U.S. stock index futures were pointing to a flat opening
on Monday morning. Friday's hit to stocks may or may not extend today,
but there is plenty of uncertainty to go around, and an employment number
to worry about this Friday.
Today's Economic Calendar:
- Chicago PMI 9:45 AM ET
- 4-Week Bill Announcement 11:00 AM ET
- 3-Month Bill Auction 11:30 AM ET
- 6-Month Bill Auction 11:30 AM ET
- Farm Prices 3:00 PM ET
News For Thought
Dubai crash could spread into U.S. real estate market. According to Reuters: "Dubai's
debt woes could further unhinge an already fragile U.S. commercial real estate,
as it illustrates the importance of that tiny country to global investors in
an increasingly interconnected world." According to the report: "In the United
States, Dubai World's portfolio includes several well-known properties, and the
fallout could have a larger impact on the entire real estate market. The company
is a partner with casino operator MGM Mirage (MGM.N) in the $8.5 billion CityCenter
project, which would add 6,000 rooms to a Las Vegas Strip gambling corridor already
saturated with unoccupied hotel rooms." And here's something to consider, the
U.S. commercial real estate market is already on the ropes, having lost over
40% of its value from the 2007 peak, according to Moody's. And "Last month, delinquencies
on U.S. commercial real estate loans that were packaged into commercial mortgage-backed
securities reached 4.8 percent, more than six times the year earlier level, according
to Trepp LLC in New York."
Less plastic may be used for shopping during this Christmas season. According
to Reuters: "Cash was king for consumers who shopped over the Thanksgiving weekend,
according to survey results released on Sunday, and that factor could have cost
retailers additional sales. Only 26 percent of people who shopped over the weekend
said they used credit cards for their purchases, according to a poll conducted
for Reuters by America's Research Group. A total of 39 percent said they used
cash, while the remaining shoppers used debit cards, the survey showed."
Japan: Yet another stimulus package. As Japan slips into deflation, the
government is once again tapping the dry well of government stimulus. According
to Stratfor.com: "Japanese Deputy Prime Minister Naoto Kan said the government
is trying to put together a new stimulus package as part of a finalized draft
of the supplementary budget by Dec. 31, AP reported Nov. 30. Kan stated that
key Cabinet members agreed the size of the budget should now be bigger than the
amount of money the Democratic Party of Japan-led government scraped together
from the first extra budget. Prime Minister Yukio Hatoyama is scheduled to hold
talks with Bank of Japan Governor Masaaki Shirakawa to discuss the Japanese economy,
including whether the central bank sees the need for further quantitative easing."
Semiconductor sales rose for the fifth straight month. Dubai may be close
to imploding but semiconductor plants may be starting to hum. According to The
Wall Street Journal: "Global semiconductor sales rose 5.1% in October from the
previous month, the eighth-straight month of gains, as companies continue to
build up inventories to prepare for the holidays."
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It's been easy to blame the world's troubles on the U.S. and
its subprime financial crisis. Yet, if Dubai's quasi-default spawns its own
viral chain reaction it could signal a significant setback for those who still
champion globalization.
But that's not really what this column is about, the failure of globalization.
It's more about a new dynamic which to us, at least, seems to be emerging, the
fractioning of the global financial system. Sure, we're used to coming up with
new terms that few, other than our readers, ever see. Yet, this isn't something
new in our private observations. The fact that it's coming out now is only a
product of the fact that we're finally starting to see it take hold.
Think about it. Most people, when in trouble, don't look ahead. Instead, they
move backward, into familiar territory, no matter how negative the act may seem
a few months or years away. It's all about security. In other words, people are
like meerkats, they venture away from the lair, until there is trouble and then
run back and hide.
So here's what we're talking about. In 2007 the world crashed because of the
global financial crisis. Then came Bernie Madoff. Then came the harsh reality
that President Obama isn't likely to fix things any faster than anyone else could
because Congress is more partisan than ever and all politicians are governed
by self interest. Most adults of some level of intelligence and life experience
know that, and most of us have learned it the hard way. But the herd, prodded
by the mainstream media always gets shocked by what many of us can predict just
by looking at history, and adapting personal experience to global events.
Anyway, the global economy has stopped falling, or so the statistics tell us.
But, geez, just as you thought the worst was over, here comes Dubai, another
miracle that was built on debt and suddenly is on the verge of going broke, no
matter what anyone says. If they can't pay their debt, then worse trouble is
lurking, that's just what history shows. You can delay it, but unless someone
wants to actually lend you a hand, you're pretty much screwed.
So, what are we left with? The world is becoming more self-centered. According
to Reuters: "the world economy and investment horizon may be turning more local
and unpredictable." You bet. And why? Because there are now more cooks in the
pot, the G-7, full of warts and nowhere near functional, was predictable. Who's
in charge now? The G-20, is in charge.
That means that you now have to get agreement from 20 countries, each of them
pulling for their own interests and leading to rising uncertainty. For example,
free market principles, or the appearance of using them as a guideline are no
longer guaranteed. Instead, consider this: "With the credibility of the old "Washington
consensus" -- advocated mainly by the United States and Britain -- hobbled by
the recent credit meltdown, the emerging economic giants appear emboldened in
pursuit of alternative policy strategies."
In essence, while the U.S., Europe, and to some degree Japan are still clinging
to the old ways of doing business, the other guys in the room, especially China
are not, especially when it comes to free floating currencies and related trade
issues.
As Reuters points out, the world is becoming "more local," a fact that means
a different climate "For investors attempting to navigate the shifting sands,
there is good reason to assume a more volatile and idiosyncratic investment climate
over the coming years."
And the key word is idiosyncratic, a euphamism for potentially insane periods
in the market.
Hints of increasing potential volatility are now being seen in the geopolitical
arena, where the previously unheard of is now commonplace, such as the gatecrashers
at the White House, and Iran's continued defiance of the world's opposition to
its nuclear aspirations.
There are new conflicts that receive little attention in the evening news, such
as Saudi Arabia's border war with Yemen, and the heavy use of Somalis and Nigerians
as soldiers to fight the Saudis, as well as the daily murders in Mexico and the
rise of vigilante groups to counter the rising anarchy.
In the financial markets, we are seeing a continuum of the issues that were spawned
in the financial crises of the late 1990s, which led to market crashes in Asia
and Russia. According to Reuters: "Avinash Persaud, chairman of Intelligence
Capital and of the UK-based Warwick Commission of economists and lawyers on financial
reform, said there is already a retreat from global to more local approaches. "We're
no longer in a flat world -- walls are being built up and countries are running
strategies that rely less on the international world," he said, adding this was
made possible after many emerging powers rejected dependence on international
capital after the 1990s Asia crisis and built up their surpluses and reserve
buffers instead."
Consider this. According to Reuters: "Jim O'Neill, chief global economist at
Goldman Sachs, said he remains bullish on the global growth outlook but feels
2010 will be a "highly unpredictable" year and tricky to manage. "The center
of gravity is changing," he said. "Coming back from China recently, I find myself
wondering for the first time in my career whether in 10-15 years we will even
have a floating exchange rate system. It's just not obvious to a lot of big developing
countries that floating exchange rates are as useful as we in the West assume."
Conclusion
President Obama campaigned on "change." But his tenure may coincide, intentionally
or not, with something that the average investor, much less person on the street
is unfamiliar with, the effects of having Brazil, India, and China set the global
economic agenda.
In other words, the playing field is changing, and the consequences of the potential
change are not just unpredictable, but unfathomable for Mr. and Mrs. Main Street.
That's where the political ground begins to shake. We may be on the cusp of something
beyond "change," cataclysmic change.
As the year comes to a close, it's a good idea to review financial goals, plans,
investments, and ideas with a whole new mindset, that of a world that is on the
verge of being split into millions of very small and local pieces.
Know when to sell and how to make money when the market falls. Get a detailed
trading plan in your pocket. Read Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for
All Seasons. Also Available As Kindle Books. |
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The Nasdaq
100 Trust (Nasdaq: QQQQ) is hoping that a move toward its
50-day moving average is just another opportunity to buy
on the dip.
Chart Courtesy of StockCharts.com
If you've waited until QQQQ has fallen to its 50-day moving
average since the market bottom in March in order to buy
shares, you've had three excellent opportunities. The question
is whether the dip that seems to be unfolding will be as
good as the other three for the bulls.
Support is at the 42.50 area, but if that gives then 39 would be support. The
MACD and RSI oscillators suggest that we will have some short term weakness which
will lead to a test of at least one of these two support levels.
Looking at the broader picture, volume is likely to shrink for the rest of the
year, and volatility may actually increase some, due to the lower volume and
the potential for more geopolitical surprises.
Still, for trend followers, the 50-day moving average on QQQQ still holds the
key and may provide another buy on the dip opportunity.
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Technical
Look at the Market |
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Nasdaq and Small Stocks Take Brunt of Selling
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The S & P
500 is now well below 1100, the key chart point that
has so far defined whether the rally can move higher.
So far, the answer is fairly clear, not much.
So the Thanksgiving rally ended badly, as questions about whether the potential
default from Dubai's sovereing fund is meaningful to the rest of the world or
not. Yet, it seems as if all that the markets have been looking for lately is
an excuse to sell. So now it has one, and we'll see where it goes.
We have been cautious on this market for a couple of weeks given the low volume
of the rally above 1100 on the S & P, and the real lack of conviction in
any of the sectors that had been leading things. Most important has been the
lack of breadth in this market and the very noticeable underperformance of the
small stocks.
What's more curious, and perhaps dangerous as we look ahead is the fact that
the Nasdaq, the S & P 500, and the small stocks in the Russell 2000 are all
now acting worse than the Dow. That's a big negative.
This is a good time to reassess any positions that aren't working, especially
as the market's advance has become narrower over the last few weeks.
Raising cash, along with sector and individual stock selection are the most important
aspect of trading this market. Investors should also consider what happens next
week as more representative of what lies ahead.
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
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