Interest rates will be going higher! No, that is not a question but rather a statement. Just think about it, as states and countries find themselves in budget deficit, they will have to pay more to borrow money because of the slippage in their ratings. This leads to higher interest rates all around as people value risk more carefully. The thought being that if the states and countries have to be bailed out…..oh we forgot, refinanced, that cost will be borne by the larger entity, here in the states, it is the government, in Europe it is member of the European Central Bank. We have seen wealthy countries bail out their poorer, more leveraged relatives, case point Dubai.
Here in the states we, the home owners, find that our real-estate taxes are increasing. House values continue to retreat and yet, we must pay more in real-estate taxes. Why, because we are paying for those neighboring homes that have gone into foreclosure. Crime is on an up-tick. Even on safe streets, we have an increase in break-ins and robberies as the desperate become more desperate and brazen. What is to be done? The world is becoming a less friendly place to work in and to live in.
People today, who are employed, continue to have trouble making their bills. The tax increase felt by the increase in real-estate taxes along with high utility bills and other increases are causing the steady earner to fall behind. Credit card companies, instead of understanding that some money is better that no money on a bill, are recklessly raising the rate that they charge on their cards. We noticed one of our cards charging almost 26%! Naturally, we will be closing that account permanently. You would think the financial wizards that run the credit card companies would understand that higher rates on already stressed balances will likely lead to default which will lead to additional write-downs on their financial statements. Why not reduce interest rates on the cards so that the balance can be paid. It seems like moronic behavior, wonder why people are getting into credit card trouble, look at the way those companies are run. So where is the spending going to come from? Certainly apparel is cheap enough and electronics seem to be cheap as well, but with the current flock of cost increases just to live, who can afford a new outfit or another gadget that you really don’t need?
Tuesday: E-commerce sales for 4th quarter are released at 10:00, Kansas City Fed President Hoenig speaks, Minneapolis Fed President Kocherlakota speaks and U.S. credit-card defaults are reported.
Wednesday: January housing starts and building permits are released at 8:30, the minutes of the January FOMC meeting are released at 2:00, and industrial production/ capacity utilization is released at 8:30.
Thursday: January leading indicator index is released at 10:00, PPI is released at 8:30 and February Philadelphia Federal Reserve Survey is released at 10:00.
Friday: CPI is released at 8:30.
The US Dollar index rallied in the Friday session, but was unable to remove the high seen in the February 5th session. Friday marked the third day in which the US Dollar index opened lower than it closed leaving three bullish candles on the chart. It looks, however; as though the US Dollar bulls are a little skittish rejecting the highs as they occur leaving large upside shadows on the chart. The stochastic indicator is overbought and is issuing a buy-signal. Our own indicator and the RSI are both issuing a buy-signal. Only the Thomas DeMark Expert indicator is issuing a sell-signal. The 5-day moving average is at 80.053. The top of the Bollinger band is at 81.109 and the lower edge is seen at 77.368. So long as the US Dollar index remains above 79.65, we will remain bullish the US Dollar index. Looking at the weekly chart, we see signs of exhaustion. On the weekly chart, we have an inside candle for the week. All of our indicators on the weekly chart are issuing a sell-signal. Remember, the run to the upside in the US Dollar index has been pole-like and some backing and filling would be in order and would not be negative longer-term for the US Dollar index. We are above the Ichimoku Clouds for the daily time-frame, but below the clouds for the weekly and the monthly time-frames. The uptrend line on the weekly chart is at 78.68 for next Friday and 78.66 for this coming Monday.
The S&P 500 has been up for three of the past five sessions. The action seen in the Friday session looks as though the bears had the ball, but badly fumbled it letting the bulls run toward the highs of the day, closing near those highs. All of the indicator that we follow herein continue to issue a buy-signal with plenty of room to the upside. The downtrend line for the Monday session is at 1087.73. The uptrend line for the Monday session is at 1060.12 and for the Tuesday session is at 1061.94. We are below the Ichimoku Clouds on the daily chart and the monthly chart, but above the clouds for the weekly time-frame. Both the weekly and the daily indicators are issuing a buy-signal. The 5-day moving average is at 1072.91. The top of the Bollinger band is at 1139.74 and the lower edge is seen at 1038.75. We likely will feel some stiff resistance at 1086 and 1090. It is likely that we will see some continued buying in the indices as the dilemma of Greece is sorted out. Remember, there are others not far behind Greece with ample deficit problems. Here in the USA we need not be too smug, we have California, New York and other states that are in budget deficits that continue in trouble. Meanwhile those troubles some states are being forced to pay more for borrowing as their risk of failure increases. This brings us to wonder why anybody would be satisfied with the yield of the 5 and 10 year treasury securities when there are other alternatives. True the treasuries are safe but are they safe? For now, they are safe.
The NASDAQ 100 closed right near the highs of the day in the Friday session. All the indicators that we follow herein are issuing a continued buy-signal with plenty of room to the upside. The first area of resistance should be seen at 1792. We are in the Ichimoku Clouds for the daily and the monthly time-frames, but are above the clouds for the weekly time-frame. The indicators for the weekly time-frame are about to give a buy-signal. The 5-day moving average is at1758.25. The top of the Bollinger band is at 1880.41 and the lower edge is seen at 1695.93. It looks as though this market wants to rally.
The Russell 2000 was the best performing financial index in the Friday session. Not only did the market turn from a negative day to a positive day, but the index closed very close to the highs of the day. The 5-day moving average is at 599.12. The top of the Bollinger band is at 642.97 and the lower edge is seen at 578.17. We closed just above the 20 day moving average in the Friday session. We are inside the Ichimoku Clouds for the daily time-frame, but above the clouds for the weekly time-frame. The indicators on the daily chart are all pointing higher and beginning to near overbought levels. The weekly indicators are just about to issue a buy-signal. We expect to see some resistance as we rally towards 617.50. We may be setting up for some range bound trading between 648.90 and 578.40.
Crude oil declined in the Friday session leaving a very bearish red candle on the chart. The indicators that we follow are issuing sell-signal from just above the neutral level. We will see a point of inflection on Wednesday. Do not fight that trend, just go with it. We are below the Ichimoku Clouds for the daily time-frame but in the clouds for both the weekly and the monthly time-frames. It is important that crude oil stay above 69.50 or risk a trip to 68.59 and lower. On the other hand, if the market rallies above 78.04, the door will be open to the early 80’s. The 5-day moving average is at 74.23. The top of the Bollinger band is at 78.97 and the lower edge is seen at 70.84. The uptrend line is at 72.60 and the downtrend line is at 75.70. The point of inflection will be seen at 74.67.
Gold has a point of inflection on Thursday at 1099.70. The uptrend line is at 1074.45 and the downtrend line is at 1108.55. The indicators are giving us mixed signals and are neither overbought nor oversold. We have a doji candle as a result of the Friday session. Doji’s indicate that the market is in transition and could likely change direction. In this case it would be from up to down. We are below the Ichimoku Clouds on the daily time-frame, but are well above the clouds for the weekly and the monthly time-frames. The 5-day moving average is at 1082.81. The top of the Bollinger band is at 1137.52 and the lower edge is seen at 1049.83. This market is going to make a major move by the end of the week so, fasten your seatbelt and go with the move.
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