal income was up .1% and personal spending was up .6 %. In a consumer spending economy this is not a dire number. There was also a revision higher made for May. There seems to be continued concern and jitters fueled by the planned layoffs at U.S. companies jumping 26 percent in July from June. Announced job cuts at U.S. companies last month were the second highest total so far in 2008, more than double the 42,897 a year earlier. Construction and the auto industry continue to produce red numbers like clockwork. The Fed will be meeting this week and the consensus is that there will be more talk than action. Once the dust settles after the meeting it will probably be business as usual. There doesn’t appear to be too much good news out there so I am continuing to play this market to the downside. There are still some earnings due out this week, but any upside movements are subject to scrutiny. The volatility is there and I will continue to use moving averages for my entry and exits.

Currencies

The UK continues to face problems and that keeps bringing down the pound. An index of manufacturing in the UK dropped from 45.9 to 44.3 in July, lower than expected and the lowest in over nine years. In Australia, in index of manufacturing fell from 47.0 to 46.9 in July, an indicator of contraction for the second consecutive month. This doesn’t bode well for the resident currency since it will already be under pressure as commodity prices dip.

Even though Canada is rich in oil, copper and lumber, Canada’s economy is not far removed from the American economy. It’s amazing, last year Canadians celebrated dollar parity with its US counterpart for the first time since 1976, now it has been predicted that their currency could fall 17% through 2009. According to Statistics Canada, the northern nation’s economy contracted .1% in May, due to extraction of natural gas slowing and a drop in car production. The Bank of Canada also cut its 2008 growth forecast on July 15 to 1 percent from 1.4 percent. The downside is the path of least resistance for this market for now.

Published on Tue, Aug 5 2008, 06:40 GMT

For the week of July 28th, 2008

Tue, Jul 29 2008, 05:57 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

In the past year, 256 companies who reported earnings this quarter in the Standard & Poor’s 500 index saw profits fall an average of 24%. This has undoubtedly dealt a blow to stocks and corporate bonds. Investors have accumulated an amazing $3.47 trillion in money market funds, coming just under the record set in April, according to the Money Fund Report newsletter. This does not breathe confidence about the future. The worst may be ahead. So far for 2008, new home sales are down 35%. New home sales in July were down .6% from May; however it was still better than expected. May’s new home sales were also revised higher from an annual rate of 512,000 to 533,000 units. The US Commerce Department said that durable goods orders were up .8% in June, excluding defense, orders were only up .1%. The sell off in crude over the last 9 trading days should be helping a lot more than we are seeing. This market appears it will have trouble getting back to 1300 unless crude continues to slide. I am still looking at positive movements in the S&P as an opportunity to get short with close stops.

Currencies

The real estate problems continue across the pond. The average cost of a residential property in England and Wales dropped 4.4% from the previous year. This marks the most in about seven years and the property slump may continue for months. Despite the problems in the UK, there will be no major move unless the dollar can find some strength. I am taking a longer term bearish approach to the pound.

The US dollar desperately needs to get on track. We have seen a major sell off in crude over the last 9 trading days and still the dollar is lagging. It appears that there will need to be some real intervention to help this currency gain any life. This could come in the form of the FOMC meeting coming the first week in August. Most analysts had anticipated the Fed would refrain from increasing the interest rate until the fall, but recent statements have revealed an underlying tone that hints an increase may come earlier. I have a feeling that next week’s meeting will surprise us one way or another and trade in the US dollar will remain choppy until then.

Japan's Statistics Bureau reported consumer prices were up .5% in June and up 2.0% from last year. In Tokyo, consumer prices were up 1.6% in July from a year ago, the largest gain in a decade. The yen seems to be holding support. I am not completely convinced we have bottomed and will look for a break out if the support fails.

Published on Tue, Jul 29 2008, 05:57 GMT

For the week of July 21st, 2008

Tue, Jul 22 2008, 06:08 GMT
by Joe Marshall

Pit Guru

U.S. Economy

Starting another trading week, I believe that one thing is becoming amazingly clear, things are worse than expected. I still have a hard time understanding things like how Citigroup losing $2.5 billion in the second quarter and investors were relieved because it was not as bad as estimated. I also read horrible things like how US business just saw its steepest quarterly rise in corporate bankruptcies in 2 years spiking to 17% in the second quarter this year and still last week the S&P 500 Banks Index surged 16% the biggest increase since March 2000? Now let’s add to that Freddie Mac, the second-largest U.S. mortgage-finance company, might halt purchases of home loans from banks and bonds backed by housing debt to shore up its capital amid record delinquencies. I have to honestly say that there is really no reason that this market should test the 1300 mark. The bottom line is as long as analysts continue to lower the bar the numbers will never appear to be as bad as expected. This does not mean that things are getting better. I am looking at these false rallies to go short.

Currencies

The ECB President announced he does not expect strong growth in the second and third quarters of 2008. The expectation for 2009 however is moderate growth. With the problems facing the US and the dollar I would look for the Euro to continue to climb and test 160 again.

Statistics Canada announced wholesale sales were not only up 1.6% from the previous month and up 2.9% from a year ago but were also stronger than expected. It still looks like there will have to be some serious help in the form of a crude and gold rally to get this currency above the 1.00 mark. Concerns over the largest export market – the US – slowing down and dragging Canada’s economic growth down too will keep some heavy pressure on the dollar.

Across the pond, the U.K's Office for National Statistics announced a budged deficit of 24.4 billion pounds in the April to June quarter. This was somewhat historic given that it was not only more than expected but it was the largest quarterly deficit since records began in 1946. The housing problems remain a key factor and concern in the United Kingdom and will keep the British Pound from rebounding quickly.

Published on Tue, Jul 22 2008, 06:08 GMT

For the week of July 14th, 2008

Tue, Jul 15 2008, 05:59 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

Friday was a news filled day providing a lot of volatility. After withdrawals by panicked depositors, California based Indy Mac, which specialized in a type of mortgage that often required minimal documents from borrowers, became the 5th U.S. bank to fail this year. This was also the third largest banking failure in U.S history. However the FDIC ensured that the takeover of IndyMac is going to cause no disruption for most customers. The market seems to agree at least early in the session. The S&P is trading higher. The Federal Reserve is preparing to announce final rules overhauling mortgage lending. There has been uproar from consumer groups arguing that the regulations proposed back in December are full of loopholes clearly allowing the irresponsible lending to continue. Industry executives are complaining that the proposals place too great a burden on lenders and will make them further restrict credit. Even though the proposals offer no help and mean nothing to existing homeowners who have already fallen behind in their mortgages, the Fed’s goal is to prevent another crisis by tightening lending standards particularly for sub prime mortgages. A bear market is defined as a drop of 20% from peak to trough. This was achieved by both the S&P and the Dow last week. The question now is how long will this bear continue? One of the worst drops started in ‘73 and reached a 46% drop and lasted until December of ‘74. The average bear stretch is a 29% decline usually lasting over a year. I don’t expect the news to continue to get better but it seems clear that there will be intervention on every trip towards the 1200 mark. This market is showing great opportunity to day traders. Keep your stops close and try not to get emotional as this market opens the doors up to clip some nice profits.

Currencies

In Canada, the unemployment numbers were reported by Statistics Canada last week and there was an increase from 6.1% to 6.2% in June, this showed a net loss of 5,000 jobs which was weaker than expected. The Canadian has been heading towards the 1.00 mark again and it is not hard to see why with crude hitting 145 a barrel and gold above 960 providing most of the help. If these markets continue to climb we will test the $1 mark very soon.

After continued weakness, the US dollar will need a lot of optimistic news to gain against the euro. The Feds efforts to help seem like putting a band aid on an amputated leg with the continued climb in energy costs it will be very difficult for the dollar to gain any strength. Inflation continues to remain a very big concern. I believe that there is still a good chance were going to test the lows in the US dollar and maybe make new ones.

Published on Tue, Jul 15 2008, 05:59 GMT

For the week of July 7th, 2008

Tue, Jul 8 2008, 07:07 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

With the holiday now behind us the market appears to be trying to push up thanks to an early $4.00 sell off in crude and an uncharacteristic dollar spike. Last week the US Labor Department announced that the unemployment rate was unchanged at 5.5% in June with non farm payrolls declining to 62,000 which came in line with expectations. This was seen favorably by the market. May non farm payrolls were revised from a decline of 49,000 to 62,000. There is concern among traders that we have not hit a bottom and unless crude oil continues to drop like a rock this market does not have buyers flying into it. Add to that the unofficial start to earning season which begins Tuesday and the expectation that the S&P 500 companies’ earnings will be down 10% for the second quarter and I see traders continuing to tread lightly in these markets and be quick to pull out on bad news.

Currencies

The Canadian dollar has not had a lot of strength lately. Crude oil is the big story for our neighbor to the north; Alberta's oil sands hold the largest crude deposits outside the Middle East. Canada’s unshakable job market appears to be changing. June’s jobs report is expected to reflect at minimum a portion of the recently announced layoffs. This should be accompanied by weakness in the financial services and real estate sectors as well. I would expect the national unemployment rate to increase 1/10th of a percent from 6.1% the current level to 6.2%. Poor jobs number and weakness in crude oil will bring this market down.

The US dollar appears to have been inspired by the 4th of July. The ECB did shake things up temporarily with their ¼ point increase. This was a seen as a surprise because the consensus was that the rate would remain unchanged through to the end of summer, however the increase was made due to ongoing concerns about inflation according to the ECB. With a rally in the US dollar coming off of the double bottom set on July 3rd this market could continue to have strength despite the problems facing the US markets. This market has been down and out long enough.

Published on Tue, Jul 8 2008, 07:07 GMT

For the week of June 30th, 2008

Tue, Jul 1 2008, 06:01 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

It’s clear that the market is reacting to the problems that arise from astronomical energy costs. Nine out of 10 S&P industries dropped, lowering the index 8.7% in June. It was the largest monthly decline since September 2002. Even the world’s biggest companies like Wal-Mart and General Motors fell as oil went higher than $143 a barrel. Despite the obvious energy issue the U.S. Commerce Department reported that personal incomes were up 1.9% in May, also consumer spending was up .8%. The comical part, I think, is that the increase is attributed to the government’s release of stimulus checks. The University of Michigan's index of consumer sentiment decreased from 59.8 to 56.4 in June, slightly lower than expectations. Inflation which is also a key concern does not appear to be a problem just yet according to the Commerce Department’s report that the core rate of personal consumption expenditures was up .1% in May and up 2.1% from a year ago, less than expected. Unfortunately as oil increased there is more downside potential for these markets. Going into the holiday weekend I am not anticipating any major news and instead I am looking for quick entry and exits intra-day.

Currencies

According to Statistics Canada the industrial product price index was up .6% in May and up 2.4% from a year ago. Undoubtedly high crude and gold is helping this currency. However it may not be enough and I anticipate the Canadian dollar will be heading back down to 97 before it turns back to test the 100 mark.

The U.K.'s Office for National Statistics reported that real GDP first quarter estimates of 2.5% were not met. Although real GDP was up 2.3% in the first quarter from a year ago it was weaker than expected. Nominal GDP was up 5.3% in the first quarter from a year ago. The pound appears to still have some room to the upside.

Japan's core rate of inflation was up 1.5% in May from a year ago, marking the largest gain in a decade. Also, household spending was down 3.2% in May from a year ago. The yen climbed the most in almost a month against the euro after Moody's announced the nation's banks have avoided the worst of the credit crisis. The yen also advanced as a decline in European and Asian stocks reduced demand for higher-yielding assets funded in Japan. Stay long the yen for now.

Published on Tue, Jul 1 2008, 06:01 GMT

For the week of June 23rd, 2008

Tue, Jun 24 2008, 06:30 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

The market has digested Friday’s news and it looks like this week will start little better. Merrill Lynch cut earnings estimates for several regional banks as well as the speculation their own earnings outlook may be in trouble. Citigroup has warned that more write offs in the 2nd quarter may be in store. In addition to that Moody’s downgraded its ratings on bond insurers MBIA and AMBAC. The markets will be heading lower with only a few bumps on the way down.

It appears bad news is in store for Fed chairman Ben Bernanke’s fight against inflation. Skyrocketing oil prices are raising costs to ship outside goods into America giving encouragement to consumers to buy more domestically made products in turn allowing producers of those goods to raise prices. Ahead of this week’s meeting, this news brings home the point that it will be hard to substitute cheaper foreign goods to keep cost of living down. It will be interesting to see how they approach the inflation issue and it is likely some traders are looking for an earlier rate increase while most expect rates to remain unchanged until August.

Currencies

This week will bring employment, earnings and a study of consumer prices reports from Statistics Canada which should keep traders of the Canadian dollar on their toes. As long as higher crude prices hold, the Canadian currency will likely maintain its current price. It will take an extremely negative report or a reversal in crude to move this market lower.

Weak German economic data and lower business and consumer confidence across the European Union will likely put a damper on the Euro this week. Bad news has definitely called the possibility of an interest rate hike by the European Central Bank into question. The risk to growth will have to be weighed against the issue of inflation.

High fuel prices are cited as the reason for a possible dip in Japanese business confidence levels. The soaring costs of each stage of fabrication from base goods to shipping costs will probably be on everyone’s mind as exports start to slip. Watch for the Yen to slide as well.

Published on Tue, Jun 24 2008, 06:30 GMT

For the week of June 16th, 2008

Thu, Jun 19 2008, 11:53 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

On Friday, the US Labor Department reported that consumer prices were up .6% in May. That’s a 4.2% increase from a year ago - right in line with expectations. It is clear that higher fuel costs made up most of the gain. If you remove energy and food, prices were only up .2%. The University of Michigan’s index of consumer sentiment dropped from 59.8 to 56.7 which was weaker than expected. Today the stock index futures fell after JP Morgan Chase and Company cut their recommendation of GE due to the concern rising fuel costs will cut into earnings. This week be alert to the PPI report as well as housing starts and permits on Tuesday. Even though the expectations are not very high at this point even bad numbers that exceed the expectations will help the current market conditions.

Currencies

The Canadian dollar fell on Friday to the lowest close in two months. Statistics Canada reported a stronger than expected increase of 2.0% in manufacturing sales. The Canadian appears to have hit a bottom and I will be long from this point.

The Bank of Japan decided to keep the interest rate unchanged at .50% as expected. The yen continues to climb today and I expect more gains throughout the week.

Speculation that the dollar rally is just getting started as the Federal Reserve’s turn to fighting inflation makes is more probable that they will raise interest rates more aggressively than the European Central Bank. The consumer price numbers report all but solidifies expectations the Fed will soon look to raise the interest rate from its current 2%. Despite this foregone conclusion, the euro increased against the dollar for the first time in three days after the Group of Eight nation summit stopped short of calling for a strong U.S. currency and European inflation accelerated to a 16 year high. There appears to still be some room for the euro to appreciate short term but the long term outlook is bearish.

Published on Thu, Jun 19 2008, 11:53 GMT

For the week of June 9th, 2008

Wed, Jun 11 2008, 10:09 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

WOW! The US Labor Department reported on Friday that the unemployment rate increased from 5% to 5.5% in May, and non farm payrolls were down 49,000 in the same period - not as bad as expected. It was almost comical listening to the house try to blame the increase in unemployment to the amount of teenagers unable to find work. Oh yeah, and I think crude was up a little too.

Friday is over and crude was the story! Today however, at least early in the session, crude seems to be retracing. Undoubtedly being up $11 and hitting a high of $139.12 a barrel did affect the stock market. This morning stocks have already started trying to push higher. It looks to have weathered the blow and started the climb back to 1400. I am going to remain careful and keep close stops. I think it makes sense to everyone in this crude dependant economy that if crude continues up to $150 a barrel as some are estimating the S&P will be trading back at the 1300 levels.

Currencies

The unemployment rate in Canada remained at 6.1% in May with a net increase of 8,400 jobs in May. The last year has shown an increase of 339,000 jobs. High crude is typically a major contributor to a higher Canadian. I expect this market to still remain under the 1.00 mark even if crude climbs to the 140's.

Across the pond U.K. producer prices have increased at the fastest pace in 20 years in May. This just increases the odds the Bank of England will refrain from cutting interest rates even as the economy steers toward a recession. The housing crisis remains a huge concern in the island nation and inflation pressures run a close second. It will be interesting to see how the bank plays this out.

The euro has increased to the strongest level this year versus the yen as well as trading almost at the two-week high against the dollar. As speculation increases, the region's central bank will increase rates as early as next month.

Published on Wed, Jun 11 2008, 10:09 GMT

For the week of May 19th, 2008

Tue, May 20 2008, 14:14 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

The S&P 500 continues to look strong. This strength has come from about 2/3 of its companies posting first-quarter profits that beat estimates. However, with the new buzz signaling stagnation in the world's largest economy unfortunately there could be a two step forward one step back situation. Protect any long positions with close stops as enthusiasm can quickly turn when nervousness sets in as people realize we have not seen these prices since January.

The U.S. Census Bureau reported that housing starts were much stronger than anticipated up 8.2% from March's pace. This is really the first and only good news coming out of the housing industry in while but it is a little deceiving. The higher housing starts were in mutli-family homes rather than the single family homes, which are at their lowest level in years. The economy is continuing to be plagued by high fuel costs and even higher food costs. According to the University of Michigan its consumer sentiment index fell from 62.6 to 59.5n May, which was weaker than expected. The retailers will be looking to make up ground this Memorial Day weekend. Heavy discounts are expected more so than in previous years. With some stimulus checks still on the way it will be interesting to see how much Americans will spend and if it will be enough to chase away investor fears.

Currencies

Statistics Canada reported that retail sales among large retailers totaled C$8.33 billion in March, up 9.4%. The Canadian has cracked the 1.00 mark and with crude prices continuing higher there could be more room to go. However, with the volatility crude oil has seen there is a definite possibility any day it could sell off hard and if that's the case the Canadian will be right behind it. Keep close stops.

The Australian dollar reached a new contract high of 95.02, supported by a 7.25% interest rate compared to our 2.00%. Inflation remains a concern for most developed nations and traders need to be watchful for any economic policy changes. Japans Cabinet Office reported that real GDP was stronger than expected up .8% in the January to March quarter. Real GDP for the 2007 – 2008 fiscal year, which ends on March 31st, increased by 1.5% and that left people believing that even if there is a slowdown in the US, Japanese exports will not suffer too badly and should remain resilient which will bring much needed support to the yen.

Published on Tue, May 20 2008, 14:14 GMT

For the week of May 12th, 2008

Tue, May 13 2008, 09:14 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

The S&P 500 looks like it will rebound from the first weekly drop in a month. The stock market gained after a pullback in oil prices boosted consumer company shares and Europes largest bank set aside less money than analysts estimates for bad American loans. Interesting how our bad loans might end up pushing the market up at this point. The US Census Bureau reported exports were down $2.6 billion in March, to $148.5 billion while imports were down $6.1 billion to $206.7 billion. The bottom line was $58.2 billion of net imports which was below expectations. This is going to have some significance but with the dollars outlook finally changing this market is looking to break 1400. With the reports due out this week like Retail Sales, CPI, Industrial Production and Housing Starts the real test will be if we are above the 1400 mark by weeks close.

Currencies

The Canadian dollar showed a bit of promise while exports increased in Canada by 1.6% in March; imports were down .3% resulting in $5.5C billion of net exports making it the most since May of 2007. Statistics Canada reported a better than expected unemployment rate even though it increased from 6.0% to 6.5% in April, with a net gain of 19,000 jobs. Canada has added 348,000 new jobs to the economy over the past year. The 1.00 mark is in reach and unless there is a sell off in crude this could be a good week for the Canadian.

According to a survey of 31 economists at Bloomberg, the ECB will lower its 4% main refinancing rate to 3.75% by the end of September and 3.50% by year-end. If this estimate is correct it will continue the descent of the Euro. The anticipation and speculation about this will continue leading up to the announcement, but the Euro looks technically weak and I expect this market to be trading lower by weeks end.

The dollar looks to be turning the tide. Speculators for the first time in a while look to be pro greenback. With the expectation of stagnation instead of cuts, and the ECB expected to start cutting, it appears to finally be time to jump on board and ride the dollar up.

The Reserve Bank of Australia expects consumer prices to increase 4.5% by the end of 2008. The expectation is that this will be followed up by a decrease of 3.25% at some point in 2009.

Published on Tue, May 13 2008, 09:14 GMT

For the week of April 28th, 2008

Tue, Apr 29 2008, 12:04 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

This week is going to be all about the FOMC meeting which starts on Tuesday. The S&P 500 has been strong, climbing 9.8% since touching a 19 month low on March 10th, thanks to positive earnings from companies like Google, Intel, Boeing, and Amex. It also appears that the market is acting ahead of the Fed announcement pushing the market over the 1400 mark on Friday. The consensus seems to be another ¼ point cut but with the dollar needing to find strength I would not be surprised to see the Federal Reserve hold the line on further rate increases. Breaking the 1400 mark makes this market appear technically strong however the Fed holds the key this week. We should see solid opportunities around this critical FOMC meeting. However entry and exit points will be crucial - use tight stops. I will continue to play both sides of the 1400 mark.

Currencies

With a critical FOMC meeting this week the announcement on interest rates should shake up the currency market. The dollar needs help in a bad way and it will come if the Fed does not decide to further rate cuts. Across the pond, the U.K.s Office for National Statistics announced that real GDP slowed to a .4% gain in the first quarter, after increasing .6% in the fourth quarter in 2007. This represents the slowest gain in three years. In Japan, retail sales were up 1.1% in March from a year ago, in line with expectations. Consumer prices were also up 1.2% in March from a year ago. This increase represents the largest annual gain in ten years. The yen looks strong. The ECB did not cut its key rate which is at a six year high of 4%. They did not implement a cut in order to contain inflation, which has increased to 3.6% last month, the fastest pace in 16 years.

Published on Tue, Apr 29 2008, 12:04 GMT

For the week of April 14th, 2008

Tue, Apr 15 2008, 10:33 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

The market still seems to have some room to the downside. Wachovia Corp helped the decline by reporting an unexpected loss - its first quarterly loss since 2001. This unexpected loss is also fueling concerns that the worst of the credit crisis has not come yet. General Electric also said that their earnings in the first quarter of 2008 were down 6% from a year ago and reduced their forecasts for the rest of the year. Retail sales in the U.S. were up .2% in March although this number is excluding autos. The University of Michigans index of consumer sentiment dropped from 69.5 to 63.2 in April. This is a number which was weaker than expected and it is also the lowest in over 25 years. There will be some discount buying but overall this market has a bearish tone.

Currencies

The June yen had its highest close in a week. Will this cause Japan to raise its interest rate? Producer prices were up 3.9% in March from a year ago, the largest increase in 27 years reported this by the Bank of Japan. Deflation has been the recent struggle for Japan. There could still be some room to the upside. After the weekend meeting the G-7 voiced concerns that ``sharp fluctuations'' in currency markets may hurt the global economy, which ``continues to face a difficult period.'' The yen advanced as a drop in stock markets caused investors to cut holdings of higher-yielding assets funded by loans in Japan. This statement also came out of the meeting - ``Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability,'' the G-7 statement said. ``We continue to monitor exchange markets closely, and cooperate as appropriate.'' I believe that a stronger greenback is what is wanted by almost all; however we will need some help to make it happen.

Published on Tue, Apr 15 2008, 10:33 GMT

For the week of April 7th, 2008

Tue, Apr 8 2008, 08:58 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

The US housing crisis is so devastating that some banks have started to just look the other way when homeowners have stopped making mortgage payments. The number of borrowers at least 90 days delinquent on their mortgage payments increased to 3.6 percent at the end of December, marking the highest percentage in 5 years according to the Mortgage Bankers Association in Washington. That number is almost double the 2% who have already been foreclosed on. On Friday the U.S. Labor Department reported the unemployment rate jumped from 4.8% to 5.1% in March. This was the highest in over 2 years with a loss of 80,000 in non-farm payrolls. This number was far bleaker than expected. Looking further into the numbers the Labor Department also revised Januarys non-farm payrolls from down 22,000 to 76,000 jobs. February was also revised from down 63,000 to down 76,000. The market is going to feel further effects from the unemployment numbers. I would look for the market to be down by weeks end, despite early enthusiasm to start the week.

Currencies

Just above us, our neighbor to the north Statistics Canada reported a decrease in the unemployment rate from 5.8% to 6.0% in March with a net gain of 14,600 jobs. This number was weaker than expected. However over the past year Canada has added 325,000 new jobs. Additionally it was reported by the Conference Board in Canada that its index of consumer confidence fell from 96.5 to 94.5 in March. The Canadian dollar should not pass the 1.00 mark for a while. Australia's Bureau of Statistics said that retail sales were down .1% in February, weaker than expected. Both of these export based

Dollar denominated deposits held almost no appeal due to the Feds lowering of its target rate for overnight loans between banks to 2.25%. It is the second lowest after Japans .5% among the G-7. Surveys are saying the European Central Bank will keep its rate at 4% at its April 10th meeting, I would like to disagree since the European union has seen a number of ill-effects from its inflated currency which have contributed to general slowdowns in export and manufacturing. Any action to revive these sectors might weaken the euro and bring buyers back to the US dollar.

Published on Tue, Apr 8 2008, 08:58 GMT

For the week of March 31st, 2008

Tue, Apr 1 2008, 14:57 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

Last week, the U.S. Commerce Department announced that consumer spending was up .1% as expected and personal incomes were up .5% in February. The University of Michigans consumer sentiment index fell from 70.8 to 69.5 in March which was weaker than expected. During a time of the biggest housing plunge in over 20 years, continued job losses and the general expectation for America to slump into recession there is an obvious watch for a slowdown in consumer spending. In a continuing effort to help banks stay liquid, the Fed announced that it will offer $50 billion on the 7th and 21st of April. This week, Fed Chairman Ben Bernanke will testify before Congress after his attempts to calm the financial markets by lowering rates and extending credit to non-banks. It is expected that the jobless rate rose and payrolls shrank by between 50,000 and 63,000 according to some estimates. There is heavy intervention to try and breathe life into the market. I expect after Bernankes testimony the market will get a spark but there is still room to move to the downside. Continuing conversations calling to revamp financial industry policy will unfold in the weeks to come, but anything that gives the market jitters will also bring in selling pressure amid uncertainty.

Currencies

The unemployment rate in Japan increased from 3.8% to 3.9% in February. It was also announced that consumer prices were down .2% in February, but up 1.0% from a year ago. Japan has also cut production for the second straight month in February. The cut is due to the countries biggest exports market the United States verging on a recession. This is the first back to back decline in production in nine months. This is a true indicator that companies are concerned word demand is decreasing as the U.S. economy slows. I would not be surprised to see some intervention coming soon and I am looking for the yen to trade lower this week.

Across the pond the U.K.s Office for National Statistics announced real GDP was up .6% in the fourth quarter of 2007 and up 2.8% from a year ago, slightly less then expected. The confidence level in the British nation for property has slipped, reflected in the six straight month of lower prices for homes. Consumer confidence is at a 13 year low and the UK slowdown is causing credit crisis talk and forecasts for credit market unrest for at least the rest of the year. Although I expect the pound to find support around 197, I think it will be a long time before we surpass the 200 mark again.

Published on Tue, Apr 1 2008, 14:57 GMT

For the week of March 24th, 2008

Wed, Mar 26 2008, 10:58 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

Last week, heading into the Easter holiday, the news was not so good. The U.S Labor Department reported that jobless claims were up 22,000 to 378,000 more than expected. There was also the near collapse of Bear Sterns which undoubtedly took its toll on the stock market. However things have changed. After the Federal Reserve stepped in to arrange a takeover deal the stock surged and now JP Morgan may raise its offer from $2 to $10 a share. Other positive news is that Tiffany & Co climbed above analysts estimates. This news was surprising given that Tiffany is surging in the higher end retail sector despite astronomical metal prices.

Look this week for the new home sales number on Wednesday to be the only slowdown to a market that is going to go higher over the next week. Keep your stops close. The 30 day moving average is at 1350 thats a number a lot of traders will be looking at.

Currencies

Statistics Canada reported that the composite index of leading indicators was down .3% in February. This was weaker than expected. The Canadian is going to be hard pressed to break the $1.00 mark for a while if crude and gold continue to sell off.

The US dollar is coming back. The dollar continued gains on the Swiss Franc, Canadian, and Yen started off by the Feds cut of its benchmark rate .75 percentage points on March 18th. Help also came after some analysts said the Group of Seven nations may take action in currency markets to offset the impact of a slowing U.S economy. It doesnt appear to be coming as hard and fast as some would like but the dollar should continue to rally.

Published on Wed, Mar 26 2008, 10:58 GMT

For the week of March 17th, 2008

Tue, Mar 18 2008, 14:10 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

The stock market was struck by the news out of Bear Stearns; Wall Streets biggest buyer of mortgage securities needs emergency funding to keep from going under. Now its sold for $2 a share. The Fed will provide up to $30 billion to JP Morgan & Chase Company to help finance the purchase of Bear Stearns. This will also help the company from going bankrupt while they shop it around.

The Federal Reserve, in its first weekend emergency action in almost 30 years, is in a struggle to prevent a meltdown in financial markets and decided to lower the central bank discount rate by a quarter point to 3.25 percent. The Fed will also lend to about 20 firms that buy Treasury securities directly. I would look for the markets to change by weeks end but the long trades will show after the meeting. Before the meeting I am short.

Currencies

Mr. Bernankes cuts have not been helping the dollar to say the least. Today provides more intervention; the Fed reduced the rate on direct loans to commercial banks by a quarter point to 3.25 percent. It will likely lower the target rate for overnight loans tomorrow to 2.25 percent. Lower borrowing costs work against the dollar by making government issued fixed income securities less appealing to global investors. The rest is pretty much common sense on a day like today, but I would look for there to be currency intervention coming soon. The dollar has to come back. The dollar fell below 96 yen for the first time in 12 years. The dollar fell to as low as 95.76 yen, the weakest since Aug. 15, 1995, before trading at 96.71 yen at 8:38 a.m. in New York.

Consumer prices in the Euro area 15 were up 3.3% in February from a year ago, up from a 3.2% gain in January and slightly more than expected. The Euro naturally is up today but there is heavy speculation that the central banks may try to intervene soon to support the U.S. Dollar.

With crude down about $4.00 the Canadian is trading lower today. Couple that with Fridays news from Statistics Canada which reported that productivity was down .8% in the fourth quarter, the biggest decline in twelve years, blamed on the loss of manufacturing jobs.

This week it would be wise as they say to go with the flow. STAY TIGHT WITH STOPS! I would not be surprised by some intervening.

Published on Tue, Mar 18 2008, 14:10 GMT

For the week of March 10th, 2008

Mon, Mar 10 2008, 15:27 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

It was only a matter of time before we dipped back below 1300 on the S&P and I believe this week will be more of the same. Last week the Fed came out and announced that in an effort to increase liquidity its Term Auction Facility (TAF) will auction $50 billion to banks on March 10th and another $50 billion on March 24th. This is far more than the original $30 billion amount that was set. They also indicated more auctions will be coming in the future if necessary to ease the credit crisis. Last week the U.S Labor Department said that there was an improvement in the unemployment rate in February from 4.9% to 4.8% while non-farm payrolls also declined 63,000. This drop was weaker than expected and was the largest drop in the last 5 years. The January non-farm payrolls number was revised from down 17,000 to down 22,000. In December, the number was revised from a gain of 82,000 to a gain of 41,000.

What does this mean for traders? Play down to support at 1250 and keep your stops close there will be short in day rallies thanks to discount shoppers.

Currencies

The unemployment rate in Canada remained at 5.8% in February, the lowest in 33 years, with a net gain of 43,300 jobs, much more than expected. This information still left the Canadian with a down day on Friday but this week it should climb with help from crude and gold.

The Bank of Japan met and kept its interest rate unchanged at .50%, as expected. For the first time in almost a decade foreign exchange traders are confident that the Bank of Japan won't intervene in the currency market, creating a perfect scenario for the yen to extend its biggest rally since 2000. This market can and will continue to rally.

Published on Mon, Mar 10 2008, 15:27 GMT

For the week of March 3rd, 2008

Tue, Mar 4 2008, 10:59 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

The market tried to gain some ground at the end of last week with positive news on a potential bail out for bond insurer Ambac Financial. With so many negative stories, it feels like the market will take any excuse to turn positive. The trick will be holding the ground once it is gained and this week will provide the test for that. Fed chairman Bernake will be speaking twice in the coming week and his comments, paired with a couple of key reports, will set us up for a chance to short the S&P with tight stops as I am looking for the news to continue to be gloomy.

Currencies

This week may present some great opportunities for short plays in the Canadian dollar as its historic ride higher may come to an abrupt halt with economic slowdown in the United States and quarterly earnings reports due from some of their major banks. The key thing to remember is that around 75% of Canadian exports head south and if domestic and American demand slump, so does the loonie. In addition, the International Monetary Fund has projected a 1.8% decline in Canadas economic growth.

On the other side of the pond, the Bank of England lowered their interest rate by a quarter point but still projected weaker consumer spending amid reports that loans are getting harder to come by and housing prices have dropped for the fifth month in a row. I expect this will be the first of at least a few reasons to be short the British Pound. Take advantage with long puts and put spreads.

Published on Tue, Mar 4 2008, 10:59 GMT

For the week of February 25th, 2008

Tue, Feb 26 2008, 10:23 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

Currencies

Published on Tue, Feb 26 2008, 10:23 GMT

For the week of February 11th, 2008

Tue, Feb 12 2008, 09:15 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

Last week, in the face of an election year possibly starting in recession, Congress passed an emergency plan to expedite rebates from $600 to $1,200 to most taxpayers and $300 checks to disabled veterans, lower income individuals, and the elderly. This stimulus package will give money to those who will spend it and ultimately stimulate our economy. This will cause the market to react positively and I believe you will see the stock market rise in the week following the official endorsement by Bush.

This comes off the heels of last weeks announcement by the U.S. Commerce Department stating wholesale sales decreased .7% in December while inventories increased 1.1%. This week should be choppy, keep close stops.

Currencies

Despite poor forecasts, Canadas economy grew by 46,400 jobs in January moving the unemployment rate to a 33 year low. This was impressive because it was a complete reversal from December when the Canadian employment picture had a decrease of 2,900 jobs. The key here is that the gains were spread broadly and the employment growth in January was almost entirely due to full time jobs. The statistics agency revealed that over the past year full time positions have been created at nearly double the rate of part time ones. This currency looks to once again be on the move. I will be long until I see a major correction in crude or gold.

Last Thursday the European Central bank (ECB) remained unchanged in its key lending rate leaving it at 4.0 percent due to high inflation threatening the Euro zone while the Bank of England cut to 5.25 percent to support stumbling growth in Britain.

The decisions by both were right in line with economists expectations who doubted the ECB would follow suit with US Federal Reserve who slashed its key rate from 4.25 percent to 3.0 percent in just eight days last month. However, I would look to the ECB to seriously consider a cut later in the year. I still believe that this currency has downside potential and will short when my indicators alert me.

Capital investments in the worlds second largest economy might be slowing. On Friday, the Japanese core machinery orders fell for a second straight month in December, falling 3.2% from November according to the government. This drop contributed to a 4% drop in core machinery orders for all of 2007, the first decline in five years. This news came amid growing concerns that a slowdown in the U.S. economy could drag on Japans growth.

Published on Tue, Feb 12 2008, 09:15 GMT

For the week of February 4th, 2008

Tue, Feb 5 2008, 09:36 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

The stock market has really shown reaction to the 50 point rate cut announced by the Fed. Last weeks announcement that Microsoft offered to buy Yahoo for around $45 billion in stock and cash surely helped the market as well. This purchase offer by Microsoft fueled investors with bullish sentiment causing the S&P 500 to jump to its best close in two weeks.

I believe this is a short term rally - there are still major issues in sub prime housing and credit markets. The U.S. Commerce Department reported last week that construction spending was down 1.1% from Novembers pace. Construction spending was also down 2.6% for 2007. Although there was good news last week the US Labor Department announced that the unemployment rate improved from 5.0% to 4.9%. However the key indicator was in the non farm payrolls showing a loss of 17,000. Not only was this weaker than expected it was the first monthly net loss of jobs in over four years. Finally, although the University of Michigans consumer sentiment index increased from 75.5 to 78.4 in January it was still weaker than expected.

With the real issues still at hand, the Fed has made it possible for the market to rally. This is temporary; the Fed is prepared to step in again and will have to by the next meeting because this market is going to turn down before then.

Currencies

The dollar has also felt the negative effects of the Fed lowering its benchmark lending rate by 50 points to 3.0% and indicating they are prepared to make further cuts if needed. The dollar has declined 14% during the past 12 months as lower interest rates made dollar-denominated assets less attractive to international investors. However, I see the dollar forming a bottom. The ECB should step in shortly to cut rates and this will help the dollar. For now, expectations are that the ECB will keep its main refinancing rate at 4 percent at a policy meeting on Feb. 7.

Looking ahead, interest rate futures contracts on the Chicago Board of Trade show a 70% chance the ECB will cut the benchmark rate 50 points at the March 18th meeting. Despite this expectation from traders ECB council member Nicholas Garganas said on Jan. 31 that the central bank won't consider a rate cut because inflation remains ``a major concern.''

The Reserve Bank of Australia will meet on Tuesday and is expected to raise the interest rate by .25 % to 7.0%

Canada's industrial product price index was up 1.1% in December, more than expected. This currency will test 102 in the coming week.

Published on Tue, Feb 5 2008, 09:36 GMT

For the week of January 14th, 2008

Tue, Jan 15 2008, 09:00 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

Last week the S&P was able to hold some temporary ground with some value stock buying as well as help coming from the U.S Census Bureau reporting that exports have increased from $141.7 to $142.3 billion in November. Imports also increased from $199.4 to 205.4 billion. One of the headlines repeated most often was about problem plagued mortgage lender Countrywide Financial, which was acquired by Bank of America for $4 billion in stock. This was a risky play for Bank of America and time will tell if this was a home run or a strikeout.

The story hasnt changed though as this market is still going down. Continue to use a 5/25 moving average on a 5 minute for your daytrading indicator moving average indicators work well with trending volatility so ride her til she bucks you off. Keep close trailing stops. Id look for the S&P to find its next level of support at 1350.

Currencies

Economic growth appears to have slowed down in Japan. It is now estimated by some major players like Goldman Sachs that the chances of a recession in the worlds second largest economy is 50/50. The yen will suffer if they are right.

The Euro still has some room to go based on the expectation that the Fed will reduce rates yet again here in the states. This market is due to top out soon, just not yet. I am waiting for confirmation that a top has been set.

The Canadian dollar closed out the week at 98.01. Canadas unemployment rate remained unchanged in December at 5.9%, but there was a net loss of 18,700 jobs which was weaker than expected. However, overall the economy gained 366,600 jobs in 2007.

Our northern neighbor is benefiting from inflated gold and oil but our recession is their problem, too, since the US is Canadas major trading partner. This currency is going to channel to the downside while the US tries to come out of recession.

Published on Tue, Jan 15 2008, 09:00 GMT

For the week of January 7th, 2008

Tue, Jan 8 2008, 08:49 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

I hope everyone enjoyed the holidays but unfortunately the slate is not wiped clean on January 1st and the markets have started off the New Year in correction mode. The issues from 2007 continue to plague the markets. Last weeks jobless claims numbers and $100 crude did not help either. The U.S. Labor Department reported that the unemployment rate increased from 4.7% to 5.0% in December with a net gain of 18,000 jobs less than expected - this was also the weakest monthly report in over four years. It appears that we have left stagflation and are headed toward a recession. The sub prime problem is really starting to take effect. These issues will add to the likelihood that the Fed will be forced to cut rates again at the next meeting.

Currencies

There is no doubt that the world is feeling the effects of record commodity prices like $100 crude, $870 gold, beans close to the teens, $4.50+ corn and sub prime exposure still across the board. The currency sector is primed for some real volatility. Volatility means opportunity and I look to cash in along with my premium subscribers!

Friday the Eurostat estimated that consumer prices in the Euro area will increase 3.1% in December parallel with Novembers gain. The Euro climbed to its highest close in a month. This market seems to be getting toppy and there is not much benefit to the Euro going much higher. A correction is due.

The pound finished off the week at its lowest close in four months at $1.9686. This was due in part to stronger than expected number from an index of services in the U.K. from 51.9 to 52.4 in December.

Friday also provided a two week low against the U.S. dollar for the Canadian. This low was due to lower than expected domestic purchasing activity data for December. This is raising concerns that the U.S. economic slowdown is affecting Canada as well. With $100 crude and gold at $850 or above you would think that the Canadian would be strong because Canada is a major producer of both oil and gold - strong commodity prices have traditionally benefited the Canadian currency. But the worry now is on how much additional pressure those high prices will add to a faltering U.S. economy.

The United States is Canadas largest trading partner and a significant economic slowdown in the States would undoubtedly have a negative impact on Canada.

Published on Tue, Jan 8 2008, 08:49 GMT

For the week of January 7th, 2008

Tue, Dec 18 2007, 08:41 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

Currencies

The United States is Canadas largest trading partner and a significant economic slowdown in the States would undoubtedly have a negative impact on Canada.

Published on Tue, Dec 18 2007, 08:41 GMT

For the week of December 10th, 2007

Tue, Dec 11 2007, 08:33 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

Last week the US Labor Department reported unemployment rates remained at 4.7% in November with an employment gain of 94,000 non-farm payrolls - this was more than expected - but still short of the ADP estimate. There was also a bit of news that might have been slightly overlooked - The University of Michigans index of consumer confidence fell from 76.1 to 74.5 in December.

Looking ahead, we have an unusually important December FOMC meeting tomorrow. Historically this meeting was seen as a low profile final gathering before the New Year which is not the case this year. The expectation is another rate cut, the question is will it be ¼ or a ½? There seems to be heavy speculation and optimism that we will see a ½ point cut. I think differently and believe that there will be a ¼ point cut and room for a further cut of ¼ point coming early next year. The interesting part of Tuesday will be the reaction an extremely volatile S&P will have. I look for this market to spike on the immediate news and correct by Friday. If the heavy consensus is ½ point cut I believe the market will drop if we see ¼. After the market has a chance to digest the information, we should be below 1500 by weeks end.

Currencies

Friday showed the Canadian dollar sharply rising thanks to stronger than expected Canadian employment data. The numbers showed Canada creating 43,000 jobs in November much higher than the 7,500 decline that was forecast. The employment rate also set a new high at 63.8%. The currency did not quite get parallel with the dollar despite the news. I am still overall short this market and I will play dips and use $1 as my stop.

Japan reported a lower revision in the Real GDP from a .6% gain in the third quarter to a .4% gain. GDP was up 2.1% from a year ago. The yen is still a technical short after breaking the previous support level at 8975. Give yourself some room on stops intraday, overall I see this market trading lower by weeks end.

Last week the Bank of England cut interest rates a ¼ point to 5.5%. Britains central bank weighed inflation vs. further evidence that the countrys long term housing boom is quickly coming to an end. This was also coupled with concerns about deteriorating consumer confidence. I expect the pound to be up but I believe this week will show better trading opportunities in other currencies.

The European Central Bank kept its benchmark rate unchanged at 4 percent Thursday but appeared to set the stage for a possible rate decrease sometime in early 2008.

Lower interest rates can jump-start an economy, but they can also weaken a currency as investors look to move funds to countries that provide a higher return.

Published on Tue, Dec 11 2007, 08:33 GMT

For the week of December 3rd, 2007

Tue, Dec 4 2007, 08:15 GMT
by Kalvin OBrian

Pit Guru

U.S. Economy

The major gain made by the S&P last Wednesday followed through, ending the week off at 1483. The high expectations for favoring continued rate cuts from the FOMC next Tuesday seems to be a leading cause. Couple that with the U.S. Commerce Department reporting that personal income and consumer spending were both up .2% in October. The retail sector is also doing better than expected giving this market a reason to rally.

BUT...

There are still those huge sub prime issues lingering. That is why U.S Treasury Secretary Paulson and other federal officials will be meeting with U.S. mortgage lenders to help find a way to prevent more foreclosures and help minimize the damage that the sub prime mortgage market is dealing with. This is a big indicator to me that this will not just go away. The banks cant just make this issue disappear no matter how hard they try. I expect a somewhat quiet week leading into next weeks meeting, suggesting a relatively tight trading range heading into Friday's employment report.

Currencies

Despite positive GDP and consumer numbers across the board the currencies seemed to turn around vs. the dollar. Crude and expectations of an FOMC rate cut could be leading the way for a true correction.

The time has finally come for the Canadian. Real GDP in Canada was up .7% in the third quarter up 2.9% from a year ago and even that couldnt hold it over the water mark. Reality has finally set in. The Canadian dollar closed at .9996 the lowest close in two months and key close given that it was below the $1.00 mark. I believe there is still a little more to go. I will be short this market on a dip below...with a stop at...Premium subscribers check for this trade in my instant messenger alerts this week!

Taking a look at the yen, it dropped last week to .9012 but consumer prices in Japan were up .3% in October from a year ago, the Unemployment rate remained unchanged at 4% in October and household spending was up .6%. I would stay short this week.

The December euro also closed down .0115 at $1.4643 despite positive numbers. Eurostat reported that real GDP was up 2.7% in the third quarter from a year ago, up from last months estimate of 2.6%. The expectation of consumer prices for November is + 3.0% - that would be the highest in 6 years.

Published on Tue, Dec 4 2007, 08:15 GMT

For the week of November 19th, 2007

Wed, Nov 21 2007, 10:08 GMT
by Kalvin OBrian

Pit Guru

Last week the S&P traded within my expected 1525 to 1585 range. On Thursday the Labor Department reported that the Consumer Price Index increased by 0.3 percent last month, the second straight month with inflation at that level. The acceleration was in part due to another jump in energy prices and continued increases in food costs.

Also, the Unemployment numbers were higher than expected increasing by 20,000 last week to 339,000. This is the highest level in a month. The labor department did report that about 2,000 of this 20,000 was due to the effects of the California wildfires and the writers strike, shutting down production on many tv programs.

I expect the S&P 500 to do more of the same this week. The volatility should be relatively low especially later in the week. Play bounces off 1500 in both directions with close stops. Daytraders be aware that the FOMC minutes are relesed on Wednesday. This could provide a nice spike.

Currencies

Its still basically a ½ off sale here in the States for the foreign shopper. I do, however, sense that a change will come this week in the form of a US dollar spike. I will be long the dollar heading into Black Friday here in the States. Last Monday was a great day for the dollar hitting a high of 76.23. Even though there was no real follow through, this market is going to see a spike midweek and I feel the FOMC minutes will help it along.

The Canadian dollar was chopped down on Monday and this freefall is long overdue. I believe this market showed confirmation and I continue to be short. I would not make too much of the bounce we saw on Friday. This market will be at 1.00 very soon. I base this on the strength I feel the U.S dollar will see.

Looking at the daily chart on the yen, it looks like this market will continue to move higher. I am long this market early in the holiday shortened week.

Published on Wed, Nov 21 2007, 10:08 GMT

For the week of November 13th, 2007

Wed, Nov 14 2007, 09:58 GMT
by Kalvin OBrian

Pit Guru

While some of the pits were closed Monday in observance of Veterans Day, most remained open and the S&P closed in the middle of the days trading range. This market will stay in the 1435 to 1475 range for the week. I would continue to look at early and late day moves and anticipate the middle of the day will be slow. Play early and late rallies up to or down to 1450 with close stops. Although the currency pits were closed, there was quite a bit of action on the Globex and the currency markets are following through on the movements we saw last week.

Currency outlook:

Japanese Yen: Yasuo Fukudo, the Japanese prime minister, came out and expressed his concerns that the yens gains are not desirable. He issued a warning to traders and investors not to make speculative moves on the currency even though it rose to the highest level in 1 ½ years. I will be long this market despite this concern.

Euro: Friday saw a cut in the European Union economic forecasts. The EU will show slow economic growth over the next two years associated with a reduced manufacturing output due to the high cost of oil as well as the export market being impacted by the record highs in the euro. Look to short this market with close stops.

Canadian: I wanted to save the best for last. Globex trading had the Canadian following through on last weeks meltdown. Monday provided the biggest one day fall since January 1971. It seems that all the news coming out of Canada lately has been sunshine and rainbows. We finally get a piece of bad news and it provided just the catalyst this market needed to come back to earth. The largest bank in Canada is announcing write downs associated with their investments in the sub prime mortgage market and my advice - SHORT! SHORT! SHORT! This market is going down to 100 as the greenback rallies. If you have followed my reports, you know that I have been expecting this from the Canadian. This market has hit the top, now hit eject, pull the cord and glide on down to 100.

Published on Wed, Nov 14 2007, 09:58 GMT

For the week of November 5th, 2007

Tue, Nov 6 2007, 11:29 GMT
by Kalvin OBrian

Pit Guru

Halloween might have been what spooked the stock market but I think there might be a little more to it. The week started as expected and the FOMC meeting turned out an anticipated cut of ¼ point after which the market was very bullish. Then on Friday, the U.S. Labor Department said that the unemployment rate remained at 4.7% in October with a net increase of 166,000 jobs, much more than expected. This was a bull's dream and the S&P immediately produced a 5 min bar that set the high of the day and then stalled out. The only thing that saved this market was that it was Friday and they rallied it back to about even on the close going into the weekend.

This market is starting to realize the effects of inflation and the sub prime exposure that is still very much out there. Just ask Citigroup who called an emergency meeting which revealed some gloomy numbers tied to their subprime mortgage holdings and announced the resignation of their CEO, Charles Prince. With reality setting in this market is set up to drop. After the key support at 1500, the next number to watch is 1489. We will be below 1500 at the end of the week. Day traders - once we break 1500, play the bounces.

It may appear that all I have been talking about lately in currencies is the Canadian dollar and it seems like every day there is more positive news coming out of Canada. The Canadian dollar was the best performing currency against the U.S. Dollar this week. It rose to the strongest against its U.S. counterpart in decades. Whether it is the huge tax cut for Canadians or the 63,000 new jobs created in October - 6 times the expectation - this news or this rally cant continue. I still see this as a great time to short this market. The top is here and we will see the Canadian down on the week.

What does the flip side of the coin look like? The dollar fell to a record against the euro and dropped to the weakest since 1981 versus the pound but I am expecting a kick midweek. Along with a bounce in the dollar, I am watching for two other things - playing the dips in the market once we break 1500 with close stops and shorting the Canadian placing stops above the previous daily highs.

Published on Tue, Nov 6 2007, 11:29 GMT

For the week of October 29th, 2007

Tue, Oct 30 2007, 16:42 GMT
by Kalvin OBrian

Pit Guru

The Financials Pit Review

Last week had stock index futures moving on speculation that earnings will keep growing. This market has had some key reports, but get ready for a Fed bombshell. Last week included bad news from Merrill, good news from Apple, crude over $90, and Countrywide Financial Corp losing $1.2 billion in the third quarter (this was the first quarterly loss reported in 25 years). This information was followed by great optimism from Countrywide, who is forecasting to be in the black for the next quarter and '08. I am not as optimistic.

Its all about the Fed meeting this week. Bernanke and the Fed are still trying minimize the housing market meltdown with rate cuts. The U.S. housing market is in turmoil, the worst its been in 16 years. This rate cut is going to happen but its not the solution. The market is going to be down after a Fed cut.

Trading this market is quite simple right now; I continue to use a 5/25 bar moving average on a 5 minute chart. These moving average indicators provide my entry points and the market is volatile enough to consistently clip points. This is a temporary system but it is working incredibly well right now as my Premium subscribers know. Keep it going until I advise otherwise.

Last week also showed us a record low U.S dollar against the euro. This was due in part to the speculation of a Fed cut this week. We also saw the dollar go to a 33 year low versus the Canadian. The Relative Strength Index (14 day) is showing 67.95. When the RSI hits 70 I will have the indicator I have waited for to start heavily shorting this market.

Published on Tue, Oct 30 2007, 16:42 GMT

For the week of October 22nd, 2007

Tue, Oct 23 2007, 08:25 GMT
by Kalvin OBrian

Pit Guru

The Financials Pit Review

We started last week with the December futures at 1574 and closed the week off at 1505. The market certainly provided great opportunities for us bears to short the market. What happened? Last week was all about the earnings and they were disappointing, especially in the banking sector. Mix in crude oil prices, a weak dollar, gold, and finally top it all off with the labor department reporting the biggest one week surge in applications for jobless benefits since February 10th and we have the lowest close in a month.

Looking ahead this week provides some excellent trading opportunities thanks to volatility generated by key info and data that is sure to swing the market. The beginning of this week should setup some intraday rallies due to the G7 meeting and a general recovery from Fridays plunge, but overall we will be below 1505 at weeks end. Day traders make note of Thursdays durable goods report and new home sales.

The G7 has the floor this week and they want a change. The gain these currencies have seen is starting to be felt heavily in their inability to sustain good exports. With foreign currencies testing or setting new highs there is key support in-house for the G7 meeting to set the stage for a currency trend change. Last Thursday Germany, France and Italy - the three biggest economies in Europe - had business leaders increase the pressure on the G7 finance ministers to agree to measures to stop the euro currency from rising and hitting the European economy.

Correction starts in.NOW!

Last week the British Pound ended up .0049 at $20465, the highest in about three months. This came thanks to the U.Ks Office for National Statistics reporting that real GDP was up .8% in the third quarter and up 3.3% from a year ago.

The Canadian dollar hit the highest spot price close in 33 years. Granted, Canada reported consumer prices were up .2% in September and up 2.5% from a year ago the biggest annual increase in over a year. This helped the Canadian dollar hit a new contract high of $10368. This will not continue. I am short!

Well last week is over and premium subscribers are taking some nice profits into the upcoming week. For my premium subscribers our focus this week will be on intraday rallies in the S&P and on a strong dollar push causing selling pressure in the Canadian dollar and euro currency.

Published on Tue, Oct 23 2007, 08:25 GMT

For the week of October 15th, 2007

Tue, Oct 16 2007, 13:49 GMT
by Kalvin OBrian

Pit Guru

The Financials Pit Review

Fridays surprisingly strong retail sales suggested that consumer spending was holding up. The mergers and acquisitions activity also caused some encouragement to investors. The end result was a strong rally to end the week. I dont think that I am alone in wondering, when is it going to end? The stock market is showing one of the best 12 month periods in history despite a housing crisis, a dollar meltdown, employment concerns and benign growth. This resilient market has seen two major retracements this year and has responded to both with two of the fastest percentage gains in the S&P in the last decade. This market has yet to feel a true correction and is overdue for an extended breakdown watch out as my indicators suggest that we miss 1600 and the market is toast from here.

A slew of economic reports are coming up and market sentiment suggests any one of these reports could spark a bear break and bring some reality back across the board. This week provides a great opportunity for traders. Look to short the market placing a stop above the highs of last week. Be aware of the CPI report on Wednesday. These reports should provide excellent day trades. Premium Subscribers be ready for alerts.

Last I checked I passed on being a travel consultant to be a professional trader, but here is a little travel advice for you fellow Americans out there. Put off your trip abroad for about a month as the dollar is about to make a major coming back. Recent panic selling in the dollar came after it broke key historical technical support but the potential for continued selling is minimal as markets like the Euro feel the heat of its currency is doing heavy damage to exports. Several currencies are getting very top heavy. The Canadian Dollar has not seen a 15% rally in any 7 month period in 20 years. This market is way ahead of itself. Its made the 15% move and the correction in that market is just about due. Short the Canadian with stops above the highs.

If you are like me you have to be just waiting for one thing to happen. A MAJOR CORRECTION IN THE STOCK MARKET!!! The Canadian is worth more than my greenback?

Stocks rose on Friday as surprisingly strong retail sales suggested consumer spending was holding up, while investors were encouraged by renewed mergers and acquisitions activity. "After seeing yesterday's pullback and the pullback we had a couple of months ago, it seems that people are buying the pullbacks," said Joe Ranieri, head of Nasdaq trading at Canaccord Adams. "There's just too much value in large caps and growth is starting to chase small and mid caps, so look for any kind of pullbacks to be buying opportunities," he said.The Dow Jones Industrial Average closed with a gain of about 78 points, or 0.6%. The S&P 500 saw similar gains while the Nadasq Composite ended with up 1.2%, rebounding from a 1.4% drop in Thursday's session. For the week, the Dow rose just 0.2%, the S&P gained 0.3%, while the Nasdaq advanced 0.9%.

Published on Tue, Oct 16 2007, 13:49 GMT

For the week of August 13th, 2007

Wed, Aug 15 2007, 07:12 GMT
by Larry Levin

Pit Guru

The Financials Pit Review

Recap - The volatility in the stock indices is at an all time high. I cant remember a time in my trading career where the market has been all over the map like this. The market this past week has had incredible moves in both directions - sometimes on the same day. Weve literally watched this market drop 200 Dow points, only to rally right back within the same hour. The trading on the floors of the exchanges has been fast and furious. One might say the reason for this movement is simple - the credit markets - but its not that simple. Yes, the credit markets have been providing big bearish headlines and theyve definitely helped push these markets lower, but that is not the real reason for the huge moves in both directions. No, instead its a little noticed change that took place within the trading of stocks. Early in July the NYSE removed the up-tick rule for the short sale of stocks. Previous to this, you could only short stocks on an up-tick. Now you can short a falling market (which hasnt been allowed since 1934.) That is the real reason for all the volatility. Weve had a major change in the way the stock market is traded and in all honesty not very many people are talking about it. But they will be!

Outlook - Well these past weeks you can almost throw the charts in the garbage (for now). Because of the credit markets and the above mentioned rule change, traders have had a very difficult time gauging any real technical levels. This wont last forever and we will be able to watch solid technical points in the market again soon. But keep in mind when markets change, traders have to change too. And with the added volatility traders must trade with small contract size and still keep in mind that low risk is the key to successful trading. The credit market headlines will still be the biggest push for the stock indices this week. Continued bad news will push these markets to the downside again. That is the most likely scenario.

Published on Wed, Aug 15 2007, 07:12 GMT

For the week of August 13th, 2007

Wed, Aug 15 2007, 07:02 GMT
by Larry Levin

Pit Guru

The Financials Pit Review

Published on Wed, Aug 15 2007, 07:02 GMT

For the week of August 06th, 2007

Mon, Aug 6 2007, 14:32 GMT
by Larry Levin

Pit Guru

The Financials Pit Review

Recap -

Outlook -

This market has got a chance to bounce a little higher for a very short period of time as short sellers may get a little jumpy and begin a short covering rally.
That short covering rally will most likely be met with big resistance and this market will have a much harder time moving to the upside.

Published on Mon, Aug 6 2007, 14:32 GMT

For the week of July 30th, 2007

Mon, Jul 30 2007, 14:59 GMT
by Larry Levin

Pit Guru

The Financials Pit Review

Recap

Outlook

Published on Mon, Jul 30 2007, 14:59 GMT

For the week of July 23th, 2007

Tue, Jul 24 2007, 07:19 GMT
by Larry Levin

Pit Guru

The Financials Pit Review

Recap Can you believe another week with record prices? Of course you can, it never ends around here. But wait just a second, something very interesting happened on Friday and its very different from what we've been seeing lately. We watched as some big companies (notably Google, Caterpillar and Microsoft) simply didn't impress the street with the earnings like they usually do. Microsoft didn't do badly, but the other two missed by a lot, and thats all the stock indices needed to finally find sellers on Friday. And that all happened right after we made new records in the stock indices on Thursday. So up on Thursday and down on Friday is the way it went on the trading floor. It was definitely a very weak finish late on Friday as the market staged a comeback that simply couldnt hold up. It is very interesting indeed.

Outlook - The focus will be on the big sell off late in the week and on the housing reports that are due. This market has a bit test in front of it. Will it rebound like it has done so many times previously? Or will it finally run out of gas for a little while and push lower, which would be a big change from what weve seen lately. The real key is oil prices. If energy prices (especially crude oil) can finally top out and start moving lower, the stock indices can recover quite nicely. But if oil prices continue to push towards $80 a barrel, will we see the stock indices find some more sellers and most likely test lower prices. We've certainly seen a strong rally this summer, a little pull back would be fine with me and probably very healthy for the market.

*Chart Courtesy of Gecko Softwares Track n Trade Pro*Chart Courtesy of Gecko Softwares Track n Trade Pro

Published on Tue, Jul 24 2007, 07:19 GMT

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For the week of July 16th, 2007
Tue, Jul 17 2007, 06:56 GMT
by Larry Levin
Pit Guru

The Financials Pit Review
Recap: So let's get this all straight: We've got sub-prime mortgage worries, crude oil at the $74 level, and weaker than expected retail sales. What should all this mean to someone using common sense? The market should move lower or at the very least have a hard time going up. What does it mean in reality? The market will continue to move higher and set nonstop records as it ignores most signs that the market should move lower. But in trading, reality is all we care about. And this market wants (and needs) to go higher as more and more money is literally pouring into the stock market on a regular basis. The reality is this market (the stock indices in general) will not have a consistent move lower anytime soon, barring terrorism in the United States.

Outlook: More inflation data is upon us this week. We get both the CPI and PPI as well as Mr. Ben Bernanke speaking in front of congress. Everyone will be glued to their television sets for those hearings. So it will be more of the same as we watch out for inflation in the form of economic data as well as Uncle Ben telling us hes still nervous about inflation, housing, blah, blah, blah. This market should move higher once again, but even if it doesnt, any pullbacks will certainly, once again, be buying opportunities that the bulls will pounce on!

*Chart Courtesy of Gecko Softwares Track n Trade Pro*Chart Courtesy of Gecko Softwares Track n Trade Pro

Published on Tue, Jul 17 2007, 06:56 GMT

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For the week of July 9th, 2007
Mon, Jul 9 2007, 16:28 GMT
by Larry Levin
Pit Guru

Recap - We had a week of solid gains even with the holiday. While the volume was light the move was decidedly to the upside. We got some decent economic data and that was also a big push for the bulls. Job growth was strong and the ISM report was also bullish. The market had faltered a little bit lately, but this past week was another show of strength as this market was even able to fight off crude oil prices above $72 a barrel. A little bit of M and A activity didnt hurt the market either.

Outlook - On Thursday and Friday the S&P futures contract got back above the 1540 level once again. Believe it or not, this market just does not want to go down for very long. Short of an act of terrorism, Im not sure what could bring this market considerably lower. But with that being said the market can still pull back a bit and then find more buyers. So this week keep an eye on the 1537 level in the September S&P 500 futures. Any sustained trading below that level could bring a test of the 1520 level. Also keep an eye out as earnings season starts back up again. The market will be closely watching U.S. earnings as they come out, starting with Alcoa on Monday.

*Charts Courtesy of Gecko Softwares Track n Trade Pro

Published on Mon, Jul 9 2007, 16:28 GMT

10169110-4e40-42bc-b35b-80e161e5d326

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For the week of June 11th, 2007
Tue, Jun 12 2007, 08:24 GMT
by Larry Levin
Pit Guru

Recap - This was a new one. For the first time in a long time, we got a new situation in the market. Instead of continually moving higher, we finally brought some excessive selling into the stock indices. Not only did we contend with the rollover period where we switch from the June to the September contracts, but we also got three down days in a row this past week. We hadnt seen a situation like that in a long, long time. But its really no big deal, as most people are not worried about any extended downturn in the markets. In fact, the Dow Jones Industrial Average rallied more than 150 points on Friday. It didnt erase all the losses for the week, but it did get a good percentage back after three down days.

Outlook - This week we can finally look for resistance levels in the S&Ps and other stock indices. Keep in mind we are now trading the September contracts instead of the June this week. There will be quite a few important pieces of economic data this week. Especially important will be the PPI and CPI that come out in the middle of this week. It will be especially important for this market to see a decreasing amount of inflation. That is the only way the Federal Reserve will give up the idea of raising rates by the end of the year. Any increase in inflation will continue to push the stock indices downwards. Keep an eye out for the 1527-1530 level in the September S&P 500 contract. That level will act as significant resistance this week and any sustained trading below could push that market all the way down to the 1500 level again.

*Charts Courtesy of Gecko Software's Track n Trade Pro

Published on Tue, Jun 12 2007, 08:24 GMT

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For the week of June 4th, 2007
Tue, Jun 5 2007, 07:05 GMT
by Larry Levin
Pit Guru

Recap - Even on a holiday shortened week we end up with the same exact situation once again. The stock indices (along with the stock market) once again moved higher. It doesnt matter if we have good news, bad news, or zero news, these markets continue to want to only do one thing, move up! Another buying opportunity presented itself when the Chinese stock market pushed us sharply lower on Wednesday on the news that the Chinese government was again trying to limit participation in their own markets, but once again we recovered without a problem and moved higher the rest of the week. Even the Jobs Report on Friday drove the market to new highs, finishing at the 1540 level in the S&P futures contract.

Outlook - The key point to watch in the S&P 500 futures will be the 1535 level. Weve got a few tops at that level and the market should start above there. If we get back below that level, watch for the 1525 level to come into play once again. Dont be surprised to see the market test some lower prices this week as the economic data coming out is not very important and the market sooner or later will need to consolidate. This week is as good as any. Watch for some lower trading this week.

*Charts Courtesy of Gecko Softwares Track n Trade Pro

Published on Tue, Jun 5 2007, 07:05 GMT

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For the week of May 14th, 2007
Wed, May 16 2007, 10:36 GMT
by Larry Levin
Pit Guru

Recap -We continue to see this market’s resiliency time and time again. We got economic data last week that, at the very least, should have given this market more of a reason to sell-off. But it just doesn’t happen as we continue to move higher and make record after record. We did see a little bit of a sell off on Thursday after the Fed meeting, but just as quickly the market recovered on Friday. So we continue to see an uptrending market with no real end in sight.

Outlook -This week we have some more inflationary data to be released. The highlight of the week will definitely be the CPI data that is released on Tuesday morning. That data will be one of the most closely watched pieces of information for the Fed to base its interest rates decision on. So keep an eye on that piece of economic data this week as well as the 1509.00 level in the June S&P 500 contract. Lessening inflation (with the CPI) and consistent trading above the 1509.00 level in the S&P should bring continued buyers in this market. If we get and stay below 1509.00 watch for a test below the 1500 level and even a possible test of the 1491.00 level.

*Chart Courtesy of Gecko Software's Track n' Trade Pro

Published on Wed, May 16 2007, 10:36 GMT

Archive

For the week of November 3rd, 2008
Published On Tue, Nov 4 2008, 05:40 GMT
For the week of October 27th, 2008
Published On Tue, Oct 28 2008, 06:38 GMT
For the week of October 20th, 2008
Published On Tue, Oct 21 2008, 05:51 GMT
For the week of October 6th, 2008
Published On Tue, Oct 7 2008, 07:14 GMT
For the week of September 29th, 2008
Published On Tue, Sep 30 2008, 06:08 GMT
[ View All ]

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