Monday, December 15, 2008

Stock Market -- Position Overview

Our recent newsletter, dated November 13th, stated that the US economy could get a modest boost from Obama's proposed $175 billion economic stimulus plan to rebuild infrastructure and help municipal governments avoid budget cuts, but the questions still remains if the effort will create overall long-term economic growth. We further anticipated that the DOW would remain within a large elevated trading range during the month, between 8,000 and 10,850, as the major stock indices consolidate before resuming the primary bearish stock market downtrend. The actual result saw the DOW continue the downtrend further before entering the period of consolidation, producing a trading range for the month between 7,449 and 9,653.

We projected that the US dollar would remain the preferred global currency of choice, as economies slow all over the globe and various central banks cut their key lending rate, but was overbought and due for a period of consolidation. We anticipated that the US dollar would have a euro fx equivalent trading range for the month between $1.24 and $1.32. The actual result saw the US dollar decline during this period of consolidation, producing a euro fx equivalent trading range for the month between $1.2436 and $1.3072.

We stated that the Federal Reserve and the US Treasury are in a kitchen-sink mode -- anything is getting tossed at the crisis, whether or not it make economic sense. This type of government effort was projected to place additional price pressure on the various US treasuries, during the course of the month, and anticipated the US 10-year Note would have a peak yield of 3.70%. The actual result saw all corporate bonds remain under tremendous price pressure, while the US treasuries were the safe heaven of choice. The US 10-year Note had a yield range for the month between 2.92% and 3.91%.

Thursday, November 13, 2008

Stock Market -- Position Overview

Our previous newsletter, dated October 15th, stated that the deleveraging of the financial system is expected to continue for years, and new policy measures will slowly unclog the credit markets a bit. However, this just takes us to a consumer led economic slowdown and weak consumer spending, which appears to be taking hold this quarter for the first time in 17 years. We further stated that this would keep the major stock indices under pressure for the long-term and projected large DOW trading range for the month between 7,800 and 11,200. The actual result saw the DOW indeed remain under pressure, with a trading range for the month between 7,880 and 10,882 -- a very accurate forecast.

We stated that the US treasuries could decline in price during the course of the month, as the various US bailout programs increase the supply of the issued treasury instruments to raise the needed cash for the various rescue plans, resulting in a low yield for the US 10-year Note at 3.75%. The actual result saw the US treasuries remain under price pressure, causing yields to rise, and produced a US 10-year Note yield range for the month between 3.53% and 4.64% -- a very accurate forecast.

We anticipated that the US dollar may be close to a peak in price, due for a period of consolidation, and projected a euro fx equivalent trading range for the month between $1.32 and $1.41. The actual result saw the US dollar continue to rally in price, as it remained the favored currency with the global economies slowing, producing a euro fx equivalent trading range between $1.2523 and $1.4108 -- a fairly accurate forecast.

Wednesday, October 15, 2008

Stocker Market -- Position Overview

Our recent newsletter, dated September 10th, stated that household spending is likely to be flat-to-down in the second half of 2008, with leading indicators like the labor market still pointing down, credit remaining tight, and household-debt loads maintaining at especially high levels. We forecasted that the DOW could remain under pressure during the course of the month, and projected a trading range of between 10,600 and 11,800. The actual result saw the DOW remain under pressure, with a trading range for the month between 10,365 and 11,790 -- a very accurate forecast.

We stated that the US dollar recent rally remains a manifestation of broadening economic weakness outside of the US, rather than strength at home. We anticipated that the US dollar rally could continue, as a currency of renewed safe-heaven choice, with global economies slowing, and projected a euro fx equivalent trading range for the month between $1.38 and $1.46. The actual result saw the US dollar remain supported, with a euro fx equivalent trading range for the month between $1.3821 and $1.4780 -- a very accurate forecast.

The US treasuries were anticipated to remain a global safe-heaven during the course of the month, and we projected a peak yield for the US 10-year Note at 3.90%. The actual result saw the US treasuries rally in price, as yield inversely declined, producing a yield range for the month between 3.57% and 4.07% -- a fairly accurate forecast.

Wednesday, September 10, 2008

Stock Market -- Position Overview

Our previous newsletter, dated August 9th, stated that businesses are going to be forced to step up their layoffs to protect profit margins, with this placing additional pressure on the stock market going forward. We forecasted that the DOW would remain within a period of consolidation, before resuming the primary downward trend, and anticipated a trading range for the month between 10,850 and 11,775. The actual result saw the DOW continue to consolidate as anticipated, but with a narrower trading range than expected, between 11,221 and 11,867.

We stated that the US dollar's recent strength could be contributed to the unwinding of various currency spreads, resulting in a sharp short-term rally. We further stated that it could have run its course, and expected the it to resume the primary downward trend, with a forecasted euro fx equivalent trading range for the month between $1.50 and $1.56. The actual result saw the US dollar continue its rally and produced a wider-than-expected trading range for the month, between euro fx equivalent of $1.4580 and $1.5551.

The US treasures were expected to be price-supported, since spreads on mortgage bonds were near where they were before the Bear Stearns collapse, corporate-bond yields have followed to a significant degree, and bank borrowing from the Federal Reserve discount window remained quite high. We anticipated the US Treasury 10-year Note would have a peak-yield for the month of 4.05%. Our concerns and expectations were accurate, with the US 10-year Note being price-supported as anticipated, producing a yield trading range for the month between 3.75% and 4.04%.

Saturday, August 9, 2008

Stock Market -- Position Overview

Our recent newsletter, dated July 14th, forecasted that the major stock indices could continue to remain under pressure, and projected a DOW trading range for the month between 10,200 and 11,450. The actual result saw the DOW slightly supported, still working off the oversold condition from the large decline in June, producing a trading range for the month between 10,827 and 11,698. The stock market will routinely consolidate within a supported and elevated range before resuming its primary trend, which was the case this past month.

We stated that the uncertainty of Fannies and Freddie's ability to guarantee the various mortgages could cause US treasuries to decline in price, inversely making yields rise, but in the near-term, felt that they would be price-supported, with a peak-yield for the month of 4.00%. The US treasuries, during the course of the month, were price-supported as a safe-heaven through a declining stock market, as well pressured with the uncertainties still existing with Fannie and Freddie, resulting in an actual yield-range of between 3.81% and 4.14%.

The US dollar was anticipated to resume the downtrend, after a period of consolidation, and we projected a euro fx equivalent trading range for the month between $1.56 and $1.60. We further stated that there was significant support for the US dollar at euro fx equivalent at $1.60, and it would be interesting to see how the currency would perform at that key level -- hold and be price-supported or breaking-through and continue to decline even further. The actual result saw the US dollar decline as projected, with a euro fx equivalent trading range for the month between $1.5486 and $1.5955. This proved to be a very accurate forecast, and it was interesting to watch the US dollar decline very closely to, but not touching, the euro fx equivalent key level of $1.60 before reversing course and being price-supported.

Monday, July 14, 2008

Stock Market -- Position Overview

Our previous newsletter, dated June 10th, stated that the stock market appeared to be resuming a broad bear market decline, and we forecasted a DOW trading range for the month between 11,300 and 12,625. The actual result saw the DOW, along with the other major stock indices, resume the decline, producing a DOW trading range for the month between 11,287 and 12,610 -- a very accurate forecast.

The US dollar was projected to remain under pressure, due to the unsuccessful attempts by the Federal Reserve to stimulate the US economy, and we anticipated a euro fx equivalent trading range for the month between $1.53 and $1.58. We saw the US dollar continue to decline, with a euro fx equivalent trading range for the month between $1.5266 and $1.5730 -- a very accurate forecast.

The US treasuries were expected to be price-supported, as they remain a safe-heaven during these uncertain economic conditions, and we projected a peak-yield for the US 10-year Note at 4.05%. The final result saw the US treasuries exposed to both inflation concerns, putting pressure on prices, and safe-heaven price-supporting as well, causing the US 10-year Note to have a yield range for the month between 3.90% and 4.24% -- a somewhat accurate forecast.

Tuesday, June 10, 2008

Stock Market -- Position Overview

Our recent newsletter, dated May 9th, stated that the sentiment for the stock market may have shifted, but skepticism, let alone profound bearishness, has not taken root. We further stated that some investors may be bullish because of the tax rebates or the delusion that the credit crunch is history, but that makes us all the more certain that we have not seen the last nor the worst of this bear market.

We forecasted that the DOW would decline during the course of the month, and projected a trading range between 11,950 and 13,150. The actual result saw the DOW decline as forecasted, but with a narrower trading range for the month, between 12,442 and 13,136.

The US treasuries were anticipated to be price-supported during the month, at least for the near-term, with a projected peak-yield for the 10-year Note of 3.90%. The actual result saw the US 10-year Note first being supported, but then begun to decline in price, as inflation pressures grew during the course of the month. The 10-year Note yield range for the month was actually between 3.74% and 4.09%.

We further projected that the US dollar would likely experience renewed pressure during the course of the month, with a euro fx equivalent trading range between $1.53 and $1.59. This proved to be a very accurate forecast, as further uncertainties pressured the US dollar, resulting in an actual euro fx equivalent trading range for the month between $1.5294 and $1.5773.

Friday, May 9, 2008

Stock Market -- Position Overview

Our previous newsletter, dated April 11th, forecasted that the DOW, along with the other major stock indices had completed a three-month period of consolidation and were resuming the primary downtrend, with a projected DOW trading range for the month between 11,525 and 12,750. The actual result saw the DOW continue to remain within a consolidation mood, with an elevated trading range for the month between 12,270 and 13,010. The better-than-expected earnings reports, showing less losses than anticipated, supported the major stock indices during the month.

The US dollar, due to declining interest rates and less demand for the currency, was anticipated to resume its decline in value, with a trading range for the month between euro fx equivalent of $1.54 and $1.60. This projection proved to be very accurate, as the US dollar declined during the course of the month, producing an actual trading range between euro fx equivalent of $1.5478 and $1.5964.

We stated that the Federal Reserve's response of cutting rates -- the fed funds rate from 2.25% to 2.00% on April 30th -- will simply help create the next asset bubble in commodities and precious metals. We further stated that "there appears to be the case, as the Federal Reserve may eventually be successful in re-igniting growth within the US economy, but at what price to overall long-term growth, the rate of inflation, and global economic stability." The US treasuries reflected these concerns of inflations during the month, being pressured to decline in price and inversely causing yields to rise, producing an actual US 10-year Note yield range between 3.47% and 3.87%.

Friday, April 11, 2008

Stock Market -- Position Overview

Our recent newsletter, dated March 10th, stated that the proceeds from the sale of leadership stocks are not yet being reinvested into the broader market, but simply used to pay down debt. We also expected international stocks to be the next shoe to drop, creating more proceeds with which to pay off debt and move back into safer domestic heavens. The DOW was projected to continue its bear market decline, with a trading range for the month between 10,880 and 12,350. We anticipated a larger range, as the period of consolidation after the large decline that occurred in January 2008, was now completed and would be resuming the downtrend. Actually, the period of consolidation continued longer than expected, producing a narrower as well as elevated trading range for the month, between DOW 11,731 and 12,622.

We expected the Federal Reserve to cut the prevailing fed-funds rate to 1.75% by the end of this year, from the current 3.00%, but even that aggressively of a response would not be any quick cure, since economic growth cannot resume until the banking system and the credit markets begin to function more normally. The Federal Reserve did cut the fed-funds rate part-way, to 2.25%, and ushered in a one-day positive response from the markets. The US treasuries were projected to be price-supported, at least for the near-term, with the anticipation of further interest rate cuts by the Federal Reserve, resulting in a US 10-year Note peak-yield for the month of 3.65%. This proved to be very accurate, as the price of the US 10-year Note was supported, inversely causing yields to decline, with an actual yield range for the month between 3.31% and 3.70%.

We stated that the US dollar would remain under pressure and could motivate foreigners to eventually start reducing their US dollar holdings, as the decline in interest rates makes it less attractive for them to hold. We anticipated the US dollar to have a euro fx equivalent trading range for the month between $1.51 and $1.57. The actual result saw the US dollar continue its decline, as the US economy slowed even further and the Federal Reserve cut the fed-funds rate once again, with a euro fx equivalent trading range for the month between $1.5155 and $1.5835.

Thursday, March 13, 2008

Stock Market -- Position Overview

Our previous newsletter, dated February 7th, stated that the stock market was anticipated to remain under pressure, as further evidence unfolds confirming the deteriorating US economy. We projected a DOW trading range for the month between 11,520 and 12,775, as the stock market is in a well -established downtrend, with several sectors declining more than 20% from their peak price levels. The actual result for the month was a narrower range, with the DOW trading between 12,069 and 12,767. The major stock indices were apparently working off the oversold condition produced by the strong decline in the month of January 2008, resulting in a narrower range than expected, but with an accurately forecasted upper level price point.

The US dollar was projected to have possibly found near-term support, due to elevated levels of inflation, with a anticipated euro fx equivalent trading range for the month between $1.43 and $1.49. We further stated that the US dollar may have discovered support at euro fx equivalent of $1.50, which has been tested and held on several occasions. The actual result saw the US dollar initially trade within our expected range, but when it fell through the stated key support level of euro fx equivalent of $1.50, causing the US dollar to accelerate its decline and resume the downtrend. The euro fx equivalent trading range for the month was between $1.4445 and $1.5218, as the US dollar traded within our projected range, then broke lower.

The US treasuries was expected to be price-supported, as they continue to anticipate further slowing of the US economy, with a projected peak-yield for the US 10-year Note during the course of the month of 3.90%. This proved to be very accurate, as additional economic data released during the month further confirmed our beliefs, with the US 10-year Note being price-supported and a yield range between 3.57% and 3.92%.

Friday, February 8, 2008

Stock Market -- Position Overview

Our recent newsletter, dated January 9th, stated that domestic fears of a recession would fuel a contraction in most developed countries and a significant slower level of growth among fast-developing nations. This would result in the continued downward trend in equities, with inflation pressures remaining. We anticipated a DOW trading range for the month between 12,100 and 13,280, as these concerns as well as others would propel the major stock indices lower. The actual DOW trading range for the month was between 11,645 and 13,278 -- a larger range than anticipated, but an overall accurate forecast.

We projected that US growth would decline to nearly 0% in the fourth quarter of 2007, and that efforts by the Federal Reserve in cutting interest rates would have a minimal lasting effect on the economy and the stock market, but would price-support the US treasuries, with a anticipated peak-yield for the US 10-year Note during the month of 3.90%. The US economy did slow dramatically, causing a flight to safety within US treasuries, resulting in a yield range for the US 10-year Note between 3.44% and 3.91% -- a very accurate forecast.

The US dollar was projected to resume its decline in value, as US treasury were price-supported and inversely yields driven downward, anticipating a euro fx equivalent trading range for the month between $1.46 and $1.50. The US dollar was both pressured and supported during the month, resulting in an actual euro fx equivalent trading range between $1.4488 and $1.4902 -- an expanded range with enhanced volatility, but still a fairly accurate forecast.

Wednesday, January 9, 2008

Stock Market -- Position Overview

Our previous newsletter, dated December 12th, stated there were growing negative divergences that would seriously challenge the outlook for both the domestic and overseas markets. We further stated that the November correction in the major stock indices was the worst in five years, and that the bears are growing increasingly stronger and the bulls weaker, as we transition toward a prolonged bear market. We projected a DOW trading range for the month between 12,200 and 13,785. The actual result saw the DOW decline during the month, but not as much as forecasted, producing a narrower trading range, between 13,092 and 13,780.

The US dollar was anticipated to hold new-found support, with a euro fx equivalent trading range for the month between $1.43 and $1.48. This forecast proved to be very accurate, as foreigners supported the US dollar, resulting in an actual euro fx equivalent trading range for the month between $1.4336 and $1.4743.

The US treasuries were projected to be price-supported, since the US financial system will be first to break down, followed closely by the US consumer, leading to a peak yield for the US 10-year Note during the month at 4.17%. The actual result produced a larger yield-range than anticipated, as inflationary-concerned data released during the course of the month caused the US treasuries to both decline as well as rally in price, resulting a yield-range for the US 10-year Note between 3.90% and 4.29%.