Archive through May 02, 2008

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deanrosario

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Post Number: 1397
Registered: 11-2002

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Friday, May 02, 2008 - 10:14 am:

Hi Rudy

As with Colin's musing in yesterday's newsletter, I think any optimistic view for a time frame "longer than days" (weekly, monthly) still requires caution on the XJO.

As you can see from the weekly chart, the weekly bars show resistance at 5670ish has proven difficult to break.

Adding further selling pressure (in my view) to the resistance is the position of the 20 ema on the weekly chart.

Today could be very important from a technical point. If the xjo ends the week strongly above this resistance level then it will show some - albeit early - optimism.

XJO June futures just hit 5700, which includes the current premium to the cash, which is approximately 30 points.

Don't forget the very important "retail sales figures" being released at 1130 a.m. - should provide further information for the RBA to digest prior to Tuesday's cash rate announcement.

"Never commit yourself to anything you can't walk away from in 30 seconds." Neil McCauley (played by Robert de Niro) in 'Heat'.

"Hope is a dangerous thing. Hope can drive a man insane." Ellis Boyd "Red" Redding, played by Morgan Freeman, in 'The Shawshank Redemption'.

rdumas

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Post Number: 1375
Registered: 11-2006

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Friday, May 02, 2008 - 11:23 am:

Hi Dean,

I continue to discuss market actions regardless of whether I think that they are well grounded purely to acknowledge that the action itself has actually occurred. I still believe that the US market's bullishness is based on 'hot air', cooked government figures and a false belief that the worst is over.

Whether I am right or wrong, the US market will continue to do what it wants and I have to accept that fact. It doesn't change the fact that I too will continue do what I have done in the past which is to insist for my own investment strategies that the fundamentals and technicals are mutually supportive before I make a commitment of funds.

If I am right then the market will eventually fall again to reflect the underlying fundamentals. If I am wrong then we will end up in another bull market. I can very easily live with that.

rdumas

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Post Number: 1376
Registered: 11-2006

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Friday, May 02, 2008 - 11:31 am:

Hi Dean,

Just a little bit more on your previous post. I agree with you that the 5670ish level did previously pose a solid resistance to our market. As can be seen by the chart below it was able to break through that this morning on the lead from Wall Street. Whether it closes above that level naturally remains to be seen.

It is starting to seem quite likely that the next level that it will attack is the 5768 level shown by the blue line. By the time that it does this it will also be 'kissing the bottom of the 30 week EMA' which will be a real test of its strength. The last time that it attempted to do that was in early January this year. I am standing by as a very interested observer.

deanrosario

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Post Number: 1398
Registered: 11-2002

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Friday, May 02, 2008 - 11:46 am:

Retail sales figures (March 2008) released 1130 a.m.

Ref: abs.gov.au

SEASONALLY ADJUSTED ESTIMATES

- The seasonally adjusted estimate of turnover for the Australian Retail and Hospitality/Services series increased by 0.5% in March 2008 (decrease of 0.1% in February 2008 & a revised no change in January 2008)

- In seasonally adjusted terms, the volume measure decreased by 0.1% in the March quarter 2008

- all industries - apart from "food retailing (increase on 1.7%) and Household good retailing (increase of 1.7%) had a decrease in the seasonally adjusted estimate in March 2008.

end of abs data

My simple analysis of this data:

1. We are spending more on Food and household goods (consumer staples)

* It's hard to know if we are actually buying more since I don't have the volume figures. It could be we are buying less but unit prices have gone up - pushing up turnover spending figures.

2. With less money to spend, we are having to cut spending in other areas (consumer discretionary)

rdumas

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Post Number: 1377
Registered: 11-2006

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Friday, May 02, 2008 - 12:23 pm:

Hi Dean,

Thanks for those figures. Based on many of the people that I know, I think that your assessment on what is happening is correct. The 'Joe average' is buying a little less of needed items (consumer staples) but due to the price increases is actually spending more than previously thus leaving less to spend on consumer discretionary items.

I keep very accurate records of what we spend each year and I know that our super market bill has gone up around 38% in the last year. We are in the fortunate position that we basically buy what we always have regardless of the cost when it comes to our super market shopping. For those on lower incomes I suspect that they would move to the cheaper cuts of meat and other items and possibly even cut out the extras. It just goes to show how much things have gone up. The published inflation figure of around 4.2% doesn't truly reflect the actual price hits that Joe average deals with living in our society.

This same thing is happening in the US and based on their cost increases to commodities I believe that their position is far worse than ours and yet the tame inflation figures that they trot out for public consumption is so out of whack with what the 'avearge man in Main street' pays its just laughable. It just proves the old adage about lies and statistics.

ody

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Post Number: 2422
Registered: 10-2006

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Friday, May 02, 2008 - 01:56 pm:

US MARKET RISE

The key driver, it appears, is largely that the Fed is interpreted as having "hinted" that the economy is stabilising, and that therefore "the worst of the credit crunch is now over". That is: the Fed has cut and cut and intimates that it won't go on cutting, so that THAT must mean that the worst IS over. (After all, the Fed knows everything, and honestly passes on all its knowledge to us, too.)

Utter nonsense, of course - but this just shows the psychology of investors. What is the latest ECONOMIC news in the US? The following is the relevant section from the most recent CNN report, providing a list of facts which to any normal person might suggest that there is reason to sell one's stocks rather than push their prices up - but not so for Americans.

Here is that list of economic data:
---------------------------------------------------------
Economic news: A busy day for economic news brought reports on income and spending, jobless claims, construction spending and manufacturing.

Personal income increased a less-than-expected 0.3% in March, while personal spending rose a greater-than-forecast 0.4%, the Commerce Department reported. The Core PCE deflator, the report's inflation component, jumped a greater-than-expected 0.2%. (Full story).

The number of Americans filing new claims for unemployment jumped by 35,000 last week, the government said, topping forecasts for a rise of 18,000. (Full story).

Construction spending fell 1.1% in March versus forecasts for a drop of 0.7%. Spending rose 0.4% in the previous month.

The ISM index of manufacturing activity held steady at 48.6 in April, unchanged from March. Economists thought it would fall to 48, according to Briefing.com. Any reading below 50 represents a slowdown in the sector.
---------------------------------------------------------

I rest my case.

rdumas

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Post Number: 1378
Registered: 11-2006

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Friday, May 02, 2008 - 02:00 pm:

Hi Eugenio,

I don't know whether it would be a good idea to take you on with that bet. The way the US market is at present they are likely to make new All Time Highs in the middle of a recession. The US market sort of reminds me of the captain of the USS Montana. I know I shared this U Tube clip with you a little while ago but others may not have seen it. When the might of the US is questioned some amazing things happen. I recommend people to view the video clip below to prove my point.

http://www.youtube.com/watch?v=ktITVQj6A1s

sway

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Post Number: 255
Registered: 12-2005

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Friday, May 02, 2008 - 03:12 pm:

Ody,
When next you Google, try searching for optimism and economic, instead of pessimism and economic. You won't get quite as many hits, but it doesn't hurt to see things from a different point of view (for example http://www.briefing.com/GeneralContent/Investor/Active/ArticlePopup/ArticlePopup.aspx?ArticleId=NS20080501093140TheBigPicture - sorry about the poorly placed popup)

SPX

I still maintain that the chart is reality and has tells me more than reading 50 pessimistic and 50 optimistic web sites.

I don't rest my case, as I think there is more to be learned from continuing debate.

Sway

This is not a recommendation or advice. As they say .... DYOR.

sway

Member

Post Number: 256
Registered: 12-2005

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Friday, May 02, 2008 - 03:15 pm:

ASX up 7% with no news? Anticipation of a bull run?

Sway

This is not a recommendation or advice. As they say .... DYOR.

rdumas

Member

Post Number: 1379
Registered: 11-2006

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Friday, May 02, 2008 - 03:46 pm:

Sway,

The article that you quote in your post number 255 is interesting in as much as the complete lack or real data.

An extract quoting his main points:

"The key points are:

1)Consumer spending was up steadily through the first quarter.
2)Exports are booming.
3)Business investment in equipment and software is holding up very well.

He fails to mention that the reason that consumer spending went up was because of higher prices. http://www.boston.com/business/articles/2008/05/01/soaring_prices_for_food_gas_p ush_consumer_spending_higher/

He fails to mention that whilst exports are up (which you would expect with a huge fall in the value of the US dollar) but that this was more than compensated for by the huge increases in imports. This was evidenced by the increasing deficit. http://www.bloggingstocks.com/2008/04/10/february-u-s-trade-deficit-widens-unexp ectedly-as-imports-rise/

I can't comment on his point that business investment is holding up but if it is as badly investigated as his other quotes then I don't find his views very credible.

By some chance you would happen to be a crew member of the USS Montana would you?

ody

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Post Number: 2423
Registered: 10-2006

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Friday, May 02, 2008 - 04:01 pm:

Sway: "Resting one's case"

To "rest one's case" is a quaint US expression which means to "bring the presentation of evidence pertinent to (a law case) to a close voluntarily" (Oxford English Dictionary, sense 8g of the verb "rest").

Note that, therefore, I simply presented evidence for a case (not, of course, this time, in law). That does not in any sense mean that no reply is expected or that no other case is encouraged: quite the contrary. And once the cases have been presented, the judging begins. So, in fact, my post is wholly in tune with your thought that debate is desirable.

As for the 7% for ASX: yes, usually that company goes up or down according to people's expectations as to how much share market activity there is likely to be. So those who suddenly are paying 7% more must expect one hell of a bull market. Unless, of course, someone knows something else, e.g. that a take-over offer is in the wings. It is a VERY big jump, so possibly it's based on inside knowledge. It is difficult to see bulls as solely responsible, given the difficulties surrounding ASX as a company, but who knows?

sway

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Post Number: 257
Registered: 12-2005

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Friday, May 02, 2008 - 04:07 pm:

Rudy
Now now, no need to get narky. I have no more faith in the optimistic articles, of which there are plenty (try this - it won't bite http://www.google.com.au/search?source=ig&hl=en&rlz=&q=optimist+economic&btnG=Go ogle+Search&meta= ), than in the gloom and doom ones that are in the majority on this thread. As always, I only trust the chart.

Sway

This is not a recommendation or advice. As they say .... DYOR.

rdumas

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Post Number: 1380
Registered: 11-2006

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Votes: 0


Friday, May 02, 2008 - 04:25 pm:

hehehehehehe

Sway, I also trust the charts and believe that I probably spend as much time analysing them as you do.

Where we differ however is that you believe that the charts represent the real economy where as I believe that the charts represent what investors think may represent the economy (or stock) at some future point in time. That is to say that the charts are a forecasting implement that bases its forecasts on a combination of facts and sentiment on what may be an ultimate future outcome. That is hugely different to what actually exists at any point in time. I find it hard to understand why you don't see that.

When people try to forecast the future they can sometimes get it wrong. This is the very reason why there can be many false rallies during a bear market. It is purely the market changing its mind on the potential outcome.

Based on the data that I glean from the various government reports I believe that from a medium term perspective (ie, perhaps around 12 months or so) they are getting it wrong.

I am not arguing that the market is going up, I just think that on this occasion it going up based on false assumptions.

rdumas

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Post Number: 1381
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