"Inter Market Relationships" - by Corey Rosenbloom on Finz.tv

Inter market analysis is an important one and most seem to miss it in their checklist. Highly recommend watching this video from Corey Rosenbloom:

"Gold rate soaring", "Dollar falling", "recession recovery slow"

Unemployment was worse than expected at 10.2%, but the equity market doesn't seem to care about it much. And the productivity report rose by 9.2% in 3Q, meaning the employers are squeezing out maximum from the employees. This can also be interpreted that employers can delay hiring more workers for some more time and Employment may not recover soon.

For this recession, the housing and the consumer spending might give a good indication for recovery than the unemployment report. So watch closely for Housing data and Consumer expenditure/Consumer confidence data in order to get the pulse of the market.

Besides the US market, the US dollar is feeding the global equity market frenzy, and the rally in Gold/Commodities. The feds are far from raising the interest rates and this cheap money is proliferating into different parts of the world and into different sectors.

On the technical charts, the equity market continued its monthly pattern on rallying by the first two weeks of the month and declining after the expiration's Friday.

Next Week's economic calendar:

• Trade Balance - 11/13

Last week's (week over week) market Sectors Returns and Internals:

• SP 500: 3.2% 
•  Volatility Index, VIX =24.19
• Short term bond rate (average of 3 year and 5 year) = 1.85%
  
• Small Cap (IWM): 3.11%
• Latin America (ILF): 7.13%
• Europe (IEV or EFA): 3.37%
• Emerging Markets (EEM): 5.54%
• Commodities (DBC): 0.72%
• Long term Bonds (TLT): -2.24%
• US Dollar, 5 DMA = 75.96
• Gold, (GLD) 5 DMA = 4.78%

NYSE (New Highs - New lows), 5 DMA =47
NYSE (Advances-Declines), 5 DMA = 636
10 year Treasury yield = 3.54%

Put/Call Ratio, total of equity/Index = 0.87
Bull/Bear Ratio, Investors Intelligence survey = 1.96


-Nidhi

"ISM Index", "FOMC Rate Decision", "Unemployment Report"

Is this the beginning of the much awaited correction in equities? Lets wait to see further confirmation of that. This week is a big one with multitude of reports coming out: FOMC rate decision, Unemployment report and ISM Index. Since market didn't get bullish evidences from Q3 earnings, it is looking for direction now and this week might provide just that.

Commodities (& Latin America), Emerging markets and small cap all took bigger hit last week, despite a good GDP report that was aided by government programs like "Cash for clunkers" and "first time home buyer incentives". However US dollar strength can be attributed to the equities fall too.



Next Week's economic calendar:

• ISM Index - 11/2
• FOMC rate decision, ADP Employment report - 11/4
• Unemployment rate, Consumer credit -11/6

Last week's (week over week) market Sectors Returns and Internals:

• SP 500: -4.02% 
•  Volatility Index, VIX =30.69
• Short term bond rate (average of 3 year and 5 year) = 1.87%
  
• Small Cap (IWM): -6.21%
• Latin America (ILF): -7.48%
• Europe (IEV or EFA): 0.2%
• Emerging Markets (EEM): -7.83%
• Commodities (DBC): -4.53%
• Long term Bonds (TLT): 0.87%
• US Dollar, 5 DMA = 76.2
• Gold, (GLD) 5 DMA = 101.93

NYSE (New Highs - New lows), 5 DMA =37
NYSE (Advances-Declines), 5 DMA = -1056.2
10 year Treasury yield = 3.41%

Put/Call Ratio, total of equity/Index = 1.21
Bull/Bear Ratio, Investors Intelligence survey = 2.15

-Nidhi

"Durable Orders", "Q3 GDP", "New Home sales"

Dollar continued to fund the global equity and commodity rally. Though last week the large cap stocks seemed to do better than the small cap. Risk avoiding might be in order. Gold and Oil continued the rally. Long term Treasury retreated.

Earnings continued to beat (at 72%) the already battered expectations and guidance has been higher as well. But remember that the expectations are quite low. Interesting point as highlighted by Bespoke is that the Beat rate is so high this quarter that the beat rate in Q4 might fall short.

Other interesting point to note this Q3 earnings season is that even though companies like AA, IBM, AXP beat expectations and the stock rallied, but they were immediately sold into the strength. Aren't investors believing the earnings? or is it the expectations that is not trust worthy?

Brazil decided to impose a 2% tax on foreign investment in local stocks in order to avoid gains in Brazilian Real. This lead to a weekly negative for ILF the last week. Emerging markets can be expected to continue perform well at the expense of US dollar. Some short term weakness can expected however.

Next Week's economic calendar:

• Durable Orders, Case Schiller report - 10/7
• Michigan Sentiment - 10/30
• GDP, PCE - 10/29
• New Home sales - 10/28

Last week's (week over week) market Sectors Returns and Internals:

• SP 500: -0.74% 
•  Volatility Index, VIX = 22.27
• Short term bond rate (average of 3 year and 5 year) = 2.015%
  
• Small Cap (IWM): -2.63%
• Latin America (ILF): -0.6%
• Europe (IEV or EFA): 0.2%
• Emerging Markets (EEM): 0.02%
• Commodities (DBC): 3.39%
• Long term Bonds (TLT): -0.52%
• US Dollar, 5 DMA = 75.31
• Gold, (GLD) 5 DMA = 103.49

NYSE (New Highs - New lows), 5 DMA =237
NYSE (Advances-Declines), 5 DMA = -212
10 year Treasury yield = 3.51%

Put/Call Ratio, total of equity/Index = 0.8
Bull/Bear Ratio, Investors Intelligence survey = 2.14

-Nidhi

"Beige Book", "Housing starts", "Existing Home sales", "Leading Indicators"

We are into Q3 earnings season and the results have been positive so far, particularly technology companies. The number of companies rising their earnings guidance has jumped quite a bit! You may need to be forward looking rather than using historical data in order to benefit from this up swing. Adding fuel to the earnings season is the demise of the US dollar. All in all, this makes the dollars that you have in the bank CD all the more less value when you view it from an international investor's perspective. So holding on to the dollar may not be prudent any more.

Since the equities are in the overbought zone, starting a new long position can only be short term. The economic indicators are not boding well with the equity rally. That makes the argument stronger for an equity rally to be short term.

The US consumer is still in doldrums - September retail sales was -1.5% with all the government incentives ending. The Core consumer prices came in little hotter at +0.2%.

When you look back at the past year's performance, only four sectors have exceeded S&P500's performance - Consumer discretionary (huh? - yeah, its true) , Energy, Materials and technology. Telecom, Utilities and Consumer staples are the most undervalued with respect to S&P 500.

Conditions currently favor the equities outside the US, particularly the ones relates to commodities. You would want to look at ETFs from Latin America - ILF, EWZ, BRF, etc.. Not necessarily buy into them right away, but a good pull back can help.

Next Week's economic calendar:

• Core PPI, Housing Starts - 10/20
• Fed's Beige Book - 10/21
• Leading Indicators - 10/22
• Existing Home sales - 10/23

Last week's market Sectors Returns and Internals:

• SP 500: 1.51% 
•  Volatility Index, VIX = 21.43
• Short term bond rate = 1.93%
  
• Small Cap (IWM): 0.42%
• Latin America (ILF): 3.95%
• Europe (IEV or EFA): 2.85%
• Emerging Markets (EEM): 2.26%
• Commodities (DBC): 5.29%
• Long term Bonds (TLT): -0.47%
• US Dollar, 5 DMA = 75.71
• Gold, (GLD) 5 DMA = 103.61

NYSE (New Highs - New lows), 5 DMA =295.2
NYSE (Advances-Declines), 5 DMA = 97.6
10 year Treasury yield = 3.43%

Put/Call Ratio, total of equity/Index = (not able to get this data freely anymore)
Bull/Bear Ratio, Investors Intelligence survey =

-Nidhi

"CPI report, FOMC minutes, Umich consumer confidence report"

Markets all around the world made an impressive rally last week at the expense of US dollar, except the Indian market. Particularly Latin America topping the list. And Gold broke the previous record from March 2009 and is now at an all time high.

Clearly US dollar has become the source of cheap funding for equities, commodities, precious metals and to bonds as well. Hence we see both equities and bonds rising together at times now. Though we do not see good evidence of economy improving (the decline rate might be slowing), the cheaper dollar is elevating the prices of everything else.

The ISM services showed slight expansionary mode at 50.9, but consumer credit contracted again by 12B. US jobless dropped by 30,000 to 521K which is still at a high level. The US international trade declined to 30.7B since exports increased and imports declined.

FOMC minutes and CPI reports can significantly affect your trading performance this week. So watch out!

Next Week's economic calendar:

• Retail Sales, FOMC minutes - 10/14
• Core CPI - 10/15
• Industrial Production, Michigan sentiment - 10/16

Last week's market Sectors Returns and Internals:

• SP 500: 4.51% 
•  Volatility Index, VIX = 28.68
• Short term bond rate = 1.8%
  
• Small Cap (IWM): 5.9%
• Latin America (ILF): 6.65%
• Europe (IEV or EFA): 4.21%
• Emerging Markets (EEM): 5.26%
• Commodities (DBC): 4.61%
• Long term Bonds (TLT): -3.14%

NYSE (New Highs - New lows), 5 DMA =261.4
NYSE (Advances-Declines), 5 DMA = 1202.6
10 year Treasury yield = 3.4%

Put/Call Ratio, total of equity/Index =1.11
Bull/Bear Ratio, Investors Intelligence survey =

Nidhi