Are gasoline prices headed higher? It’s very probable if you consider the previous 2008 history, the fact that OPEC is announcing that they are cutting crude oil production and refiners have to start producing the summer month’s gasoline inventories. When will the unleaded gasoline prices increase further is an educated guess based on the UGA ETF chart shown below. UGA prices appear to have tested the resistance level a number of times. A UGA quote at time of writing is $23.10 up 3% with almost twice the daily volume. Could this be the chart breakout that will lead to higher prices? Time will tell.
This is the unleaded gasoline price dilemma – if we buy UGA on the breakout and the price keeps going up then you will have a good return on your investment. But, you will also be paying much more at your local gas station to fill up your gas guzzling SUV which
The nearly $900 billion (remember when $350 billion was expensive?) economic stimulus package, aka the Pork Package set forth by Democrats cleared the House and heads to the Senate with zero Republican support. If signed into law it would push federal debt to levels not seen since WWII. With support for many social programs, many have complained that much of it will do nothing to stimulate the economy with too much wasteful spending and not enough for tax cuts. In an op ed piece the WSJ calls it a political wonder that manages to spend money on just about every pent-up Democratic proposal of the last 40 years.
For all the talk of alternative energy and the importance of reducing our need for foreign oil by the Obama administration, the Christian Science monitor points out that just $24 billion can be directly attributed to green investments – $16 billion in tax breaks and $8 billion in loans. However, including renovations of federal buildings and public housing pushes that number higher and some see this as just a down payment with a separate energy bill to be announced later.
Some highlights of the package according to USA Today and WSJ:
If you’ve been following the financial markets this year with any degree of interest, you’ve probably heard of Peter Schiff. He’s been a media favorite over the past year for calling the US financial collapse and has been everywhere from CNBC to Glenn Beck to CNN to Fox to Bloomberg. I even spotted him in Newsweek a couple weeks ago being credited with calling the collapse.. In an era of rampant corruption, fraud, inept CEO’s and fund managers, Mr Schiff has been made out to be somewhat of a hero in all this. Let’s give credit where credit is due. Peter Schiff has been sounding the alarm for quite awhile and while doing so was often ridiculed by the talking heads on CNBC a year ago. Much of what he’s been saying has come to pass… at least in the US financial markets.
The theme for this week was a return to resiliency. We began to see good resiliency in the market back in December despite the constant barrage of negative news and managed to attack the 50 day moving average 3 times, eventually pushing significantly above at the tail end of 08. The oversold conditions set the market up for a profit taking situation but as the financials began to fall apart again, traders took profits… and took profits.. as the indices find themselves once again submerged below key resistance of their 50 day moving averages.
I’ll call last week’s trading resilient stabilization. The market didn’t go anywhere, but let’s keep in mind that despite a 350 point plunge on inauguration day the market was unable to follow through and quickly bounced back above support. The next 3 days, the market sold off in the morning to key support levels and held each time, staging healthy rallies. This despite another financials free fall, awful earnings from Microsoft and GE as well as an avalanche of job losses.
The Nasdaq OMX has put together an equal weighted index (called the Nasdaq Government Relief Index) of 24 companies that have received over 1 billion in government relief in the form of TARP or other programs. Any index without volume numbers isn’t of much use to me from a trading perspective, but nonetheless it might be of interest to see how these companies perform collectively over the next couple years. Perhaps an ETF is in the pipeline that will follow this index, but for now any of the big financial ETF’s such as the SPDR Financials ETF (XLF) will be a half way decent representation since most of the big banks have received government funds but this index would include companies like AIG and General Motors as well.
Something I’ve talked quite a bit about over the past few years in running this blog is the big advantage of the small guy.. the self investor over the big, laboring elephant that is the institutional investor. You are the nimble, market ninja able to move to cash quickly by cutting losses quickly on positions and waiting for better investing environments. The big fella has no such advantage because of the requirements to stay mostly invested and the slow process of unwinding positions and moving into new ones. Institutions are forced to rely on on the financials of the past and management guesstimates of the future to make million dollar bets. The problem with this approach is the executives lie or are just flat out wrong AND long before the earnings show deterioration, the stock will have already fallen off a cliff.
Case in point, Satyam Computer (SAY) of India. Now here’s a company …
I’m back! After more than a week in beautiful Troncones, Mexico I’m ready to get back to work and recharged for the coming year! While I was away the market worked off overbought conditions in a way that was .. I’d say a bit less than healthy as the indices broke through support of the 50 day moving averages with increasing sell volume. I really wanted to see the indices work off overbought conditions by trading somewhat sideways along the 50 day moving average, but traders clearly wanted to lock in profits after a nearly 30% move up offer the late Nov lows.
The action didn’t look good heading into late Thursday morning. We got a big distribution day on Wednesday, sending the indices convincingly below their 50 day moving averages with a continuation of that downward pressure Thursday morning. However, with the market getting into very oversold levels and the Dow down 7 straight days, it was time for a bounce ..
It’s been some time since I’ve put together the weekly report. Between the power outages, the holiday festivities and a big upgrade here at Self Investors of all software and a move to a new server, I’ve had little time to post here at the blog. That will continue through the middle of January as I’m taking off for a week of vacation in Mexico to recharge the batteries for 2009. I’m excited about the coming year and hope you’ll continue to join me as I navigate the wild waters that is the stock market.
The market has certainly improved over the past several weeks and I’ve been highlighting the ability of the market to shrug aside bad news and hold steady or even rally for decent gains. In recent days the indices have begun to battle that pesky resistance of the 50 day moving average and last Friday managed to really bust through in a big way, albeit on light holiday volume. On Dec 30th I sent members a report on the current market discussing the renewed vigor of the indices as they tested the 50 dma again.
“Is the 2nd time a charm? For the 2nd time this month, the indices are attacking major resistance of their 50 day moving averages. With the first test a couple weeks ago, I cautioned against getting too aggressive because of overbought conditions. The market had just come too far too fast off the Nov lows and needed to rest and work off overbought conditions. With a bit of holiday rest, and overbought conditions no longer an issue, it appears the bulls may have their legs back with a nice follow through today on yesterday’s late day recovery.
