Dow has been the weakest of all indices????
Why the weakness?
First it is very easy to sink Dow in a hurry ..as it has only 30 stocks..so hedge funds CAN pick 1 or 2 stock based on its weighting formula and start selling.....when Dow goes down program selling takes hold as they are all computer driven.....
Dow is followed by S&P500 which is second weakest index....thanks to computer driven trading of mini S&P which is also very easy to trigger sell program.....
Nasdaq is the only index which is STILL very healthy above 145.75 points from its INTRADAY low back on Nov 20th.....
S&P 500 is 29.03 points ABOVE intraday low back in Nov.....
So...
S&P500 & Nasdaq index is still above their lows..while Dow has taken lows two days in a row....
This non-confirmation by S&P500 & Nasdaq is very healthy & MAY spark a turnaround in Dow also...which will be a big confidence builder for traders & investors......
So what caused all this weakness in markets????
It is Banks Banks & Banks weakness.....which was triggered by Treasury Secretary Geithner's unprepared comments as to HOW he will resolve Bank toxic assets..which has some marketable value.....
Pimco has been buying toxic assets @ prevailing market prices which ranges from 80% to 20% depending on their asset quality......so the rumour that these toxic assets have NO value is NOT true.....
Market will be comforted in a big way...IF Fed & Treasury face the reality of toxic asset & buy it @ market value from all banks and start trading it like any derivative in all exchanges .....Fed CAN give banks HIGHER price than FAIR value but must take preferred status in banks debt...
Hopefully.... all this IS coming in a hurry...or else S&P 500 & Nasdaq will join on the downside.....
While Banks situation is being sorted out meticulously by Geithner as he is NOT going to rush into Paulson approach..say one thing & do another thing......
GOLD is flying off the shelf......
Most Gold stocks are making new highs.....
Even speculative junior mines are coming into play.....
Ag stocks are also perking UP.....
All this is telling me that some commodity is giving us a signal that things are going to IMPROVE for world economy.......
Chinese Shanghai index is going against worldwide trend & is going UP on most days...???
Shanghai composite index hit its LOW on Oct 28th @ 1664.93..it closed Friday @ 2261.48 near its high of the day....So Shanghai is UP 596.55 points or +35.83% in LESS than four months...a major signal to world stock market that Chinese economy is perking along & their stimulus package IS working....
US has to get its act together on banking fiasco..which is the only area left to deal with.....which will start lending activity in a big way......Banks need working ratio to be positive to start lending ...currently with toxic asset they are teetering @ or BELOW book......
So the market is @ the mercy of Geithner & Fed action to resolve Bank toxic asset issues.....
Market is also trying to figure out the DEPTH of this "mother of all recession"once market has a good handle that recovery will start to take shape & TROUGH has arrived...then we will also move UP like Shanghai !!!!
BLOG does NOT give buy or sell.
Saleem
6 comments:
Hi Saleem,
China saw a 19% increase in retail spending in December alone. Their economy still is looking at a 6.5% GDP. Yet IBD journalists slant this growth as dismal and unacceptable. I read the articles for the numbers now and ignore the comments. So many journalists with their heads in the sand. Following the trend instead of leading. IMHO. BDI up 2099.
Best Regards
Hi Standards,
China will grow close to 7%..India close to 6%...rest of the world will grow also....
Only Europe & US will have .5% to 1% negative growth in GDP.....you will think with all the NEGATIVE reporting that there is a depression all over the world.
CNBC/IBD are NOT known for "being AHEAD of the CURVE"..they report backword looking indicator & SLANT their views....
I am looking forward to June & beyond when numbers will show STABILITY & IMPROVEMENT..yes even in US & Europe....
Saleem
Rates are up---DRYS and DSX are buys here
EUROPEAN steel mills are booking capesize vessels to ship iron ore from Brazil for the first time since October, brokers have reported, boosting hopes of a sustained recovery in bulk carrier freight rates.
ArcelorMittal was among those mills that this week began to quietly nominate cargoes to be loaded from Brazil in March and April.
“These are the first cargoes to be transported that we have seen for some time,” said a London-based broker. “They’re trying to keep it quiet, but the principals and brokers are receiving nominations. Will it carry on? We don’t know. But for now it’s good.”
Steel mills around the world controversially defaulted on contracts of affreightment for iron ore shipments last October, when the global economic crisis saw the demand for steel collapse.
There have been no iron ore cargoes nominated from Brazil to Europe since then, several brokers familiar with the capesize market told Lloyd’s List.
The resumption of trade is viewed as one of the most positive signs for the global market for dry bulk since the five-year shipping boom ended in the final quarter of 2008. Rates to charter capesize vessels are expected to jump next week, as very few of the global fleet of capesize vessels are available for business in the Atlantic region. “I can count them on one hand,” said a broker.
Steel mills in Asia and Europe redelivered ships early and cancelled time charters or contracts of affreightments in September and October, triggering a dramatic fall in freight rates, as well as a wave of bankruptcies among vulnerable shipowners and operators.
The global steel industry provides business for roughly half the world’s fleet of bulk carrriers. Many mills are currently renegotiating long-term contracts of affreightment signed with owners to ship iron ore rates now much higher than current levels.
Hi Madmax,
Thanks for your update on iron ore shipments.
GNK & DSX Tape looks healthier than other shippers.
Saleem
Hi All,
I was also reading that the housing supply has contracted from 11 months, now down to a 5 month supply. Housing sales in Calif 2008 were 85% above 2007 sales after the price collapse of 41%. I like what I see, but the market is still ignoring any good news or is it just playing possum?
Best Regards
Hi Standards,
Pretty soon they will use all statistics to justify why markets are UP !!!!
Saleem
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