| ====== 12/2/2007 - TigerSoft and Peerless Daily Hotline.
This shows the approach our Hotline takes and we suggest for traders and investors
First, we look at the Peerless DJI chart with signals and key indicators. We take into account the
price patterns and try to anticipate future support and resistannce. Historic parallels are considered.
We always watch key commodities and leading indicators for the technology sector. Lastly,
my background is in political ecoomy, so I try to incorporate macro-economic trends that also
appear in the Tiger Blog.
The last Peerless signals are buys preparatory to the usually bullish December seasonality.
However, the DJI's price pattern suggests lots of selling awaits any move to 13800-14000, because
of the potential head and shoulders pattern a top there would mean if we take 12700 as the
neckline-support in such a pattern. The Peerless Indicator is still quite negative. A rally to the
upper band with it negative will likely bring a major Sell, even though December is normally bearish.
The first 3-6 months of a Presidential Election year (2008) often bring substantial declines
(1916, 1920, 1924, 1932, 1940, 1948, 1952, 1960, 1968, 1980, 1984, 2000 and 2004). There were
13 such cases and 11 exceptions.since 1916. Financial stocks and semi-conductor stocks have turned
very weak. Oil stocks and Gold are strong. The consumer is will be pressed hard if oil prices keep rising.
And the Semi-Conductor Index's weakness is telegraphing a warning for the NASDAQ and QQQQ.
The maldistribution of wealth in the US now resembles 1928. The first few months of next year
are apt to be difficult because of the bearish seasonality for the first 3-6 months of a Presidential
------------------------------------- DJI-30 ------------------------------------------------------------
12/1/07 - The DJI appears to have tested the 12700-12800 level successfully.
The A/D Line did confirm the new low of 11/15 but (red) NYSE Down Volume did not by
a wide margin. Now breadth is improving. The NYSE A/D Line downtrend has been broken.
So the Buy B19 looks good and Buy B19s have a great track record. They work 95%
of the time. For these signals, the average gain is 9.4% on the DJI at the time of the next
major Peerless Sell Signal from 1965 and 2005. There have been two additional B19s since.
They were both profitable. The reversing Buy B19 on 3/6/2007 gained 14.4%.
I have emphasized the importance of seeing the market now as being
dominated by (1) trading range dynamics, (2) the Fed's desire to prop up the market
until after the next election with interest rate cuts, (3) the foreign markets' strength
as being the locomotives for this very long bull market. The longer term problem and
and counter force posed by the Dollar's weakness, (4) Decembers are usually
bullish, especially after the middle of the month.
1) Trading Range Dynamics
Having successfully tested the lows of a wide trading range, prices usually move back
up very easily to the top of the trading range. In our case, that means a move back up to
13,900-14,000, perhaps after some chewing up of the resistance at 13600. The DJI is now just
below 13,400. I suggest looking at the charts for 1956 and 1986 to see fine examples of trading ranges
that the DJI has entered every 30 years since 1956. See website's blog for 10/21/07.
2) The Fed's Propping Up the Market until after the next Presidential Election.
It is extremely difficult to be too cynical regarding the Fed when you see how much
pressure is put on them by politicians and how their actions tend to favor the
political party that appointed the Fed Chairman. My website's blog for 8/19/2007
shows these. If I am right, the Fed will lower rates until perhaps the middle of next year.
In this way they can show homeowners and the housing industry they care. And they
will avoid being controversial. In doing this, they risk weakening the dollar much more.
Hot international money goes where the interest rates are highest. So we have to watch
the US Dollar closely. The US Government routinely understates the level of inflation.
So, they must believe that whatever are the inflationary consequences of a lower dollar,
these can be hidden. That remains to be seen, because OPEC has its own point of view and
has tended to raise Oil Prices as the Dollar goes down. These pressures have become a vicious
circle. So we will watch the Dollar and Oil prices. Presently, there is the beginnings of a rally in the
Dollar because Crude Oil is falling back from the $100 bar. resistance. That is favorable for
a continuation of the present genral market rally for now. See the charts of the US Dollar,
Oil and Gold below.
3) We must recognize that the US stock market is now dependent upon the world
bull market, because overseas' sources supply the profits of the many US multinationals
that populate the indexes we watch, the the DJI-30 or the SP-500. We must watch the overseas
market because if these bull market end, the Chinese and others will be much less able to
keep buying US treasury bills. That would probably put much more pressure on the US Treasury
to raise interest rates exactly at a time the US economy is turning down sharply. The last few days
have seen strong recoveries in most overseas ETFs. The biggest gains were in China (PGJ),
Chile (CH), IFN (India). These are each up more than 10% since our Buy signal a week ago.
The gains in Brazil and Mexico were a more modest 4%. The UK, France, Spain and Europe, in general
were the weakest.
What the US will have to do to keep propping up the US markets and the dollar,
in the absence of any radical change in the lopsided ratio of the imports to exports, is to borrow
more money and sell off its assets. This will end badly when the US has no more valuable
assets to sell off or when foreigners stop making loans to the US. In Argentina, this condition
lasted for mosth of the 1990s before its economy turned down and went into a four year
recession before its Peso had to be dramatically revalued, causing 40% unemployment and
a fire-sale in its very depressed equities' market. The Chinese are learning to playing the role that
the IMF has been playing with countries like Argentina for years. This is the role of the casino
that keeps providing chips to a losing player until finally they get all his money. See my blog about
the Argentine financial collapse of 2002 and what we in the US can learn from it:
Though the Chinese market is over-extended by most reckoning and shows dangerously
heavy red distribution for most of the last year's trading, it is destroying the recent bearish-looking
head and shoulders pattern. And that buys time. As long as the pattern's neckline (shown below)
is not violated, all is probably well, at least until the Chinese summer olympics are over and the Chinese
government may no longer trying to be putting up such a good face. See my blog about China
on November 27. http://www.tigersoft.com/Tiger-Blogs/11-27-2007/index.html
Watch for the Tiger Index of Chinese stocks to make another new high. I would then expect
resistance and the selling there to overcome the rally. That is usually what happens after a rally
takes place above the apex in a head and shoulders pattern, Note that at the last top in the Chinese
market, the Cumulative Advance-Decline Line for these 63 Chinese stocks failed to confirm a new
price high by the index. Such A.D Line non-confirmations are valuable market timing tools. You
can see this in the DJI-30 in July and the London FTSE recently.
The All-Foreign ETFs chart, as produced by TigerSift, shows an excellent advance since the
Peerless DJI major Buy B19, but it is not yet above the apex of its right shoulder. It still cannot
be classified as a bullish looking chart pattern. Weakness in European stocks seems to be the
problem. And that is directly related to a widespread lack of confidence in bank and home loans.
=============================== DOLLAR =====================================
After falling 19% for the past year, the Dollar has moved above its 21 day mvg,
avg. Looking back this past year, we see that these rallies have tended to be brief. In fact.
selling the dollar short each time it goes back below the black 21-day ma by, say .5%,
would have been an excellent way to make FOREX trades or just Buy Gold or Gold Stocks.
See the blog I have written about this: http://www.tigersoft.com/Tiger-Blogs/11-28-2007/index.htm =
========================== SILVER ===============================
Silver failed to make a breakout run upon moving over 147 a month ago. That
was a surprise. But realities are what we must face. It had made nice runs in the past, as you
can see in the Blog for 11/2, soon after earlier breakouts.
But not all breakouts work and we have to decide if we want to stay in a stock, commodity
or currency that makes a "fakse breakout." False breakouts are often dangerous.
Traders are well advised to respect them, even when it produces a small loss, and get out
of whatever it is that fails the breakout. Failed breakouts too often bring beg drops.
In this case, the dollar's long-term trend still looks very bearish. And I keep remembering
how silver rose from $15/ounce to $40/ounce in weeks. So, I am inclined to hold all the
precious metals' positions we have.
There is another force operating many of the Peruvian and Bolivian silver miners
are demanding much better pay and work conditions. The re-election for life of Chavez
is going to create more labor pressures on mining companies, even those that are Canadian
and not US owned. Silver production may be restricted in the future. That would be bullish
for the metals.
--------------------------------------------- NASDAQ -----------------------------------------------------------------------
The NASDAQ has almost reached the resistance of its 50-day ma. It is on its own
Buy B8. The NASDJI (relative strength) Indicator is weakening. The Accumulation Index
is negative still. Tech stocks usually do well from Novermber to April. So, perhaps, any
retreat may be simply a staging for an advance later. I find the weakness after the opening
in the chart of the QQQQ (Nasdaq-100) to be a warning, at least, for the present. Many
of the hottest NASDAQ-100 stocks like AAPL, GOOG and RIMM, have run up too fast
and may retreat next week.. See how the QQQQ's Closing Power is bearishly lagging
price. And below that, note the profound weakness of the SOX - Semi-Conductor Index.
----------------------------------- Semi-Conductor Index (SOX) -------------------------------------
======================= CONCLUSIONS ================================
There were 1350 more up than down on the NYSE. In fact, for 4 of the last
six days there have been more than 2200 daily NYSE advancers. While this seems impressive.
for the first time since 10/31/07, the number of NYSE new yearly highs exceeded new
yearly lows. For now , we will consider this a reflection of the pressures of tax selling,
but it bears watching. New lows should not exceed new highs so soon after the the DJI has made
a new high, as happened this July. That was definitely a warning.
The market's rally will probably continue. But I suspect it will be narrow. Defensive
and Biotech stocks will be favored. Tax loss selling will depress the weak stocks. I doubt if
the malaise in housing and home finance stocks will soon end. Look at the steadily negative
RED distribution in the Housing stocks. The strongest stocks will probably stall out at their
old highs. That may change. But that is the sense I get now.
------------- Oil and Commodities are showing unusual Accumulation and Strength ----------------------
Biotechs are stronger than the general market now. That is partly a defensive play.
But is also may mean that they are coming out of the locust like 7 year phase
of quiescence and could start to become much stronger. Our Stocks' Hotline
will look at these stocks closely this coming week.
XBI below is making its own all-time (albeit only two year) new high.