Monday, December 21, 2009

Stock Market -- Position Overview

Our recent newsletter, dated November 20th, stated that market bipolarity, intended or not, may be heightened by the massive, concentrated Quantitative Easing (QE) by central banks, as well as fiscal largesse, instead of a middle-way that allows fundamentals to flow. We further stated that heightened volatility is likely, even with central banks various attempts to control the market movements to less than what occurred this past winter. We anticipated that the continued QE could cause the DOW to remain within an "elevated period of consolidations," at least for the near-term, with a projected trading range for the month between 9,650 and 10,850. The actual result saw the DOW remain elevated, but with a narrower trading range than forecasted, between 9,678 and 10,495.

We stated that currency-debacle risk can no longer be treated with benign neglect by central banks nor segregated in portfolios, and anticipated that the US dollar would remain under pressure, at least for the near-term, with a projected euro fx equivalent trading range for the month between $1.46 and $1.53. The actual result saw the US dollar decline in value as forecasted, with a euro fx equivalent trading range for the month between $1.4633 and $1.5140.

We also stated that the lack of near-term confidence in the US dollar could cause the US treasuries to remain under price pressure, with an expected base-yield for the US 10-year Note of 3.30% or higher, during the course of the month. The actual result saw the US treasuries decline in price, inversely driving yields higher, producing a US 10-year Note yield range for the month between 3.20% and 3.56%.

Friday, November 20, 2009

Stock Market -- Position Overview

Our previous newsletter, dated October 19th, stated that the DOW could remain, once again, within an "elevated period of consolidation" during the course of the month, with an anticipated trading range between 9,400 and 10,800. The actual result was the DOW did remain elevated, but within a narrower trading range than projected, between 9,430 and 10,117.

We stated that the sliding US dollar is encouraging producers of various commodities that trade in US dollars to raise prices as a hedge against the lower currency. Furthermore, we felt that the US dollar weakness could persist, at least for the near-term, and projected a euro fx equivalent trading range for the month between $1.45 and $1.52. The actual result saw the US dollar remain, as expected, under pressure, with a euro fx equivalent trading range for the month between $1.450 and $1.508.

The various US treasuries were anticipated to decline further in price, inversely causing yields to rise, due to the US dollar weakness, and projected a US 10-year Note base-yield of 3.10% or higher, during the course of the month. The actual result saw the US treasuries decline in price, with yields inversely rising, producing a US 10-year Note yield-range for the month between 3.10% and 3.58%.

Monday, October 19, 2009

Stock Market -- Position Overview

Our recent newsletter, dated September 18th, stated that we would expect lower stock prices once the sugar high, provided through the various stimulus programs, has run its course. We further stated that the sugar high is still persisting, allowing for the stock market to remain within an elevated period of consolidation, and anticipated a DOW trading range for the month between 9,200 and 10,300. The actual result saw the DOW trade within a narrower range than projected, between 9,252 and 9,917.

The US dollar was anticipated to decline in value even further during the course of the month, with a projected euro fx equivalent trading range between $1.42 and $1.50. This forecast proved to be fairly accurate, with the actual euro fx equivalent trading range for the month between $1.4194 and $1.4840.

The US treasuries were projected to have low yields for many years to come, but in the near-term, could remain under price pressure. This price pressure was anticipated to occur during the course of the month, inversely producing higher yields, with the US 10-year Note having a base-yield of 3.30% or higher. The actual result did see US treasuries decline in price, inversely causing yields to rise, with the US 10-year Note having a yield range for the month between 3.27% and 3.53%.

Friday, September 18, 2009

Stock Market -- Position Overview

Our previous newsletter, dated August 18th, stated that the DOW remained within a period of consolidation, and we were anticipating a trading range for the month between 9,100 and 10,050, before resuming the primary bear market decline in the near future. The actual result saw the DOW continue its period of consolidation during the course of the month, with a trading range between 9,116 and 9,630 -- a fairly accurate forecast.

The US treasuries were projected to have a base-yield for the month of 3.45% for the US 10-year Note, due to the expectations of the suspension in the Federal Reserve purchasing program and the continued increasing supply size of the various US Treasury Refunding Auctions. The actual result did see yields rise, as prices of US treasuries declined in price, with a US 10-year Note yield range for the month between 3.39% and 3.88% -- a very accurate forecast.

The US dollar was anticipated to remain under pressure, at least for the near-term, and we projected a euro fx equivalent trading range for the month between $1.40 and $1.46. The actual result saw the US dollar decline in value during the course of the month, with a euro fx equivalent trading range for the month between $1.4060 and $1.4445 -- a very accurate forecast.

Tuesday, August 18, 2009

Stock Market -- Position Overview

Our recent newsletter, dated July 17th, stated that improved liquidity, along with other reasons outlined within the report, could keep the DOW within a broad trading range during the course of the month, between 8,100 and 9,500, before resuming the primary bear market decline. The actual result did see the DOW trade within a broad range, continuing within a period of consolidation, between 8,087 and 9,246.

The US dollar was projected to decline in value, at least for the near-term, and we anticipated a euro fx equivalent trading range for the month between $1.38 and $1.48. We did indeed see US dollar weakness during the course of the month, with an actual euro fx equivalent trading range between $1.3831 and $1.4281.

The US treasuries were anticipated to be under price-pressure for the month, inversely causing yields to rise, with a base-yield on the US 10-year Note of 3.25%. The forecast proved to be very accurate, as the US treasuries declined in price, producing an actual yield range for the month between 3.26% and 3.77%.

Friday, July 17, 2009

Stock Market -- Position Overview

Our previous newsletter, dated June 19th, stated that our technical perspective may allow the stock market to remain within a period of consolidation -- removing the oversold environment that exist, prior to resuming the long-term bear market decline. We anticipated that the DOW would have a trading range for the month between 8,450 and 9,400, as this period of consolidation continues even further. The actual result did see the DOW continue in a period of consolidation, but in a narrower range than projected, between 8,259 and 8,878 -- a somewhat accurate forecast.

The US treasuries were projected to remain under price-pressure for the entire yield curve during the course of the month, inversely causing yields to rise, and, therefore, we anticipated a base-yield for the US 10-year Note at 3.60%. The actual result did see US treasuries decline in price, inversely allowing yields to rise, producing a yield range for the month between 3.46% and 4.01% -- a very accurate forecast.

The US dollar was projected to remain under pressure and we anticipated a euro fx equivalent trading range, during the course of the month, between $1.37 and $1.44. The actual result did see the US dollar steadily decline, producing a euro fx equivalent trading range for the month between $1.3750 and $1.4310 -- a very accurate forecast.

Friday, June 19, 2009

Stock Market -- Position Overview

Our recent newsletter, dated May 15th, stated that the stock market remains within a period of consolidation, as it gradually removes the oversold condition that exist, before resuming the primary bear market decline. We anticipated a DOW trading range for the month between 8,100 and 9,250. The actual result saw the DOW continue to consolidate, within a slightly narrower trading range than forecasted, between 8,099 and 8,591.

We projected that the US treasuries could be price-supported, and anticipated a peak-yield for the US 10-year Note of 3.45%. The forecast proved to be fairly accurate, as the US 10-year Note had a yield range for the month, between 3.08% and 3.75%, as it both rallied and declined in price.

The US dollar was forecasted to decline in value, based on our technical perspective, and projected a euro fx equivalent trading range for the month between $1.32 and $1.40. The actual result did see the US dollar decline during the course of the month, and produced a euro fx equivalent trading range between $1.3247 and $1.4160.

Friday, May 15, 2009

Stock Market -- Position Overview

Our previous newsletter, dated April 13th, stated that too much damage from the massive stock market decline has been inflicted to consider an advance as anything but a bear-market rally. Bargain hunters should note that a bottom is not a place -- it is a process that can take years and requires an active money manager to generate profits in either a rising or declining stock, bond or real estate market, as offered below. We projected that the DOW would continue a period of consolidation during the month, and anticipated a trading range between 7,400 and 9,600. The actual result was a narrower than forecasted trading range, between 7,483 and 8,307.

We anticipated that the US dollar would decline in value, based on our technical prospective, at least for the near term, and projected a euro fx equivalent trading range for the month between $1.31 and $1.41. The actual result saw the US dollar both decline and rally in value, with a euro fx equivalent trading range for the month between $1.2917 and $1.3555.

The US treasuries were forecasted to remain under price-pressure during the course of the month, and we projected a base-yield for the US 10-year Note of 2.85%. The actual result did see the US treasuries decline in price during the the month, inversely causing yields to rise, producing a US 10-year Note yield range between 2.86% and 3.31%.

Monday, April 13, 2009

Stock Market -- Position Overview

Our recent newsletter, dated March 18th, stated that normally savings are a buffer to support consumption during an economic slowdown, but now consumer spending has been hit by the slowing economy plus the negative-wealth effects associated with falling home values and stock prices as well as the need to replenish savings. Saving rates should return to at least the long-term average of 7%, but the return to forced savings will not pull the economy out of recession. We anticipated that the DOW was entering into a period of consolidation before resuming the primary bearish downtrend, and projected a trading range for the month between 6,400 and 8,800. The actual result saw the DOW enter a period of consolidation, with a trading range between 6,469 and 7,931 -- a fairly accurate forecast.

We stated that the US treasuries could be price-supported, at least for the near-term, due to the decisive action by the Federal Open Market Committee (FOMC) to purchase various US treasuries and agency securities to push mortgage rate down. We anticipated the US 10-year Note to have a base-yield for the month of 3.47%. The actual result saw the US treasuries rally in price, inversely driving yield downward, with a US 10-year Note yield range for the month between 2.89% and 3.46 -- a very accurate forecast.

The US dollar was anticipated to decline in value, as lower US treasury yields would make the currency less attractive, at least for the near-term, and a projected euro fx equivalent trading range for the month between $1.25 and $1.35. The actual result saw the US dollar decline in value, with a euro fx equivalent trading range between $1.2544 and $1.3744 -- a fairly accurate forecast.

Wednesday, March 18, 2009

Stock Market -- Position Overview

Our previous newsletter, dated February 14th, stated that the stock market remains fundamentally bearish, as Main Street has taken to hunkering down and saving rather quickly -- a determent to consumer spending and debt expansion. In past economic cycles, monetary policy worked by causing increases in borrowing, but that is not the case this time around, as systemic de-leveraging is the order of the day and will take years to evolve. We further stated that the stock market has discounted a normal recession, but we think this is anything but normal -- expect long-term lower prices. We anticipated the DOW, at least for the near term, to remain within a period of consolidation, and projected a trading range for the month between 7,700 and 9,000. The actual result saw the DOW resume the primary downtrend, producing a DOW trading range for the month between 7,033 and 8,315.

We anticipated that the US treasuries could decline in price, inversely causing yields to rise, and projected a US 10-year Note base-yield for the month of 3.05%. The actual result did see the US treasuries decline in price during the course of the month, producing a US 10-year Note yield range between 3.05% and 3.47%. We also stated that the excess supply of US treasuries, at least for the near-term, could cause the US dollar to decline in value, as foreign central banks may choose to hold less of these instruments and instead protect their own currency. We, therefore, anticipated that the US dollar could decline in value, and projected a euro fx equivalent trading range for the month between $1.27 and $1.33. The actual result was a slightly stronger and higher trading range for the US dollar, between euro fx equivalent of $1.2549 and $1.3030.

Saturday, February 14, 2009

Stock Market -- Position Overview

Our recent newsletter, dated January 21st, stated that the US stock market remained within an oversold condition, and is continuing within its period of consolidation before resuming the decline in the long-term bear market. We projected a DOW trading range for the month between 7,900 and 9,600. The actual result saw the DOW continue to consolidate, but in a slightly narrower trading range than anticipated, between 7,909 and 9,088 -- a fairly accurate forecast.

We stated that developing economies have allowed themselves to become dangerously export-dependent, while tying their currencies to the US dollar and building mountains of excess savings. We further stated that this type of growth model is crumbling fast as global demand is plummeting. We anticipated that these issues, along with others, could support the US dollar, at least for the near-term, and we projected a euro fx equivalent trading range for the month between $1.25 and $1.37. The actual result did see the US dollar supported, during the course of the month, with a euro fx equivalent trading range between $1.2780 and $1.3707 -- a very accurate forecast.

We stated that the world does not lack capital, which is simply sitting on the sidelines, including $6 trillion in global money-market funds. Some of these funds are invested in US treasuries and have price-supported them recently, but that could change, as funds are reallocated to different investment vehicles. We projected that this could cause the US 10-year Note to have a base-yield for the month of 2.58%, since as US treasury prices decline, yields inversely rise. The actual result did see the US treasuries decline in price and yields inversely rise, producing a US 10-year Note yield range for the month between 2.58% and 3.28% -- a very accurate forecast.

Wednesday, January 21, 2009

Stock Market -- Position Overview

Our previous newsletter, dated December 15th, stated that US money-center banks and financial institutions, using the spirit and intent of the accounting reform act, Sarbanes-Oxley, became gigantic hedge funds, leveraged 25-to-30 to 1 on net tangible assets. The deleveraging process could continue for awhile and force the stock market to remain under pressure; however, in the near-term, the stock market is due for a period of consolidation, before continuing the decline. We anticipated the DOW to have a trading range between 8,100 and 10,250, as the major stock indices remove the oversold condition that exists in the marketplace. The actual result did see a period of consolidation, but with a narrower DOW trading range than expected, between 8,118 and 9,026.

We stated that the Federal Reserve's balance sheet has expanded by $1.3 trillion in the past year. The US Treasury has backed banks and money-market funds, has taken in the government-sponsored mortgage companies and is toying with bailing out the big auto makers. Eventually, this monetary expansion will push prices higher; however, in the near-term, the US Treasury suggests prices will decline before they expand. The break-even inflation rate between inflation-protected US Treasury Notes and fix-rate US Treasury notes is nearly minus 0.5% for the next five years. We further stated that investors should brace for transitory deflation in the continued near future that will give way to inflation for the long-term. The near-term result could see the US treasuries be price supported, with the US 10-year Note having a peak yield for the month of 3.25%. The actual result was as forecasted, with the US treasuries being price-supported, causing yields to inversely decline, producing a 10-year Note yield-range for the month between 2.55% and 3.26% -- a very accurate forecast.

We anticipated that the US dollar, at least for the near-term, could decline in value. We projected a euro fx equivalent trading range for the month between $1.26 and $1.43, as the Federal Reserve, through their Federal Open Market Committee Meeting (FOMC) was likely to cut the prevailing fed funds rate by 50 basis points (0.50%) to a new level of 0.50%. This could cause the US dollar to decline in value, as the US would now offer the one of the lowest loan rates in the world. We could see the US dollar carry-trade in the future, instead of the yen carry-trade, which has been used for the past decade. The actual result saw the euro fx equivalent produce a trading range between $1.2605 and $1.4590, and the FOMC cut the prevailing fed funds rate by 75 basis points (0.75%) to new level of 0.25% -- a very accurate forecast.