The disappointment of corporate losses and lower earnings is being swept
aside by the sight of rapidly falling energy prices. Global equity markets are
in rally mode.
Shorts are being covered and new positions are being taken in the consumer
segment (discretionary spending, staples and healthcare). Volumes have
increased, both on the upside and downside.
Yesterday, the DJIA (+135.16 +1.18% to 11602.5), S&P 500 (+17.0 +1.35% to
1277.0) and NASDAQ Composite (+24.4 +1.07% to 2303.96) closed much higher on a
broad rally that climbed the wall of falling oil prices.
Crude Oil ($WTIC dropped -$3.40/bbl to 128.42. Along with the squeeze on
commodity prices, $GOLD dropped -$15.20/oz to 948.50. Both are looking lower
this morning.
With the lower commodity prices, the Toronto Composite index lost -46 -0.34%
to 13643.9 and the Toronto Venture board dropped –24 -1.05% to 2263.66.
In NY, Banks ($BKX +8.9%) and Broker-Dealers ($XBD +8.4%) continued their
5-day super-rally as short-sellers continue to protect earlier gains. XLF
(+8.4%) was the leading sector ETF, and is now up over +25% in the past week,
despite huge losses and an incredibly challenging operating environment, which
continues. The three consumer sectors (XLY, XLP and XLV) were up +2.7%, +1.8%
and +1.4% respectively at the close.
The big industry mover was Airlines ($XAL +22.2%), which moved because of the
plunging fuel costs as well as by further extreme re-organization measures taken
by UAL.
Cara 100 stocks on the move higher were the Indian banks (IBN and HDB =13.1%
and +9.8% respectively, Carnival Cruiseline CCL +12.2% on the lower fuel costs,
and SWK +7.5%, SBUX +7.4%, OXPS +7.1% and GOL +6.8%. The extreme losers were
SNDK -24.0%, MICC -22.6%, TEF -6.1% and GG -5.8%.
Today, traders will be
reviewing the earnings reports of three DJIA components, BA, T and PFE, as well
as PEP. Spinmasters will be looking closely at the Beige Book.
The 30-year US Bond ($USB) lost -0.34% to 114.16 as yields lifted when the
equity rally consumer cash. The US T-Bill yield popped +8.7% to 1.50 for that
reason.
Earlier today, the Asia-Pacific markets were strong. Tokyo (+0.97% to
13312.9), India (+5.94% to 14942.3), Australia (+1.69% to 5161.6), Hong Kong
(+2.69% to 23134.6) were strong, while Shanghai dropped -0.29% to 2837.9.
In Europe this morning at 7:43am, there is a broad rally based on continued
downward pressure on commodity contracts. The UK FTSE is up +1.12% to 5424, the
French CAC +1.59% to 4396, and the German DAX +1.07% to 6512.
Crude Oil futures are down -$2.11/bbl to 126.31.
At 7:38am ET, Gold, palladium, platinum and silver spot prices are all down,
presently at: 937.15 (up from 932.2 at 7am), 389, 1775, and 17.67 (up from 17.53
at 7am). These are well down from yesterday’s 974.38, 417.5, 1874, and 18.61
respectively at about the same time in the morning.
The Euro is at 1.5713 and the $USD at 0.72785 at 7:15am, whereas 30 min ago,
the numbers were 1.5689 and 0.72835, so there is a bit of strengthening to the
Euro, and gold/silver has recovered slightly.
DJIA futures are presently up +59 to 11621.
Comments & Outlook
The public has been getting an earful from the gold bug and silver crazy
crowd in the past month and I’m getting sick of it. Look at the 1-month charts
for gold and silver and you will clearly see the trend.
The rally in equities is based squarely on falling commodity prices,
particularly oil. That is firming the $USD and putting downward pressure on
precious metals. This scenario was painted in advance by me, and I alerted broad
market short-sellers two weeks ago that they ought to consider taking profits
ahead of the summer rally that I figured would be commodity-price based. I
warned that the changes to commodity exchange margin requirements would have an
impact. I also warned that with the HB&B earnings reports there would be a
lot of smoke being blown by desperate executives, which has been the case.
