Weekly Income Newsletter »

The markets this past week ended down as most investors were focused on the actions of the central banks and their stimulus plans.  The markets plunged when the Bank of Japan (BoJ) decided to leave their stimulus plan unchanged (and not increase it).  This followed the actions of other central banks the prior week (ECB and BoE) indicating that for the time being, they were not going to help their economies with any additional stimulus.  The actions of the central banks have added to the concerns that the Fed will consider tapering QE3 sooner as opposed to later.

In addition, the World Bank lowered its expectations for global growth citing deeper than expected recession in the EU and lower growth in developing countries.

If the central banks consider easing their stimulus plans (or even just the Fed), this will likely lead to rising interest rates around the world resulting in higher losses on loans for major projects; and that will create a drag on economic growth.

The VIX this past week (a measure of market sentiment and volatility) rose to 17.15 due to concerns over the actions of the central banks and the revised forecast of the World Bank.

The markets will be waiting for the FOMC Minutes, Forecast, and Bernanke’s press conference next Wednesday for any clues regarding when the Fed will start tapering.

A recap of economic news: the Producer Price Index (PPI) increased 1.7%, beating estimates of 1.4%; Import Prices fell 0.6%, while Export Prices dropped 0.5%; the Current Account Deficit rose to $106.1 billion in the first quarter, lower than forecasts of $109.7 billion; Industrial Production remained unchanged, falling short of expectations of a 0.2% rise; Capacity Utilization fell slightly to 77.6%, below forecasts of 77.9%;  Manufacturing and Trade Sales increased 1.5%, while Inventories increased by 4.2%, causing the Inventory-To-Sales Ratio to rise to 1.31; Wholesale Trade Sales rose 0.7%, while Inventories advanced 4.1%, causing the Inventory-To-Sales Ratio to rise to 1.21; the Consumer Sentiment Index fell to 82.7, below forecasts of 84.5; U.S. Jobless Claims decreased by 12k to 334k; and Crude Inventories rose by 2.5 million barrels last week, while oil prices rose to $96.11.

In the U.S., gas and oil output at record highs, says BP; IMF issues repeal of U.S. fiscal cuts; Syria tensions propel oil prices; Carl Icahn could drop out of Dell deal; government regulations will actually help bitcoin (digital currency), says Cameron Winklevoss; consumer mood comes down from May highs; America’s water system (treatment plant and pipes) is in need of serious repair, say experts; millennials look for easy credit outside banks (going to prepaid cards, check cashing, pawn shops, and payday loans), says new survey; grocers allege potato group pumped up spud prices; secret court ruling put tech firms in data bind; Broadcast Music sues Pandora over license fees; banks slow to mop up mortgage mess; U.S. to increase military support to Syria rebels; Fed will try to calm market nerves; workers over 60 make more than younger colleagues; high court’s ruling on DNA (not patentable) could boost biotech; retirement system headed for 3 train wrecks, says Vanguard founder Jack Bogle; tech boutiques: Microsoft teams up with Best Buy; and Senator Graham on NSA leaks: We’re at war.

In Europe, Deutsche Bank ‘Horribly undercapitalized’; BoE’s Tucker to leave after losing out to Carney; UK aerospace giant BAE Systems must adjust its cost base, says  new chairman Roger Carr; euro zone faces make-or-break summer; odds are stacked against strong euro; Italy says no more fiscal cuts despite debt pile; Turkey crisis cools after PM meets protesters; Germany seeks to halt EU-Turkey talks; anti-G8 protest target London’s banking district; Washington’s PRISM spy scandal dents Obama’s image ahead of his Europe trip; high hopes for G8 meeting are already fading; Iran begins vote for Ahmadinejad’s successor; who will succeed Hester as RBS chief?; Czech police detain PM’s aide; Google slammed for using ‘artificial tax structure’; Greek unemployment hits record high 27.4%; Greeks strike over TV closure – PM offers talks; and ECB hits back at suggestions that its mandate should be up for discussion.

In Asia, Mark Kitto, a major foreign entrepreneur in China, leaves China after facing business hardships and concerns for his children; Singapore punishes 20 banks; Indonesia’s 0.25% rate hike an early strike; Asia fights to stem fund outflows; China watchers see growth below 7%; is overconfident BoJ to blame for market woes?; Sony gets reboot at E3 show; Nintendo CEO takes the blame for poor Wii U sales; China gets the post-holiday blues as stocks slump; Yen surges as safe-haven bid back in play; North Korea blames South for collapse of talks; Bank of Korea holds rates steady, as expected; are markets facing a crisis of confidence?; Asia’s next big risk is rising rates, says World Bank; and Asia’s ticking time Bonds: time to cut and run?

The Markets for the past week are: DJIA down -1.2%; S&P500 down -1.0%; Nasdaq COMP down -1.3%.  Commodities (ETFs) for the past week are: Gold (GLD) up 0.86%; Silver (SLV) up 2.25%; Oil (OIH) down -2.07%; Dollar (UUP) down -1.26%; 30-yr Bonds dropped 4 basis points to 3.30%.

On Monday, with little news, the Dow ended fractionally lower at 15,238.  Gold was little changed at $1,386; Oil held at $96.

On Tuesday, with lack of new stimulus from BoJ leading to Fed tapering, the Dow dropped -0.8% to 15,122.  Gold was down $11 to $1, 375; Oil dropped $0.75 to $95.25.

On Wednesday, with concern that central bank stimulus is on the way out, the Dow dropped -0.8% to 14,995.

On Thursday, with solid economic data (Retail Sales and Jobless Claims), the Dow rose 1.2% to 15,176.

On Friday, with a mix of unfavorable economic data, the Dow dropped -0.7% to 15,069.  Gold ended at $1, 390; Oil ended at $98.

Next Week

The economic calendar for next week is full: on Monday – Empire State Mfg Survey, Housing Market Index; on Tuesday – Consumer Price Index, Housing Starts; on Wednesday – EIA Petroleum Status Report, FOMC Meeting Announcement, FOMC Forecasts, Bernanke Press Conference; on Thursday – Weekly Jobless Claims, PMI Manufacturing Index Flash, Existing Home Sales, Philadelphia Fed Survey; and Friday – Quadruple Witching Expiration.

If the Markets move down, stay on the side lines or consider Contra ETFs.  For Option players, selling premium is advised.

To the Charts

The following ETFs (DIA, SPY, QQQ) provide a technical review of the Market (and are also excellent Option trading vehicles).  Represented are the Dow Industrials (DIA), S&P500 (SPY), and Nasdaq 100 (QQQ).

The Charts for each include views for Monthly, Weekly (including Price Channels), and Daily (including monthly Pivot Points) with MACD and Stochastic indicators.  The Pivots are: white for central pivot point; yellow for R1 and S1; magenta for R2 and S2; red for R3 and S3.

DIA

The Dow Industrials (DIA) closed down at 150.66.  If the DIA drops, then the next level of support will be at 144.24 (weekly chart); the next level of major resistance is 155.14 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down at the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD negative and weakening, and the Stochastic moving down below the midpoint.

SPY

The S&P500 (SPY) closed down at 163.18.  If the SPY drops, then the next level of support will be at 153.55 (weekly chart); the next level of major resistance is 169.07 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down at the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD negative and weakening, and the Stochastic moving down below the midpoint.

QQQ

The Nasdaq 100 (QQQ) closed down at 72.28.  If the QQQ drops, then the next level of support will be at 66.88 (weekly chart); the next level of major resistance is 74.95 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bearish posture (down Arrow) with the MACD positive but weakening, and the Stochastic moving down at the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD negative and weakening, and the Stochastic moving toward the oversold area.