Food Inflation: Buy Ag on any dip

Chart of the Food Price Index from the Food and Agricultural Organization (FAO). The Food Price index measures the monthly change in international prices based on a basket of food commodities.

It sounds crazy to someone living in the U.S. Our supermarkets are always packed with meats, eggs, and vegetables. And we have one of the highest obesity rates in the world.

But the trend is clear when we take a look at what's happening in places like Egypt, Haiti, and Cameroon. Families in these countries are now paying 35%-40% of their monthly income on food. In China and India, sugar and meat prices are near all-time highs due to rising populations and lack of supply. Prices for corn and rice are at their highest levels since the 2008 food crisis ($CCI hit a all time high yesterday).

According to the United Nations, the world's population is expected to grow 35% over the next 40 years. To put this in perspective, that's about 2.5 billion more people than we have living on Earth today.


And that's just half the problem. These people will need a place to live. That means more industrialization. Most of these homes (Materials XLB), power plants (Buy URA), and schools will be built on areas where crops are produced today. The only solution to our food crisis comes from fertilizer companies. 


Fertilizer increases production from existing crops. In other words, it helps increase the size and improve overall quality in fruits and vegetables. In farmer's lingo, this is called an increase in crop yields. (Potash, Monsanto, Agurium and CF Industries are my favorites, stay away from Mosaic due to the unwind from Cargill) or just but the ETF MOO.

When will there be a correction in the SPX?

49?

Since the 80's there have been two times when yields have gone up 20% in a matter of a few months (see move from Sept 2010 to present) and both times the market crashed violently. We may still end up higher by year end but there is a big correction coming. If you are a bull in this market take profits when this thing gets near 49. The correction will be fast and hard and close to 20% plus but it will be back stopped by the FED and that will further drive up commodity prices. For the record I am long gold, silver, miners or metals and uranium and energy ETF, Ag ETF, and short the long bond using TBT.

An Important Development in the Bond Market Yesterday

Lost in the Bernanke Shuffle yesterday, was the breakout in the 10 year bond over 3.5% yesterday.  After a huge spike from October 2010 to mid December, the 10 year has been rejected at the 3.5% level roughly 4 times the past 6 weeks, but whatever macro views that pushed gold up during the Bernanke song and dance, also had bond participants selling bonds.

Takeaways?  A huge bonus for the banks as they can borrow at zilch and now get even more risk free return than usual.  But a potential issue for the housing market as mortgage rates are tied closely to this yield.  And some combination of worry about future potential inflation and/or confidence in future growth in the U.S. economy.  (it can be both)  Put another way, the market saw yesterday Bernanke will not take his foot off the accelerator despite his pledge on 60 Minutes he has everything under control and when the time comes he can change directions in 15 minutes.  Like every Fed move the past few decades, it is becoming clear the Fed will be late at their change of direction in policy... and cause another massive dislocation. 





Original source

Thursday Recap: A Look inside the markets

With European markets lower and the crisis in Egypt ongoing, it appeared that buyers decided to be cautious. The government reported U.S. Nonfarm Productivity in the fourth quarter rose by +2.6%, which was above the consensus expectations for a reading of +2.1% and Q3’s revised level of +2.4%. On the inflation front, Unit Labor Costs were reported to have fallen -0.6% versus the expectations for +0.1%. Q3’s reading was unrevised at -0.1%.  The Labor Department reported that initial claims for unemployment insurance for the week ending January 29 fell by 42K to 415K. The week’s total was below the consensus for a reading of 420K. Continuing Claims for unemployment for the week ending January 22 were in line with consensus at 3.928M vs. expectations for 3.828M.

The session began with a small gap lower and traded sideways for the first half hour before selling off eight points quickly just after 10 am. But the low of the day was on the chart at 10:15 as POMO began and dip buyers arrived and bought hard until lunch hour. The afternoon treated us to another lengthy stretch of ping-pong trading within a three point range until the final seventy minutes when it seemed like the NonFarm employment data was leaked and buyers arrived to pump the market into the close.

Today's market turn and rally right at 10:15 am sure had the look and feel of a POMO inspired rally. One minute the market was in danger of falling off a cliff, the next minute POMO began and the market made an about-face and rallied the rest of the session.

For the SPX Index there were 305 components advancing and 174 components declining. On the NYSE 3,137 issues were traded with 1,627 advancing issues and 1,391 retreating issues, a ratio of 1.17 to one advancing. There were 192 new highs and 7 new lows. The five day moving average of New Highs is 187 while the five day moving average of New Lows is 12 and the ten day moving average of Net Advancing is 431. The Net Advancing data indicates a bullish trend.

Advancing volume was higher at a ratio of 1.54 to one. The closing TRIN was 0.76 and the final tick was 251. The five day average of TRIN is 1.08 and the ten day average of TRIN is 1.16. The NYSE Composite Index gained 0.2% today while the SPX gained 0.24%.

For the NYSE, relative to the previous 30 session average, volume was 4.14% above the average. Of the last 15 sessions 13 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 20 sessions ended on a positive tick, 8 of last 10. For the SPX, the day's volume was 96.1% of the average daily volume for the last year. Volume was 92.6% of the last 10 day average and 104.6% of the previous day’s volume.

Breadth was fairly strong as the indices have fully recovered from last Friday’s sell-off. The only “weakness” is in the New Highs. For indices at 52 week highs, New Highs should be hovering near 400. But it is getting more difficult to believe that any significant downturn is coming.

Total tick for the day was 154,000 and the average tick for the day was 100. There were 71 ticks greater than 600 and 38 ticks more extreme than -600. There were 1 ticks greater than 1000 and 3 ticks more extreme than -1000. The tick action suggests institutional accumulation.

Intraday volume spiked during the downturn early today but also spiked on the up move later in the morning. Looking at the Nightly Breadth Indicators shows more bullish indicators than not. The only oddity among the indicators that stands out is the dropping percent of stocks above their 40 day moving average.

Sectors stronger than the SPX for Thursday:
- Basic Materials -- Outperformed the SPX by +13%.
- Consumer Staples -- Outperformed the SPX by +28%.
- Utilities -- Outperformed the SPX by +17%.
- Consumer Discretionary -- Outperformed the SPX by +93%.
 
Sectors weaker than the SPX for Thursday:
- Energy -- Underperformed the SPX by -20%.
- Financials -- Underperformed the SPX by -21%.
- Industrials -- Underperformed the SPX by -20%.
- Technology -- Underperformed the SPX by -8%.
- Health Care -- Underperformed the SPX by -10%.

Thanks Tim and Ben

GOLD ETF

As the arrows indicate every time the stochastics were this over sold in the past couple of years we have rallied to a tune of 20% plus in gold prices. Yesterday, prices spiked after "the beard" spoke and a tepid jobless recovery and the need for low interest rates and more money printing (for those of you who don't know what that is, watch the bears video on youtube).

We had four weeks of selling and that took out the late comers and weak hands and the open interest dried up big time and what happened to gold in that time frame was nothing short of remarkable, gold was down only six percent. There are reports of big buyers stepping in at $GOLD 1300 or so. Looking at the chart above you see it held support right at the 30wk ma and its been doing so for months now and people found that as a great entry point where they could safely exit without much loss.

When asked by family and friends has gold topped out I asked if they could answer a few questions for me. Has anything changed? Has the fed stopped printing money? Has the government proposed anything to slow down spending? Have bonds stabilized? Has the dollar started an uptrend. Are we now paying down debt? Has the price of everything we consume (oil, wheat, rice, sugar, cotton, meat) started going down? THE ANSWER IS NO!

So what changed except for the rice of Gold and other precious metals, NOTHING!

We just got overbought, there was no frenetic climax top, we sold off a bit while the S&P rallied and the commodities index made new highs albeit without the precious metals.

If we end today above 131.60 (will give us a bullish engulfing candle) on the GLD we can look back and say this week was the bottom. 

What Has Obama Done So Far

In his first week in office, Barack Obama did the following: 

• Froze the salaries for top White House staff members. This is a largely symbolic act, but might be an important one. 
• Set a deadline for the closing of Guantanamo Bay. Some of his supporters would say this is a great thing because they believe it operates as something from the Dark Ages. Others believe this characterization to not be true, and that no plan will be put place to determine what to do with the prisoners. Time will tell. 
• Fast-tracked the process to apply new fuel standards to 2011 car models AND initiated steps to allow California to set its own standards for auto emissions that are stricter than that of the Federal government. Again, this is a measure that some of his supporters hail as a grand step forward, while his detractors (or flamers) point out that it could provide an additional severe drag on the economy, especially in car manufacturing areas. 
• Signed a detailed executive order to ban torture and inhumane treatment of prisoners. 
• Asked the military leadership to engage in additional planning necessary to execute a responsible military draw down from Iraq. 
• Released the interrogation memos without consulting the Bush staff and/or Bush about it. And they were only partially released some of the information in the memos were not made public. 
• Signed an executive order that restored a 30-day time frame for former presidents to review records before they are released. It also eliminated the right for the vice president or family members of former presidents to do the reviews. 
• Signed an executive order that requires that appointees sign forms saying that they were not hired because of political affiliations or contributions. This is far from an unbeatable measure, but is an important early step towards cleaning up governmental hiring policies. It is easier to prove someone lied when their signature is right next to the statement in question. 
• Signed an order banning gifts from lobbyists and banning anyone from working in an agency they had lobbied in previous years. Promptly made the order toothless by immediately granting a waiver to a former defense lobbyist. 
• Lifted a ban on giving federal money to international groups that perform abortions or provide abortion information. 
• Granted his first TV interview as president to Al-Arabiya, a channel described as a "voice of moderation" to the Middle East. His supporters call this a very smart move to help angered nations and groups feel a bit less cast aside, and let them know that they need not resort to violence to be made a part of the world discussion. Detractors point out that this is the type of thing Neville Chamberlain would have done, though a TV interview and "the Munch Agreement" are leagues apart.

In his first 7 months in office

• He's done quite a lot actually. 
• He has so far passed an economic recovery bill which has met mixed criticism but is slowly progressing. He has passed the AMD Stabilization and Support bill which was tailored to help stabilize and strengthen the United States Military, and has shown improvement within the standard. President Obama has also been working on other proposals, bills, and acts to be passed on topics such as Health Care reform, Education, the Mortgage crisis, the war on Al-Qaeda, and Domestic policy. 
• Promised to send additional troops to Afghanistan in March and began the pullout of troops in Iraq. 
• Passed the bailout of the auto industry and pressured their management to tow the party line. 
• Waffled on sending troops and allowed those serving no suffer from lack of support. (If you had to send 30,000 Americans to a war zone I bet you would hesitate unless I realized lives were at stake and I was in charge) 
• Refused to allow open meetings regarding health care reform as promised. 
• Passed more tax increases on middle America than any other President. 
• Encouraged Cap and trade passage to increase demand of foreign oil and raise the cost of our supply. (How does cap and trade increase demand? (See discussion)) 
• Promised to make tough decisions regarding the ability to continue paying medicare payments. Cutting $400 billion from their budget. 
• Insulted police doing their jobs making the office look foolish. (How? (See discussion)

First Year: 

• Sent troops to Afghanistan but pulled troops out of Iraq (What planet? He has nt pulled out of Iraq!) we are now at 115,000 troops as of 2/11/2010! Zero actual draw down.

• Made a more transparent form of Government (almost daily daily Facebook Q&A's with his staff) Has had more closed door meetings then any previous administration. Even his open door committee only has closed door meetings!

• Tried several times to get the Republicans to join him and get bi-partizanship on the destruction of democracy. Republicans did not wish to contribute!

• Passed a stimulus package that is creating no jobs across the country. This bill has given more to the rich then every previous President combined!

• Well on his way to passing the HC bill which will ration health care to most Americans and help less then 12 million. The cost will destroy our children's and grand children's future.

• Managed to have the two worst months for deficit spending ever. (The two Februarys he has been President)

Read more: http://wiki.answers.com/Q/What_has_President_Barack_Obama_done_so_far#ixzz1CwdC5z3r

Gold Races Higher

Apparently the catalyst for the strong move higher in gold today was a speech given by Chairman Bernanke in front of the National Press Club this morning. Basically he repeated what I have been writing about for the past few weeks: QE isnt working in terms of Job growth and and stated, "It will be several years before the unemployment rate has returned to a more normal level,”

The market took this as a signal that there will be more easing. S&P was down 7 or 8 points and began to rally, gold spiked around noon as did silver. 

Original Source

Treasury Yields & SPX

Interest rates rallied to a new 10-month high yesterday. The yield on the 30-year Treasury bond surged to 4.64% – breaking above its December high and beginning a new move higher (and they are higher again today). 


Remember, as interest rates move higher, bond prices move lower. So, just about everyone who bought long-term bonds in the past two years is now underwater on the trade. This includes mom and pop investors who piled into the long bond at record-low interest rates last August; foreign countries like China, India and Japan, which need to do something with their trade surplus dollars ( and they are actually dumping these as fast as they can); and our own Federal Reserve.


Think about this… not only is our government running trillion-dollar deficits because the folks in Washington can't stop spending, but the Fed – through its quantitative easing program – is investing the borrowed money in our very own Treasury bonds, which are losing value almost daily.

Borrowing money to buy bad investments! Tell me is that what you would do, who would loan you the money, would any bank? But the Government can electronically manufacture dollars (Look at the $DXY). Were it not for problems in Japan and Europe the Dollar would be in much worse shape and as those countries fix their problems and we just keep printing, the dollar will plummet, there is no end in sight to the money printing, Its amazing. 

Once again you won't hear anyone on CNBC talking about this, and the fund managers have to put money somewhere, cheap money has to find a home ($CCI is at all time record high's and its doing it without gold or other metals, what inflation). The S&P 500 closed at a new 52-week high on Tuesday. It's up 3% so far in 2011, and up 15% since long-term interest rates started to rise last September.

"You have to be bullish," argue the cheerleaders on Bloomberg and CNBC, cant fight the FED or the third year of the presidential cycle, now can you"


For those that are Perma Bulls, please take note; there have been two other times in recent market history when long-term interest rates rose dramatically. Both occurred during the third year of a presidential election cycle. One was in 1999, when the yield on the 20-year Treasury bond rose 21% between April and December. Stocks peaked three months later.

The other time was in 1987. The 30-year yield rose 21% between April and August. The stock market crashed two months later.

A similar rise this time would put the 30-year yield somewhere around 4.90%. I think if your are bullish on US equities you might wanna get a little cautious. If the yield rises above 4.90%, it will equal the moves we saw in interest rates back in 1999 and 1987. Both periods were followed by sharply lower stock prices.


Happy trading!

Governments stockpile food staples

Governments stockpile food staples By Javier Blas in London and Chris Giles in Davos 
Published: January 27 2011 18:58 | Last updated: January 27 2011 18:58

Governments across the developing world are stockpiling food staples in an attempt to contain panic buying, inflation and social unrest.

But the hoarding is driving agricultural commodity prices even higher. The cost of wheat, the world’s most important staple, reached a fresh two-and-a-half-year high on Thursday, after countries from Algeria to Saudi Arabia announced extraordinary purchases.

Original Source

China on track to become top gold buyer

China on track to become top gold buyer By Leslie Hook in Beijing and Jack Farchy

February 2 2011 (Financial Times) — China’s gold imports are estimated to have more than doubled from a year ago in the run-up to Chinese new year, putting the country on track to overtake India as the world’s largest consumer of the precious metal.

… Precious metals traders in London and Hong Kong said on Wednesday they were stunned by the strength of Chinese buying in the past month. “The demand is unbelievable. The size of the orders is enormous,” said one senior banker, who estimated that China had imported about 200 tonnes in three months.

Original Source

Wed Recap SPX

Although Asian markets followed Wall Street higher, European markets were mixed as our open approached and stock futures in the U.S. were slightly lower after S&P downgraded Ireland. Challenger, Gray and Christmas reported that there were 38,519 planned job cuts announced in January which was up 20% from December’s 32,004 but down 46% from year ago levels. The planned job cut total for the month of January was the lowest seen in the month since Challenger started keeping records in 1993. ADP reported that the private sector job market expanded again during the month of January. The report shows that private sector jobs rose by 187K jobs during the month, which was above the consensus expectations for a gain of about 147K. December’s report was revised lower to a gain of 247K jobs from the initial report of 297K.

Today's session began with a small gap lower and quickly moved to put the low of the day on the chart just twelve minutes into the day. The SPX traded very choppy before moving to the high of the day at 10:32 just five points off the low. The rest of this very forgettable session traded listlessly in a very tight two point range.

Today's chart painted a narrow-range doji. There was a time when a narrow range inside day suggested a coming reversal of a short-term trend. But over the last two years, everything simply seems to suggest more upside coming.

For the SPX Index there were 159 components advancing and 323 components declining. On the NYSE 3,125 issues were traded with 1,413 advancing issues and 1,609 retreating issues, a ratio of 1.14 to one declining. There were 261 new highs and 9 new lows. The five day moving average of New Highs is 172 while the five day moving average of New Lows is 13 and the ten day moving average of Net Advancing is 333. The Net Advancing data indicates a bullish trend.

 

Declining volume was higher at a ratio of 1.84 to one. The closing TRIN was 1.62 and the final tick was 467. The five day average of TRIN is 1.1 and the ten day average of TRIN is 1.15. The NYSE Composite Index lost -0.21% today while the SPX lost -0.27%.

 

For the NYSE, relative to the previous 30 session average, volume was -1.76% below the average. Of the last 15 sessions 13 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 20 sessions ended on a positive tick, 7 of last 10. For the SPX, the day's volume was 89.9% of the average daily volume for the last year. Volume was 87.3% of the last 10 day average and 86.1% of the previous day’s volume.

 

If you’re a bear, today should concern you. Today was very normal action following the rally yesterday. The ten day average of Net Advancing has moved into bullish territory. New Highs were quite strong today despite the lifeless market. The breadth data really looks like the prelude to the market going higher.

 

Total tick for the day was 114,000 and the average tick for the day was 74. There were 26 ticks greater than 600 and 5 ticks more extreme than -600. There were no ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.

 

Volume today was just as lifeless as the market; making sense of any volume patterns is impossible. Checking the Nightly Breadth Indicators is almost as useless as well as the indicators show the effects of the big down day followed by big up day with a couple of small range inside days sandwiched in. In other words, the indicators are mixed and choppy and suggesting that we see at least another choppy small range day.

Sectors stronger than the SPX for Wednesday:

- Basic Materials -- Outperformed the SPX by +11%.

- Energy -- Outperformed the SPX by +33%.

- Technology -- Outperformed the SPX by +46%.

 

Sectors weaker than the SPX for Wednesday:

- Financials -- Underperformed the SPX by -56%.

- Industrials -- Underperformed the SPX by -4%.

- Consumer Staples -- Underperformed the SPX by -10%.

- Utilities -- Underperformed the SPX by -27%.

- Health Care -- Underperformed the SPX by -6%.

- Consumer Discretionary -- Underperformed the SPX by -2%.

  

Tuesday Recap SPX

The bulls were attempting to return to form this morning in response to solid the PMI reports out of Europe and green numbers from the major foreign markets as the first session of the month bullishness continues. There was no premarket economic news to review in the U.S. but we received reports on Construction Spending and the ISM Manufacturing after the open.

The Tuesday session opened with a significant gap upward and never looked back. Intraday pullbacks were rare and tiny as the bulls romped throughout the morning and early afternoon. The afternoon was consolidation along with what appears to be a double intraday top. The bulls managed a rare feat today as they complete shut down the bears; the bears ended the day with zero ticks greater than 600. This happens about once a year.


For the SPX Index there were 426 components advancing and 57 components declining. On the NYSE 3,146 issues were traded with 2,520 advancing issues and 554 retreating issues, a ratio of 4.55 to one advancing. There were 330 new highs and 8 new lows. The five day moving average of New Highs is 164 while the five day moving average of New Lows is 13 and the ten day moving average of Net Advancing is 186.
 
Advancing volume was higher at a ratio of 7.43 to one. The closing TRIN was 0.61 and the final tick was 970. The five day average of TRIN is 1.06 and the ten day average of TRIN is 1.24. The NYSE Composite Index gained 1.85% today while the SPX gained 1.64%.
 
For the NYSE, relative to the previous 30 session average, volume was 15.2% above the average. Of the last 15 sessions 13 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 19 sessions ended on a positive tick, 6 of last 10. For the SPX, the day's volume was 113.4% of the average daily volume for the last year. Volume was 99.3% of the last 10 day average and 116.9% of the previous day’s volume.
 
An outrageously positive session, with strong breadth and the broad NYSE Composite Index outperforming the SPX. But it is a bit surprising to see the ten day Net Advancing remain below 200. 
Total tick for the day was 431,000 and the average tick for the day was 278. There were 193 ticks greater than 600 and no ticks more extreme than -600. There were 10 ticks greater than 1000 and no ticks more extreme than -1000.

The last day with the tick this strong was last March 5^th. But in reviewing the data we found it interesting to note that prior to March 5^th the closest to what we saw to today was February 2^nd. You may recall that the February 2^nd session was sandwiched in between two powerful moves lower. It is counterintuitive but true that days such as today are often found on downturns for the market, just as the strongest market rallies are often found during bad economic times.
 
Intraday volume patterns today are difficult to determine because the session was really mostly a continuous ramp higher. Looking at the Nightly Breadth Indicators is interesting because all of the New High/New Low ratios declined and that strikes us as a bit strange on a session such as this.





Sectors stronger than the SPX for Tuesday:
- Basic Materials -- Outperformed the SPX by +119%.
- Energy -- Outperformed the SPX by +3%.
- Financials -- Outperformed the SPX by +42%.
- Technology -- Outperformed the SPX by +3%.
- Health Care -- Outperformed the SPX by +15%.
 
Sectors weaker than the SPX for Tuesday:
- Industrials -- Underperformed the SPX by -28%.
- Consumer Staples -- Underperformed the SPX by -96%.
- Utilities -- Underperformed the SPX by -66%.
- Consumer Discretionary -- Underperformed the SPX by -52%.

Monday Recap

With no major negative surprises or developments out of Egypt over the weekend, traders were more upbeat. Economic data was more positive as well. Personal Incomes rose by +0.4% in December, which was below the consensus expectations for an increase of +0.5%. The November level was revised higher to +0.4% from +0.3%. Personal Spending (now called “Consumption”) for the month rose by +0.7%, which was above the expectations of +0.6% and the November reading of +0.4%.

The week started with a small gap higher but the SPX was four points up within a couple of minutes. Trade was choppy and somewhat negative through the rest of the first half hour but at 10am the index painted the trading low of the session and began to climb. Bulls controlled the tape until midway through the noon hour when the high of the day was put on the chart. But sellers took over at that point and began pushing lower until just before 3pm when the market bounced sharply for several points. It was a bit choppy after that but the index managed to close not too far from the highs.

This session appeared to be a normal bounce after a rather ordinary sell-off on Friday. Tomorrow's session, being the first of the month, should continue the bounce.

For the SPX Index there were 352 components advancing and 128 components declining. On the NYSE 3,133 issues were traded with 2,111 advancing issues and 909 retreating issues, a ratio of 2.32 to one advancing. There were 125 new highs and 18 new lows. The five day moving average of New Highs is 162 while the five day moving average of New Lows is 15 and the ten day moving average of Net Advancing is 15.
 
Advancing volume was higher at a ratio of 2.19 to one. The closing TRIN was 1.06 and the final tick was 134. The five day average of TRIN is 1.31 and the ten day average of TRIN is 1.33. The NYSE Composite Index gained 0.95% today while the SPX gained 0.76%.
 
For the NYSE, relative to the previous 30 session average, volume was 22.17% above the average. Of the last 15 sessions 12 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 19 sessions ended on a positive tick, 5 of last 10. For the SPX, the day's volume was 91.5% of the average daily volume for the last year. Volume was 85.6% of the last 10 day average.
 
The advancing volume ratio was weaker than the advancing issues ratio but each were strong. There were still quite a few New Lows but the ten day average of Net Advancing managed to move into positive territory. Also, the broad NYSE Composite Index outperformed the SPX. 
Total tick for the day was 144,000 and the average tick for the day was 93. There were 90 ticks greater than 600 and 34 ticks more extreme than -600. There were no ticks greater than 1000 and 1 ticks more extreme than -1000. The tick action suggests institutional accumulation. 
The intraday volume pattern today shows that volume spiked on both up and down moves; not much can be read into that. Looking at the Nightly Breadth Indicators shows very mixed indicators. But worth mentioning is the McClellan Oscillator which didn't even make it into positive territory despite the gain of almost ten points on the SPX.





Sectors stronger than the SPX for Monday:
- Basic Materials -- Outperformed the SPX by +85%.
- Energy -- Outperformed the SPX by +203%.
- Financials -- Outperformed the SPX by +10%.
- Industrials -- Outperformed the SPX by +34%.
 
Sectors weaker than the SPX for Monday:
- Technology -- Underperformed the SPX by -15%.
- Consumer Staples -- Underperformed the SPX by -128%.
- Utilities -- Underperformed the SPX by -63%.
- Health Care -- Underperformed the SPX by -58%.
- Consumer Discretionary -- Underperformed the SPX by -60%.

Friday Recap "A look inside the market"

Daily taking out the 20dma, support at 1250 next target!
Then resume uptrend as long as we print and spend

Problems in Egypt caused turmoil in the overseas markets. The US government’s released estimate of the fourth quarter GDP which showed the economy grew at an annualized rate of 3.2% in the quarter and was below the consensus expectations for a growth rate of 3.6% but above the Q3 rate of 2.6%. (Recall that the final Q2 rate was +1.7% and Q1 was +3.7%). For the year 2010, GDP grew by 2.9%, which is the best level since 2005. On the inflation front, the Deflator came in at 0.3% vs. 1.6%. In addition, the Employment Cost Index was reported at +0.4% vs. +0.5% and last quarter’s +0.4%. Futures as the open approached were choppy, moving a bit lower after a steady uptrend since 3:30.

The Friday session began without a significant gap and tried to move higher and was up three points to put the high of the day on the chart at 9:48.  Internals were showing weakness early even as the market was trying to move higher. From 9:48 through noon sellers hit the tape hard as the SPX gave up 26 points. The rest of the day was choppy consolidation but the session closed at the lows of the day.

The SPX lost 7.01 points during the week. The range for the week was 27.57 points, 2.15%. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 61. Pullbacks often occur as this RSI reaches 80 and bounces near 20.

Total tick for the week was 377,000. On the NYSE, the advance/decline line increased during the week by 947 and the 10 day average of Net Advancing decreased from -24 to -60. There were 880 New Highs and 75 New Lows.

The week ended near even on the extreme ticks, 390 positive and 380 negative. But the more extreme than 1000 ticks heavily favors the bears as the count was eight positive and 29 negative. Friday's session accounted for all 29 of the negative 1000 ticks.

For the SPX Index there were 33 components advancing and 452 components declining. On the NYSE 3,149 issues were traded with 498 advancing issues and 2,590 retreating issues, a ratio of 5.2 to one declining. There were 148 new highs and 19 new lows. The five day moving average of New Highs is 173 while the five day moving average of New Lows is 15 and the ten day moving average of Net Advancing is -60.
 
Declining volume was higher at a ratio of 7 to one. The closing TRIN was 1.35 and the final tick was -712. The five day average of TRIN is 1.34 and the ten day average of TRIN is 1.28. The NYSE Composite Index lost -1.76% today while the SPX lost -1.82%.
 
For the NYSE, relative to the previous 30 session average, volume was 38.75% above the average. Of the last 15 sessions 12 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 19 sessions ended on a positive tick, 5 of last 10. For the SPX, the day's volume was 123.4% of the average daily volume for the last year. Volume was 121.8% of the last 10 day average and 136.3% of the previous day’s volume.
 
** Hugely negative market breadth but New Highs didn't really plummet nor did New Lows rocket higher. At this point this appears to be a normal but substantial market reaction to world events. 
Total tick for the day was -353,000 and the average tick for the day was -228. There were 15 ticks greater than 600 and 281 ticks more extreme than -600. There were no ticks greater than 1000 and 29 ticks more extreme than -1000. The tick action suggests institutional distribution.
 
The intraday volume pattern shows a huge spike in volume during the late morning sell-off as well as a second smaller spike of volume with a mid-afternoon down move. Looking at the Nightly Breadth Indicators we see more mixed results than would be expected. We're particularly surprised that the McClellan Oscillator didn't plunge lower.

Sector Performance: 
 
Sectors stronger than the SPX for Friday:
- Basic Materials -- Outperformed the SPX by +27%.
- Energy -- Outperformed the SPX by +142%.
- Financials -- Outperformed the SPX by +4%.
- Consumer Staples -- Outperformed the SPX by +83%.
- Utilities -- Outperformed the SPX by +44%.
 
Sectors weaker than the SPX for Friday:
- Industrials -- Underperformed the SPX by -14%.
- Technology -- Underperformed the SPX by -48%.
- Health Care -- Underperformed the SPX by -11%.
- Consumer Discretionary -- Underperformed the SPX by -150%.