Daily Analysis and Market Updates
Scroll to the bottom for GTM Market Rating.
February 18, 2010 (6:54 AM CST): I have come across stories over the past two weeks that are not getting any national recognition, but I believe can make a huge impact on the “recovery.” These stories stem from a more municipal level and perspective.
I’m going to provide two examples from school districts in the western suburbs of Chicago, Illinois. The two districts include Wheaton and Indian Prairie. Both districts would be considered by most to be in well-off areas—(mostly on the low range of upper middle class).
For example, in Wheaton, Illinois, several cuts may be come to that school district because of lack of funding from the state. This will result in job losses. According to the Daily Herald, “Dozens of teaching positions, some middle school sports teams, and a police liaison program in the high schools could be eliminated as Wheaton Warrenville Unit District 200 officials work to address a projected $8.6 million deficit in their 2010-2011 budget.
Another example comes from a recent posting from a school district in Illinois. For example, according to the Indian Prairie School District in Naperville/Aurora, Illinois, “The state's $13 billion debt is so substantial that it may be forced to reduce financial support for school districts. That means our district is facing possibly $14 to $20 million in additional budget cuts, and some of those cuts will be very difficult. Until now, we have prioritized cuts that stay away from the classroom, but as deeper cuts are needed, that will be impossible.”
More information about Indian Prairie School District is provided in the Naperville Sun. Kathy Cichon writes, “If the state of Illinois doesn't come through with the funding it owes Indian Prairie School District 204, several teachers will likely lose their jobs.” In education, non-tenured teachers will feel the pain first. Cichon continues, “The district has approximately 680 non-tenure staff members, which represents 31 percent of the more than 2,000 certified staff members.”
I’m certain that these are not the only cities in America that are feeling the pinch. As this type of action becomes more prominent, more people will begin to feel the pinch—not only in possibly losing their jobs, but in the forms of reduced hours or wages.
If you have a “local” story that you would like to share with GTM, please email us. We would like to hear more about how cuts are affecting your area.
February 17, 2010 (5:30 AM CST): Yesterday was another great rally day. Also, yesterday basically eliminated everyone’s Elliott Wave Analysis count formed over the weekend. GTM expected the market to bounce up on Tuesday, but not quite as far as it did. See the weekly Elliott Wave Analysis for the charts. As written here before, the market often times does not hand us what we expect.
Although the Advance/Decline line was decently strong, the volume lacked. This has been the trend as this countertrend rally has gathered steam: higher prices on lower volume. On the DJIA, volume was about 20% lower than it was on Friday. There were two oddities in yesterday’s market to take note of.
First, in spite of sizable rally, the VIX did not trend that much lower. This means that people still fear this market. Secondly, many top stocks, although rallied with the market, did not rally as much as one would expect.
According to reuters.com, “Investors have not yet given up on the 11-month-old world markets recovery and there is little evidence so far this year of a retreat to safe-haven bunkers in the face of mini-shocks from Greek debts, China's monetary tightening and U.S. regulatory threats.”
There seems to be a lot of confidence in the market even though it seems like country after country is going bankrupt in Europe.
On the deflationary front, Capital One announced that defaults in loans are rising. Reuters.com reports, “Capital One said the annualized net charge-off rate—debts the company believes it will never collect—for U.S. credit cards rose to 10.41 percent in January from 10.14 percent in December.” Watch out for more on these stories to surface as the unemployment rate is still high.
February 16, 2010 (9:16 PM CST): Click for GTM Charts (opens page to picasa): Russell 2000, 65 min.
The chart shows the Russell 2000. Never mind any wave count in the picture. What I’m illustrating tonight to the parabolic shape of the current rally. My “drawing tool” doesn’t not allow me to draw a curved line, so I used several different lines to form the curve. What does this shape mean? First, a stock (or index) cannot safely continue higher at this pace. Secondly, a break of the curve will draw prices rapidly lower. If you’re trading, look for any indication of the break of the curve, and that should point to a Sell-Off.
February 16, 2010 (6:42 AM CST): Two issues that have been looming in the world economy keep getting attention: Greece and Dubai. Let’s start with Greece. It turns out that Greece has been “hiding” debt problems for years.
According to The New York Times, “It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means. “
To add salt to the world’s wounds, Dubai World is rumored to only be offering its creditors 60 cents on the dollar or property. In the way that property prices are falling, the creditors should take the money before it is too late. What is more surprising than the percentage is how short it took to arrive at this conclusion. The “bailout” occurred at the end of November, and in just a little more than 2 months, they can only afford 60 percent.
Reuters.com wrote, “According to the report, Dubai World will offer creditors either 60 percent repayment over seven years and a government guarantee, or full repayment with a debt for equity swap for property assets of Nakheel and no guarantee.”
That sure seems like a bad investment if I’ve ever seen one. If the rumor is true, investors lost 40% of their money in 2 months. Yikes. I’m sure there is more to the story, etc., but the fact is that is not a strong consideration.
President Obama made the news this week again pushing for fiscal prudence. Somehow I’m a skeptic of this proposal. According to reuters.com, “Obama has tried to make fiscal prudence the centerpiece of his message on the economy while spending hundreds of billions of dollars in the near term to kick-start growth and boost job creation.”
Could it be a little too late for this prudence that he is calling for? The budget numbers are staggering.
Follow the markets that are primary topics of GTM on the right side of the screen. It is refreshed automatically—so enjoy the “fun” all day long. Also, if you would like to read about a market that we haven’t discussed here or have questions, let us know:
--------------------------------------------------------------------------------------------GTM’s Sell-Off Days Count: 7 Sell-Off Days since January 18, 2010. Any number of 6 or greater means that the market holds potential for more selling.
Long Term Market Rating: Down-Trending Market. A bear market started at the highs made in 2007, and it is continuing today.
Short Term Market Rating: Down-Trending Market. February 12, 2010 registered as a Sell-Off Day.
Suggestions for Non-Traders: Cash or Cash Equivalents (play it safe). Examples include FDIC Insured bank and CD accounts, cash, cash reserves, US Treasuries (but not bond funds).
Suggestions for Traders : Short. Wave 3 down has begun.
Up-Trending Market: The market is in a rally and has the potential to move higher (familiar term=Bull Market).
Up-Trend Confirmation: This day occurs when the market was in a Sell-Off, but has moved notably higher on increased volume. If market direction is changing, a Buy-Day Confirmation is not a one day event; instead it occurs over a few days.
Unresolved Market: There is not enough supporting evidence to validate a move higher or lower in the market.
Sell-Off Day: This day occurs during a rally when there is a down day in the market on increased volume compared to the volume of the previous day.
Down-Trending Market: The market is in a correction and has the potential to move lower (familiar term=Bear Market).
