Panic buying

Today we saw a nice amount of panic buying across the board. Right now it looks like we have put in a nice bottom. Top players today were financials, homebuilders, retail. Anything that can benefit from a rate cut. Mastercard (MA) came out with a great earnings report and was a great intra-day trade as it crossed the important 200 level. This was the Right shoulder of the Head and shoulder pattern. But the market sold off in the last 5-10 minutes as players didn't want to hold into tomorrow' jobs report.
The rally will continue for a bit longer irrespective of the jobs report based on TA. This morning, we have news of Microsoft's offer to buy Yahoo sending futures soaring. I guess now, we have enough reason to keep the market green irrespective of jobs report, thereby complementing the TA.

Fed cuts rate by 0.50

Fed cut the rate by another 0.50 percentage points bringing the target FED funds rate to 3.0. It also signalled that it will keep the door open for further cuts. Stocks first rallied on the news but in the final 30 minutes closed down back to the same level. It shows market has still not decided what it should do. Gold rallied to new highs on the news.

US markets - S&P 500 25 year chart

Here is the S&P 500 chart for the past 25 years. I have also included the famous Black Monday crash of October 1987. The 25 year chart includes the financial crisis, recession, gulf wars etc. Do you see how the market ALWAYS bounces off the 50 EMA. The only time it didn't do this was during the Nasdaq bubble burst of 2000.

Last week we touched the 50 EMA on the S&P chart.
You should bet further downside in the market only if you expect that this time is more worse than 1987 and 1990s problems we had. If you don't think this time is as bad, then you should be buying stocks for the long term. Markets are as SIMPLE as that. We make it so complicated.
Good Luck !!!

Stock market indices print bearish engulfing candle

Bearish engulfing candle printed on all market indices. Watch how Friday's candle totally engulfs Thursday's white candle. This is a bearish setup which will display further weakness in the short-term. Watch for support at Fibonacci 61.8% retracement. I have initiated shorts in MELI and MOS on Friday to take advantage of this weakness.

From the long-term perspective, the weekly chart still holds well and the turnaround bounce should also hold well this week.

We have many economic news and Fed meeting this week. So more volatility. Good Luck !!

Monthly chart of Nasdaq

The monthly chart of Nasadaq clearly shows that we are getting a bounce of this multi-year chart. Normally a multi-year chart support is never broken that easily. They created a nice panic this morning by taking out yesterday's low and it seemed they were going to break this support. That is exactly what I wanted to see and what I was waiting for the past two weeks. I now need a confirmation tomorrow. Time to aggressively buy stocks!!!
Good stocks: MA, BX, BOOM, XLF
Good Luck !!

Soros Sees End of Dollar as World's Reserve Currency

Posted on Bloomberg:

Jan. 23 (Bloomberg) -- Billionaire investor George Soros said the fallout from the U.S. subprime crisis will bring about the end of the dollar's status as the world's reserve currency.

``The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency,'' Soros said in a debate today at the World Economic Forum in Davos, Switzerland. ``Now the rest of the world is increasingly unwilling to accumulate dollars.''

The dollar's share of global foreign-exchange reserves fell to a record low of 63.8 percent in the third quarter as demand for U.S. assets waned after the collapse of the U.S. housing market, according to International Monetary Fund data. It accounted for 65 percent three months earlier. The euro's share rose to 26.4 percent from 25.5 percent. IMF quarterly figures go back to 1999, the year the euro was introduced.

The U.S. currency has dropped 11 percent against the euro and 13 percent against the yen in the past year. It has declined in five of the past six years.

Soros made $1 billion in 1992 betting against the pound, forcing the British government to abandon a peg to a basket of European currencies. He was also the biggest financial backer of the failed effort to deny President George W. Bush a second term in office. The euro has gained 55 percent against the dollar since Bush entered the White House on Jan. 21, 2001.

`Gone Too Far'

``From the 1980s we had the belief in the magic of the marketplace, and the authorities were so successful that they started to believe in this market fundamentalism,'' he said. ``That's gone too far.'' In times of crisis, ``they suspended the rules and they bailed out the banks. That created an asymmetric incentive system, a moral hazard, that allowed the expansion of credit.''

Rising defaults on U.S. subprime mortgages sparked a rout in the credit markets in August, leading banks to cut money for consumer lending, hurting the U.S. economy's main engine. The Fed yesterday lowered its benchmark rate in an emergency move for the first time since 2001 after stock markets tumbled from Hong Kong to London amid signs the world's largest economy is sliding into recession.

Soros has used past appearances in Davos to predict the dollar's decline. In January 2004, he said the U.S. currency would drop for a third year. It then fell 7 percent, according to a Federal Reserve trade-weighted index of the currency.

Stephen Roach, chairman of Morgan Stanley in Asia, said in Davos that while he remains a ``dollar bear,'' the U.S. currency's slide may be reversed in the first half of this year as other economies in Asia and Europe are hurt by the U.S. slowdown.

Tobias Levkovich cuts 2008 targets

Citigroup chief US equity strategist Tobias Levkovich cut his prior forecasts for the S&P 500 to 1550. His earlier target was 1675. Last week he mentioned that he didn't analytical basis for changing his target. I guess the world market turmoil and the past two days action in US markets would have changed his views.
Soon we will hear many other target cuts from other prominent strategists.
Note that a cut in targets for 2008 would be issued if earnings of the companies are expected to decline in 2008.

Fed makes an emergency rate cut of 0.75

The market was expecting a cut of 1% but FED responded back with 0.75. The move was prompted by market selloffs around the world. The market has recovered from the 400 point drop in Dow to now about 180 points.
The best benefit is seen in all financial stocks especially Financial sector ETF XLF.

Update on World market crash

Shanghai broke the 100 EMA support line while the Indian market also broke another important support. Looking at these two emerging country charts, it seems that further downside is to be expected in these markets as we head to next supports. In contrast, the US market is very close to support and should start bouncing back this week. If this is the case, money would start flowing back to US from many of these hot emerging markets of 2007. Also, European markets have been able to reverse some of the morning damage and would possibly close in green.
As I am writing this Dow futures are down 440 points and S&P 500 is down about 66 points. I will post the chart of S&P 500 (starting from 1985) later today to show why we would most likely bounce from this level. No action from Fed yet. This could be possibly due to TED spread.
Good Luck !!

Nikkei and Shanghai markets

Nikkei and Shanghai markets have opened with about 4% declines mounting to yesterday's decline.The Shanghai Composite has sliced through the Nov-Dec support. More importantly it broke through the 100 EMA support. This was ALWAYS a support since the 2006 bull started. This is very bad for the Chinese markets.
Now, let us see how Indian and European markets open.

Black Monday for world markets

Every market around the world has virtually crashed due to the expectation of global slowdown that would be triggered by US recession fears. The US markets were disappointed on Friday following the not-so encouraging economic stimulus package from President Bush. China was down 5%, India was down a massive 7%. The 7% decline in Indian markets marked the biggest ever decline in its trading history. Developed economies in Europe stacked declines anywhere between 5% to 8%.

US market is closed today due to Martin Luther King holiday but the futures are indicating a 500 point decline in Dow Jones. It is best to stay away from this market till things improve. The QQQQ that I closely follow will break the August lows on Tuesday morning. The next stop is around March lows. Market is not onlyexperiencing financial fears but that is coupled with recession fears with higher inflation.

We would have to wait and see how world markets open tonight and if there will be any FED action tomorrow morning. Till then stay in cash and be safe. These are tough times for us. But don't worry we won't stay here for long.

QQQQ weekly chart

QQQQ is breaking the weekly trendline. If the market closes below the trendline for the week, that is the time to be aggressive with shorts. At this time, long or short is dangerous. INTC earnings are really creating a havoc.
We have more earnings this week, so the swings can be wild and dangerous. Best time to go fishing.

Intel INTC earnings and chart

Intel Corporation today announced record fourth-quarter revenue of $10.7 billion, operating income of $3 billion, net income of $2.3 billion and earnings per share (EPS) of 38 cents. This indicated a 51% jump in earnings.

Bottom line: The estimate was at 0.40, so this is a miss.
Chart: Posted is weekly chart of INTC. It hit the upper trendline and now it will head to the dotted blue line, which would indicate a price of around 15-16. INTC closed at 22.69 today, so this would indicate a major cut.

Weekly chart of QQQQ

We made a 'not-so-strong' bounce from the lower trendline on the weekly chart. So, this means we will be spending some more time down here, swinging from one side to the other.
The good thing is that last week's low should be the low for this market. We are going to have a nice bounce moving forward to the upper trendline and then where we go from there is anyone's guess.
The ^VIX is also indicating that market's downside is limited.
Good Luck !!

MOS earnings

Mosaic, a fertilizer company specializing in phosphate and potash reported a SIX-FOLD increase in earnings. Net earnings for the fiscal second quarter ended Nov. 30 rose to $394 million, or 89 cents per share, from $65.9 million, or 15 cents per share, a year earlier. Sales jumped only jumped by 44 percent.

The rise in earnings were mainly driven by rise in the prices of phosphate and potash. As the agriculture boom continues worldwide, the prices of these commodities are expected to rise.
I believe year 2008 will continue to be a year of commodities.
Hot commodities to watch this year would be:
1) Oil
2) Gold
3) Agriculture related

I am planning to focus my investments and trading around these commodities.

Chart of First Solar FSLR

One of the hottest Solar stocks. Look how it bounced strongly from the lower trendline. Great company, great earnings. This was one of the best winners in 2007.

Market ready to bounce

Bounced from the bottom trendline on the weekly chart. This is what I was waiting for all these days. All my timing indicators signalled a must-buy. I have been adding long positions in the afternoon when I started getting the confirmations.

India growing

India's economy keeps growing and expanding irrespective of what is happenning around the world. India was only minimally affected by the sub-prime crisis in the US.
As the money flow continues to emerging countries, India is one destination which you should not miss. Currently the markets are overextended in India, so it would be wise to wait for pullback.

Listed below is a nice article from Bloomberg. Excerpts follow:

Overseas investment in India may double in 2008 for a second straight year to reach $30 billion, the government forecasts, as the world's second-fastest growing major economy arrives at what Lehman Brothers Holdings Inc. calls its ``take- off'' point. That's when consumer demand and business spending start feeding off one another and drive even more investment.

``India's growth acceleration is not a flash in the pan,'' says Robert Subbaraman, chief economist at Lehman Brothers Asia in Hong Kong. ``A middle class is fast emerging, which is spurring demand as consumption and investment interact.''

Like China and South Korea in previous decades, India is benefiting from an increasingly open economy that has already stimulated enough growth to double per-capita income since 2000, according to Lehman. The resulting surge in demand for consumer goods has tripled mobile phone use in two years and fueled a 29 percent jump in sales of microwave ovens in 2007, Lehman says.

Purchasing Power
With the explosion of purchasing power, India's economy is poised to expand 9 percent for a third straight year, while the U.S., Europe and Japan slow to less than 3 percent growth.

McKinsey & Co., the New York-based consulting firm, estimates that India's middle class -- those with annual disposable incomes between $4,380 and $21,890 in current dollars -- will increase more than 10-fold to 583 million by 2025.

India's appeal is more than a matter of demographics. Prime Minister Manmohan Singh, who as finance minister in 1991 started dismantling barriers to foreign investment and other Soviet- style controls on industry, is preparing to permit overseas companies to build retail chains in the country. That's prompting interest from companies including Hertfordshire-based Tesco, Britain's largest retailer, and Paris-based Carrefour, which operates supermarkets on four continents.

Bigger Stakes
Singh's government is also moving to raise the limit on foreign equity stakes in local insurers to 49 percent from 26 percent, and has a roadmap to let foreign banks increase holdings in India's private banks. Brown's party will include representatives of Prudential Plc, the U.K.'s second-biggest insurer, and Barclays Plc, the No. 3 British bank, both based in London.

``India has long been noted for its superb `micro' -- good companies, rule of law, democracy,'' says Stephen Roach, chairman of Morgan Stanley in Asia. ``What has been missing is the `macro' -- foreign direct investments, infrastructure. What's encouraging to me about India now is that the macro is starting to improve and is reinforcing the already positive micro.''

Foreign ownership in telecommunications has helped India become the world's third-largest user of telecom services after China and the U.S. It's the world's fastest-growing wireless market.

`Heart of Globalization'
``India is a country of enormous opportunity; it's the heart of globalization in a way,'' says Ben Verwaayen, chief executive officer of London-based BT Group Plc, the U.K.'s largest phone company. ``You see a growing base for companies from around the globe, being here not just for this region itself, but being here as a kind of base for what they can do in other parts of the world as well.''

San Jose, California-based Cisco Systems Inc., the world's largest maker of computer-networking equipment, plans to triple its Indian workforce to 10,000 by 2010, Chief Executive Officer John Chambers said in October.

Automakers including General Motors Corp. and Suzuki Motor Corp. are spending more than $6.6 billion to build new factories in the country. PricewaterhouseCoopers LLP says India's auto output will grow about 17 percent annually until 2011, the fastest among the 20 largest carmaking nations.

India's higher profile in the global economy not only makes it a magnet for foreign investment, but also gives its companies a bigger role on the world stage.

Overseas Acquisitions
Indian companies led by Tata Steel Ltd. and Hindalco Industries Ltd., both based in Mumbai, completed a record $39.2 billion of overseas acquisitions in 2007.

Tata's $12.9 billion purchase of Britain's Corus Group Plc, the biggest overseas takeover by an Indian company, made it the world's fifth-biggest steelmaker. Buying Novelis Inc. of Atlanta provided Hindalco, India's biggest aluminum producer, access to customers such as GM and Coca-Cola Co. The trend is continuing: Tata Motors Ltd. of Mumbai, India's largest truckmaker, last week was selected as the preferred bidder for Ford Motor Co.'s Jaguar and Land Rover units, the U.S. automaker announced.

Brown and Sarkozy are joining a parade of world leaders coming to India with agendas that include closer commercial ties. U.S. Treasury Secretary Henry Paulson, visiting in October, said U.S. companies will participate in India's $500 billion program to modernize roads, ports, power and other infrastructure by 2012. The U.S. will help India transform its financial capital, Mumbai, into an international financial center, he said.

During an August visit, then Japanese Prime Minister Shinzo Abe said Japan will help plan a $90 billion infrastructure corridor between New Delhi and Mumbai, including freight lines, power stations and improved access to ports and airports.

Impediment

Such projects may reduce one of the biggest remaining impediments to doing business in India -- poor infrastructure. For all the expansion in the Indian market, its foreign direct investment still pales in comparison to what China has received -- about $60 billion in each of the past three years.

It takes 24 days for Indian exports to reach the U.S. compared with only 15 days from China and 12 from Hong Kong, according to Lehman Brothers.

``If India doesn't get its act together on infrastructure urgently, then it can never realize its aim of accelerating growth,'' says Vineet Agarwal, executive director of Gurgaon- based Transport Corporation of India Ltd., the nation's biggest cargo transportation and logistics services company.

Even as India's economy reaches take-off speed, almost 300 million people continue to live on less than $1 a day, according to the World Bank.

Fewer Poor
The absolute number of poor in India fell for the first time between 1999 and 2004 after the government's policies to allow more foreign investment and reduce regulation on industry spurred growth, according to the Paris-based Organization for Economic Cooperation and Development.

``The Chinese take-off began in the 1980s and didn't show through in terms of increased living standards for the majority for quite some time,'' says Howard Davies, director of the London School of Economics and a former chairman of the U.K. Financial Services Authority. ``Just the same way, India has got the economic take-off but it needs to be sustained for a decade before you really see the place looking different.''

Still on the sidelines

I am still waiting on the sidelines. No positions either long or short. Look at the intraday action- 1 min chart. You can see the wild action. Better to wait it out. We are close to a bounce level.

Maket in undecided territory

With the recession fears increasing with Friday's dismal job report, the market(QQQQ) couldn't bounce from the important 200 Day EMA. This has never happened in all of 2007. Whatever the situation in 2007, the trendline and the 200 EMA were important support areas.

At this time it is best to watch the action unroll before taking any aggressive positions. All my indicators point that some further downside present. A bounce will be probably coming later this week.

Remember this is Election year and historically the market does very well during election year.

December 2007 Job report

We had an increase of only 18,000 jobs in December 2007 marking the smallest increase in four years. The unemployment rate rose to 5.0%. In November we had an increase of 115,000 which was revised upward from 94,000 jobs. The unemployment rate in November was at 4.7%.
This increases a chance of 0.50% Fed funds rate cut in the next FOMC meeting. I believe the 0.25% cut was already factored in the market. More rate cuts, the more bad for the Dollar.

The QQQQ broke a significant trendline today following this report and is currently testing Nov lows. The 200 EMA is just a bit below the Nov lows and I believe we will bounce from that level.
The market has always bounced from this level in Feb 2007 and Aug 2007.

Happy New Year 2008

WISH ALL READERS A VERY HAPPY AND PROSPEROUS NEW YEAR !!
May 2008 be a better year than 2007 for all of us.