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Thursday, October 20, 2005
Wednesday, October 19, 2005
***Alert***
Due to a scheduling conflict my posting will be light over the next few days. I finished the day 100% net long. It is highly probable the lows for the year are now in place for the major averages and we are in the beginning stages of the substantial year-end rally I have been looking for.
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Stocks Modestly Higher Mid-day on another Fall in Energy Prices
Indices
S&P 500 1,180.58 +.21%
DJIA 10,310.38 +.24%
NASDAQ 2,058.86 +.14%
Russell 2000 625.87 +.08%
DJ Wilshire 5000 11,751.82 +.16%
S&P Barra Growth 569.38 +.35%
S&P Barra Value 607.22 +.12%
Morgan Stanley Consumer 580.50 +.40%
Morgan Stanley Cyclical 686.36 -.33%
Morgan Stanley Technology 490.75 -.12%
Transports 3,568.13 -.59%
Utilities 392.61 +.14%
Put/Call 1.28 +36.17%
NYSE Arms 1.07 -33.38%
Volatility(VIX) 15.13 -1.30%
ISE Sentiment 170.00 +1.80%
US Dollar 90.04 -.29%
CRB 326.24 -.91%
Futures Spot Prices
Crude Oil 61.95 -1.98%
Unleaded Gasoline 167.25 -3.61%
Natural Gas 13.49 +.51%
Heating Oil 189.00 -2.29%
Gold 465.30 -1.96%
Base Metals 134.39 -.50%
Copper 180.60 -1.07%
10-year US Treasury Yield 4.44% -.45%
Leading Sectors %
Restaurants +2.07%
Gaming +1.99%
I-Banks +1.02%
Lagging Sectors
Coal -1.70%
Semis -2.23%
Gold & Silver -2.52%
S&P 500 1,180.58 +.21%
DJIA 10,310.38 +.24%
NASDAQ 2,058.86 +.14%
Russell 2000 625.87 +.08%
DJ Wilshire 5000 11,751.82 +.16%
S&P Barra Growth 569.38 +.35%
S&P Barra Value 607.22 +.12%
Morgan Stanley Consumer 580.50 +.40%
Morgan Stanley Cyclical 686.36 -.33%
Morgan Stanley Technology 490.75 -.12%
Transports 3,568.13 -.59%
Utilities 392.61 +.14%
Put/Call 1.28 +36.17%
NYSE Arms 1.07 -33.38%
Volatility(VIX) 15.13 -1.30%
ISE Sentiment 170.00 +1.80%
US Dollar 90.04 -.29%
CRB 326.24 -.91%
Futures Spot Prices
Crude Oil 61.95 -1.98%
Unleaded Gasoline 167.25 -3.61%
Natural Gas 13.49 +.51%
Heating Oil 189.00 -2.29%
Gold 465.30 -1.96%
Base Metals 134.39 -.50%
Copper 180.60 -1.07%
10-year US Treasury Yield 4.44% -.45%
Leading Sectors %
Restaurants +2.07%
Gaming +1.99%
I-Banks +1.02%
Lagging Sectors
Coal -1.70%
Semis -2.23%
Gold & Silver -2.52%
BOTTOM LINE: The Portfolio is higher mid-day on gains in my Energy-related shorts, Steel shorts, Internet longs, Medical longs and Retail longs. I exited my IWM and QQQQ shorts and added to existing longs PWR, NTES, BBY, BRCM, AAPL, ISRG and NVDA today, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mixed and volume is above average. Measures of investor anxiety are mostly lower. Today’s overall market action is slightly positive considering the decline in energy prices, fall in long-term rates and mostly positive earnings reports. As I said a few weeks ago, energy demand destruction is accelerating markedly. According to the API, gasoline demand in September fell by almost 4%, the most in over a decade. That is amazing considering how many more people are in the U.S., how many more people drive cars and how many more people drive larger cars. The sharp decline in gasoline demand is the main reason unleaded gas futures have declined about 45% since September peaks even with refinery utilization at its lowest level in 20 years. Natural gas will be no different. I already hear people everywhere I go talk of ways they are going to conserve this winter. Natural gas will follow the entire energy complex lower this fall. I expect US stocks to trade modestly higher from current levels into the close on short-covering and bargain-hunting.
Today's Headlines
Bloomberg:
- Saddam Hussein pleaded not guilty to charges of torture and murder in a massacre of Iraqi villagers, as a five-member special tribunal in Baghdad began a trial that may end in the ousted dictator’s execution. The trial was adjourned until Nov. 28.
- Shares of the Chicago Board of Trade surged more than 50% in their first day of trading as investor demand for a stake in the global $1,100 trillion futures industry overshadowed the collapse of broker Refco.
- Russia confirmed an outbreak of a lethal strain of bird flu south of Moscow while Romania said a second location in its Danube River delta area was hit by the virus that has killed 60 people in Asia.
- Crude oil and gasoline fell after the Energy Dept. reported an unexpected increase in US inventories of the motor fuel, which have been stretched since Hurricanes Katrina and Rita moved through the Gulf of Mexico.
- Hurricane Wilma, the strongest on record in the Atlantic Ocean, intensified into a Category 5 storm with 175mph winds and is forecast to strike Florida’s western coast between Tampa and the Keys by this weekend.
Wall Street Journal:
- Internet search engines such as Google and Yahoo! are being blamed for the rise in phony Web logs known as “splogs”, created to carry advertisements that promote other Web Sites.
- GM, DaimlerChrysler AG and Volkswagen AG are among world automakers racing to develop their own versions of hybrid-fuel engines to challenge Toyota’s popular Prius models.
USA Today:
- The White House plans to nominate a successor to retiring Fed chairman Greenspan in early to mid-November.
NY Times:
- The US and the Red Cross said 200,000 Hurricane Katrina evacuees are living in hotels, not 600,000 as previously stated.
- New York’s Metropolitan Transportation Authority plans to reduce fares this holiday season by tapping into an unexpected surplus.
- New Jersey will create a statewide umbilical and placental blood bank to be used by stem cell researchers and transplant doctors.
- Johnson & Johnson has told Guidant that it wants to negotiate a lower price than the $25.4 billion it agreed in December to pay for Guidant.
LA Times:
- The Orange County, California, commercial office market had its lowest vacancy rates in a decade as growing companies sought more space, citing Cushman & Wakefield.
Tehran Times:
- Iran restarted production at two oilfields developed by Royal Dutch Shell Plc after shutting them down for a week.
Financial Times Deutschland:
- Symbian Ltd., a maker of mobile operating systems partly owned by Nokia Oyj, is in talks with SAP AG to start a cooperation agreement.
Die Welt:
- The US and Canada attract more well-educated migrants than the European Union with 87% of people moving to the EU being poorly educated or having no education at all.
- Saddam Hussein pleaded not guilty to charges of torture and murder in a massacre of Iraqi villagers, as a five-member special tribunal in Baghdad began a trial that may end in the ousted dictator’s execution. The trial was adjourned until Nov. 28.
- Shares of the Chicago Board of Trade surged more than 50% in their first day of trading as investor demand for a stake in the global $1,100 trillion futures industry overshadowed the collapse of broker Refco.
- Russia confirmed an outbreak of a lethal strain of bird flu south of Moscow while Romania said a second location in its Danube River delta area was hit by the virus that has killed 60 people in Asia.
- Crude oil and gasoline fell after the Energy Dept. reported an unexpected increase in US inventories of the motor fuel, which have been stretched since Hurricanes Katrina and Rita moved through the Gulf of Mexico.
- Hurricane Wilma, the strongest on record in the Atlantic Ocean, intensified into a Category 5 storm with 175mph winds and is forecast to strike Florida’s western coast between Tampa and the Keys by this weekend.
Wall Street Journal:
- Internet search engines such as Google and Yahoo! are being blamed for the rise in phony Web logs known as “splogs”, created to carry advertisements that promote other Web Sites.
- GM, DaimlerChrysler AG and Volkswagen AG are among world automakers racing to develop their own versions of hybrid-fuel engines to challenge Toyota’s popular Prius models.
USA Today:
- The White House plans to nominate a successor to retiring Fed chairman Greenspan in early to mid-November.
NY Times:
- The US and the Red Cross said 200,000 Hurricane Katrina evacuees are living in hotels, not 600,000 as previously stated.
- New York’s Metropolitan Transportation Authority plans to reduce fares this holiday season by tapping into an unexpected surplus.
- New Jersey will create a statewide umbilical and placental blood bank to be used by stem cell researchers and transplant doctors.
- Johnson & Johnson has told Guidant that it wants to negotiate a lower price than the $25.4 billion it agreed in December to pay for Guidant.
LA Times:
- The Orange County, California, commercial office market had its lowest vacancy rates in a decade as growing companies sought more space, citing Cushman & Wakefield.
Tehran Times:
- Iran restarted production at two oilfields developed by Royal Dutch Shell Plc after shutting them down for a week.
Financial Times Deutschland:
- Symbian Ltd., a maker of mobile operating systems partly owned by Nokia Oyj, is in talks with SAP AG to start a cooperation agreement.
Die Welt:
- The US and Canada attract more well-educated migrants than the European Union with 87% of people moving to the EU being poorly educated or having no education at all.
Housing Still Strong, Oil Inventories Jump
- Housing Starts for September rose to 2108K versus estimates of 1970K ad 2038K in August.
- Building Permits for September rose to 2189K versus estimates of 2189K and 2075K in August.
- The EIA just reported crude oil inventories rose 5.55M barrels versus estimates of a 2.3M barrel rise. Gasoline supplies rose 2.91M barrels versus estimates of a decline of 1.5M barrels. Distillate inventories fell 1.92M barrels versus estimates of a 2.3M barrel fall.
- Building Permits for September rose to 2189K versus estimates of 2189K and 2075K in August.
- The EIA just reported crude oil inventories rose 5.55M barrels versus estimates of a 2.3M barrel rise. Gasoline supplies rose 2.91M barrels versus estimates of a decline of 1.5M barrels. Distillate inventories fell 1.92M barrels versus estimates of a 2.3M barrel fall.
BOTTOM LINE: US housing starts unexpectedly increased last month, suggesting demand is holding up even as borrowing costs rise, Bloomberg said. The rise in building permits was the greatest since February 1973. Applications for home purchases rose 7.3% last week, the Mortgage Bankers Association said. Construction that was authorized but not yet begun rose .8% to 235,300 units, the best since 1979. Starts rose 6.9% in the South and 1.9% in the Midwest. Starts were unchanged in the West and Northeast. Concerns over a nationwide plunge in housing are vastly overstated at this point. I continue to believe housing will slow modestly to more healthy sustainable rates, not plunge.
The EIA energy inventory data were very bearish for crude oil considering how much capacity is still shut-in.
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