Declines in Transports, Dr. Copper, and Equity Volumes are Seasonal Weakness (Until October)

Monday, August 13th, 2012

by Don Vialoux, EquityClock.com

Upcoming US Events for Today:

• No Significant Events Scheduled

Upcoming International Events for Today:

1. The Bank of Japan releases the Minutes from its July meeting at 7:50pm EST.

The Markets
Markets in the US ended positive on Friday, despite concerning signs of economic contraction with China posting a disappointingly low trade surplus number for the month of July. Investors were expecting a surplus of $33.0B, up from the $31.7B reported previous, but the actual was a mere $25.2B. A shockingly low increase in exports at only 1.0%, off from the 8.8% analyst expectation, was the predominant factor behind the weak headline number, which is being pinched primarily by slowing demand from Europe. According to Econoday.com, “this was their worst performance for a non-holiday month since November 2009.” The impact of slowing exports from China is being picked up in the Baltic Dry Index (BDI), which tracks the price to ship freight over the world’s oceans. The BDI is once again pushing towards the lows of the year, signaling that economic fundamentals remain severely depressed. This is typically a leading indicator to equity market weakness.

The Baltic Dry Index is not the only shipping gauge that is under pressure. The Dow Transportation Index has been significantly underperforming the market for almost a month, hinting of weak demand for goods. The Dow Transports typically confirm broad market equity moves, leading markets higher when economic fundamentals are strong, and leading the markets lower when fundamentals are weak. The fact that this cyclical industry, Transportation, is not showing the same upside momentum as what the broad market showing is a significant concern. Higher oil prices are also pressuring transportation stocks, a situation which is seasonally typical into September and October.

Turning to the equity markets, last week saw the lowest equity market volumes for a non-Christmas holiday week in years. The S&P 500 ETF (SPY) was shown on Friday with a 4-day volume moving average. The fifth day, Friday, only weakened the average further. The Dow Jones Industrial Average is also showing a similar volume profile to SPY. Now take a look at the NYSE Primary Exchange Index, which showed the lowest 5-day volume average since the 1990’s. Low volume implies low conviction, often a precursor to market declines. Volumes are typically lower than average during the summer months, albeit not as low as present levels, picking up once again in September as traders return to their desks from summer vacation. As a result, September and October are known to be the most volatile months on the calendar as regular trading resumes.

Concerning activity remains evident in the price of Copper, often referred to as “Doctor Copper” due to its ability to predict broad market moves. Copper has maintained a long-term declining path over the past year, underperforming the market in the process. With expectations of further monetary stimulus overriding economic fundamentals, it would be expected that copper would react positively as well, producing positive results and outperforming the market before central bank officials confirm activity, similar to what occurred prior to the last two QE programs. Investors in the cyclical metal are showing signs of skepticism toward the prominent stimulus expectations, perhaps warning that fundamental concerns are still too serious to ignore. Copper seasonally declines between August and October due to economic factors, such as weak manufacturing demand.

Despite a number of warning signals that remain intact, bullish characteristics are prevailing within the price action of equity markets. The S&P 500 continues to maintain a trend of higher-highs and higher-lows following a June low. Significant moving averages (20, 50, and 200-day) are curling positive. Even bond prices are showing signs of coming under pressure, a positive for equity markets. Sell signals for broad market indices have yet to be confirmed, so although risks are increasing, maintaining appropriate allocations to equities appears prudent until technical indicators roll over. Seasonal tendencies for Presidential election years turn negative into September, so equities are within a window where a peak could be realized at any time. Be prepare to react accordingly.

Sentiment on Friday, as gauged by the put-call ratio, ended neutral at 0.99. The ratio broke out of a falling wedge pattern, which could be the precursor to elevated levels of volatility. The VIX has fallen back to levels where the market has been known to correct as complacency reaches extremes. Volatility remains seasonally positive through to October.

S&P 500 Index

Chart Courtesy of StockCharts.com

TSE Composite

Chart Courtesy of StockCharts.com

Horizons Seasonal Rotation ETF (TSX:HAC)

• Closing Market Value: $12.37 (unchanged)
• Closing NAV/Unit: $12.39 (unchanged)

Performance*

* performance calculated on Closing NAV/Unit as provided by custodian

Click Here to learn more about the proprietary, seasonal rotation investment strategy developed by research analysts Don Vialoux, Brooke Thackray, and Jon Vialoux.

Tags: Baltic Dry Index, Baltic Dry Index Bdi, Bank Of Japan, Broad Market, Christmas Holiday, Don Vialoux, Economic Contraction, Economic Fundamentals, ETF, ETFs, Exports From China, Headline Number, Leading Indicator, Lows, Market Equity, Market Weakness, Oil Prices, Predominant Factor, Seasonal Weakness, Significant Events, Trade Surplus, Transportation Index, Transportation Stocks
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The Coming Oil Supply Gap

Thursday, July 5th, 2012

Current headlines are filled with talk of gas prices falling below $3 a gallon. It’s a welcome bit of good news for US consumers and 4^th of July travelers, and slow global growth is likely to keep oil prices down in the near term. But in a post early last month, I gave three reasons why I expect crude prices to rebound in the long term: marginal supply is increasingly coming from unconventional higher cost sources, many large oil producing companies require a high crude price to balance their budgets and OPEC has very little spare capacity.

Now, I have another reason to add to my list of why I expect crude price to rise – this chart. Included in a new BlackRock Investment Institute paper, “US Shale Boom: A Case of (Temporary) Indigestion,” the chart shows that global oil demand is likely to greatly outstrip supply by 2030.

Global energy consulting firm Woods Mackenzie expects the oil supply gap to be 20 million barrels of oil daily by 2030. As the Institute’s paper points out, the gap may not end up being this large. Annual global growth, for instance, may not turn out to be as strong as the 3.2% assumption in Woods Mackenzie’s analysis. In addition, higher oil prices could end up weakening demand and new technologies such as shale could help fill in the gap.

Still, I believe that oil prices will move higher in the longer term. As a result, I continue to hold an overweight view of global energy companies. Investors can access these stocks through the iShares S&P Global Energy Sector Index Fund (NYSEARCA: IXC).

Source: Bloomberg

Russ Koesterich, CFA is the iShares Global Chief Investment Strategist and a regular contributor to the iShares Blog. You can find more of his posts here.

The author is long IXC.


In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments typically exhibit higher volatility.

Tags: Accounting Principles, Blackrock, Chief Investment Strategist, Crude Price, Crude Prices, Currency Values, Current Headlines, Energy Consulting, energy sector, Global Energy Companies, Global Growth, Global Oil, Index Fund, International Investments, Ishares, Oil Demand, Oil Prices, Oil Supply, Sector Index, Shale
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Why Oil Prices Can Go Higher

Wednesday, June 13th, 2012

With oil prices down roughly 25% from their 2012 peak, many investors are asking about the future direction of crude.

In my opinion, while fears of a hard landing in China and overall weakness in global growth are likely to keep prices down in the near term, crude should rebound in the longer term for three reasons:

1.) Marginal supply is increasingly coming from unconventional sources, such as the tar sands in Canada, where production costs are higher.

2.) Many of the largest oil producing countries – notably Saudi Arabia and Russia – now require a much higher price for crude in order to balance their budgets.

3.)  OPEC currently has very little spare capacity. Today, OPEC space capacity is less than 4 million barrels a day, or about 11% of overall production, the lowest level since 2008. With spare capacity this tight, any supply disruptions are likely to push crude up sharply.

How should investors consider playing this? For most investors, it’s both unnecessary and unpractical to hold a direct position in crude oil. One more practical idea is to capture the potential benefits of higher oil prices through an overweight to energy stocks. Currently, US large cap energy companies are trading for roughly 1.5x book value, well below the market average and the sector’s historical values.

I particularly like global energy companies, which are even cheaper than US large cap energy companies and currently offer a healthy dividend yield. Investors can access these stocks through the iShares S&P Global Energy Sector Index Fund (NYSEARCA: IXC).

Russ Koesterich, CFA is the iShares Global Chief Investment Strategist and a regular contributor to the iShares Blog.  You can find more of his posts here.

Source: Bloomberg

The author is long IXC.

In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations.

Narrowly focused investments typically exhibit higher volatility. The energy sector is cyclical and highly dependent on commodities prices. Companies in this sector may face civil liability from accidents and a risk of loss from terrorism and natural disasters.

Tags: Chief Investment Strategist, Currency Values, Dividend Stocks, Dividend Yield, energy sector, energy stocks, Fluctuation, Global Energy Companies, Global Growth, Index Fund, International Investments, Ishares, Ixc, Largest Oil Producing Countries, Oil Prices, Oil Producing Countries, Saudi Arabia, Sector Index, Tar Sands, Unconventional Sources
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Jeff Rubin: The End of Growth

Thursday, May 31st, 2012

 

 
Jeff Rubin, author of The End of Growth (his second best-selling instalment), discusses the effect and ramifications of expensive-to-produce oil, in the context of the developed world’s over-indebtness, with Pierre Daillie. He says our growth expectations, including those of Canada need to be adjusted downward, as low interest rates will not be sufficient to re-ignite growth, and the catch-22 of (high) oil prices will snooker (global economic) growth in the foreseeable future.

Rubin, former Chief Economist, CIBC World Markets, shares his current investment outlook as well.

At the heart of Rubin’s thesis is his well-informed premise that we’ve burned all the ‘cheap’ oil, and unless we learn to use less oil, growing global consumption of the black stuff can only come at growth’s expense.

Bottom line: We are destined to relinquish economic growth in return for the increasing global appetite for energy.

The End of Growth, by Jeff Rubin, is an eye-opener, an interesting and controversial perspective on the future of trending issues affecting global economic progress.

Discussion:
The End of Growth – Do You agree or disagree?

Tags: Appetite, Bottom Line, Canadian Market, Catch 22, Cheap Oil, Chief Economist, Economic Progress, Eye Opener, Foreseeable Future, Global Consumption, Global Economic Growth, Growth Expectations, Indebtness, Instalment, Investment Outlook, Jeff Rubin, Low Interest Rates, Nbsp, Oil Prices, Perspective, Premise, Ramifications, Snooker, Thesis, World Markets
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U.S. Equity Market Radar (May 21, 2012)

Saturday, May 19th, 2012

U.S. Equity Market Radar (May 21, 2012)

The S&P 500 Index declined 4.30 percent this week. Telecom services, consumer staples and utilities outperformed as investors sought safety in the economically defensive sectors. Classic cyclical sectors such as materials and technology, along with financials, underperformed.

Strengths

• AT&T and Verizon paced the telecom service sector for the fourth week in a row as investors sought the relative safety of market leading dividend yields.
• The best individual stock performers this week were Salesforce.com, which rose by 5.7 percent, and Wal-Mart, which rose by 5.1 percent, as both companies beat earnings expectations.

Weaknesses

• The financial sector was hit particularly hard this week with the entire sector falling by more than 7 percent. Insurance companies led on the downside with Hartford Financial, MetLife and Lincoln National all falling by more than 12 percent.
• The materials sector was down more than 6.5 percent as steel-related names fell sharply. U.S. Steel and Allegheny Technologies were both down more than 16 percent this week.
• It was a very rough week for J.C. Penney which is in the middle of a new strategy with a new CEO. The company had a significant loss in the quarter as sales fell 20 percent.

Opportunity

• There were very few positive industry groups this week but gold stocks bounced on European concerns, while airline stocks were up due to lower oil prices. One week does not make a trend, but these groups are definitely worth watching.

Threat

• The U.S. remains a bright spot in the global economy but external shocks from Europe or Asia can’t be ruled out.

Tags: Airline Stocks, Allegheny Technologies, Consumer Staples, Dividend Yields, European Concerns, External Shocks, Global Economy, gold stocks, Hartford Financial, J C Penney, Lincoln National, Market Radar, Materials Sector, Metlife, Oil Prices, Relative Safety, Stock Performers, Telecom Service, Telecom Services, Wal Mart
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Energy and Natural Resources Market Radar (May 21, 2012)

Saturday, May 19th, 2012

Energy and Natural Resources Market Radar (May 21, 2012)

Strengths

• According to the Shanghai Futures Exchange, its copper inventory fell 9,178 metric tons to 187,449 metric tons.
• China’s steel product output rose 7.9 percent last month to 81.1 million metric tons from a year ago, according to the National Bureau of Statistics.
• China imported a record high 25.05 million metric tons of coal in April, up 90.1 percent year-on-year, Platts reported, citing preliminary customs figures. Chinese year-to-date coal imports rose 69.6 percent year-on-year to 86.55 million metric tons of coal.

Weaknesses

• Stocks and commodities fell this week as the likelihood of a Greek exit from the eurozone has increased significantly during the past two weeks.
• Oil prices fell 4.8 percent this week. The current bout of concerns had arisen from the resurgent fears about the Spanish and Italian banking systems and speculation that Greece may have to exit the euro. Since then, for oil in particular, news reports suggesting that President Obama is seeking G8 cooperation on an oil stock release have compounded the depressing effect.
• Reuters reported that Chinese steel mills defer iron ore shipments owing to slowness in the steel market. Some Chinese steel mills are said to have postponed iron ore deliveries from suppliers such as Vale, given the slow steel markets. Producers are also expecting a further drop in prices.

Opportunities

• Global inflation might have already pushed the costs of exploring and producing oil from new most expensive projects, known in the industry as the marginal cost of production, above $100 per barrel, according to JBC energy consultancy. That compares to $50-$75 prior to the 2008 financial crisis. A decade ago, oil companies such as BP were saying they would start a project if oil traded above $17-$20. Even the International Energy Agency, which represents consuming nations, says production costs have gone up sharply. “There is not a single drop of oil in the world that cannot be produced at a price of oil of $85-$90,” IEA’s chief economist Fatih Birol told a summit.
• The Chinese government announced a new batch of new subsidies to promote the consumption of energy-efficient home appliances and autos on Wednesday. RMB6bn will be provided to fuel-efficient vehicles with engines below 1.6L, and an RMB26.5bn financial subsidy will be provided for energy-efficient appliance products, including all the major white goods products. This appears to be a clear signal of the government’s commitment to shift domestic demand toward more personal consumption and away from fixed asset investment.
• Oil industry executives and bankers are assuming oil prices will stay above $100 a barrel in the year ahead, despite mounting economic worries, as any fall below that level would trigger a cut in Saudi Arabia’s output and force closures at high-cost projects around the world. A Reuters straw poll of oil executives, traders, bankers and fund managers showed seven respondents predicting Brent crude trading at $100-$120 a barrel in the next 12 months.
• Boart Longyear, the world’s biggest provider of mineral drilling services, expects demand to remain strong as large mining companies proceed with projects. “We still see very strong demand, particularly from the majors,” Craig Kipp, CEO of the company said. “We haven’t heard from a lot of the majors outside of Australia that there’s a change in their plans or in their budgets. We haven’t seen any change in market dynamics – we’re operating all over the world,” Kipp said. “We do see that juniors, the second-tiers, have had problems getting financing,” he added.

Threats

• In a Wall Street Journal article last year at this time, Chief Executive Marius Kloppers said BHP would invest $80 billion by the end of 2015 to expand further. The eurozone crisis, slower Chinese growth, and falling metals prices are forcing BHP to now say it will be cutting those spending plans. Falling commodity prices and rising operating costs put its cash inflows at risk and, by extension, its commitment both to raising its dividend and keeping its single-A credit rating. BHP’s plans need to become clearer if it wants to reverse the 28 percent fall in its share price since a year ago.
• Agrimoney reported that the Federal Reserve has warned, “The surge in U.S. farmland prices, which in parts of the Plains achieved their strongest run of growth on record, may be about to fade, sapped by the worsened outlook for agricultural profits.” Farmland values posted sharply higher gains in states around Kansas in the year to the start of last month, reflecting higher crop prices and an easing in the drought which has plagued much of the area since 2010. “Strong farm incomes continued to fuel demand for farmland,” the Federal Reserve System’s Kansas City bank said, noting that values had now risen by more than 20 percent for two consecutive years for the first time since it began collecting data in the 1970s. Prices in Nebraska, which avoided drought, were particularly strong, with values of irrigated land soaring 41 percent.

Tags: Banking Systems, Bureau Of Statistics, Chinese Year, Coal Imports, energy, Energy Consultancy, International Energy Agency, Marginal Cost, Market Radar, Million Metric Tons, National Bureau Of Statistics, National Bureau Of Statistics China, Oil Prices, Oil Stock, Platts, Shanghai Futures Exchange, Steel Market, Steel Markets, Steel Mills, Steel Product, Stocks And Commodities
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Rosenberg Roasts Roundtable of Groupthink

Monday, April 23rd, 2012

It appears that when it comes to mocking consensus groupthink emanating from lazy career ‘financiers’ who seek protection from their lack of imagination and original thought, ‘creation’ of negative alpha and general underperformance (not to mention reliance on rating agencies, only to jump at the first opportunity to demonize the clueless raters), in the sheer herds of other D-grade asset “managers” (for much more read Jeremy Grantham explaining this and much more here), David Rosenberg enjoys even more linguistic flexibility than even us. Case in point, his just released trashing of the latest Barron’s permabull groupthink effort titled “Outlook: Mostly Sunny.” And just as it so often happens, no sooner did those words hit the cover of that particular rag, that it started raining, generously providing material for the latest “Roasting with Rosie.”

From Gluskin Sheff:

Consensus Creates A Contrary Call

When the experts and forecasts agree, something else is going to happen.”
~ Bob Farrell’s investment rule #9.

Did the folks at Barron’s intentionally lob a ball right into my wheelhouse? The front cover says it all — Outlook: Mostly Sunny. Check it out. Any perma-bull out there right now should be trembling by the front cover effect. This is no different than the fabled Death of Equities in the 1979 Businessweek, the Economist front cover calling for oil prices to basically head towards zero circa 1998, and the front cover of Barron’s a decade ago saying That’s All, Folks when it came to interest rates supposedly bottoming out. Come to think of it, Barron’s ran with Dow 15,000 on its front cover back on February 13, 2012, and last we saw, at the nearby peak in early April, the blue-chip index closed 1,700 points below that threshold (and has been roughly flat since the date of that article).

What Barron’s is referring to here is the latest Big Money poll that it conducts semi-annually. The actual title of the article (on page 25) is Reason to Cheer. Reason to cheer? About what? Margins being squeezed? Profit growth practically evaporating? Earnings downgrades still significantly outpacing upgrades? The recovery so excruciatingly slow that senior members of the Fed are contemplating QE3? Insolvency of Spanish banks? Hard landing risks in China? The 2013 fiscal cliff? The fact that over 60% of the data in the past two months have surprised to the downside?

The results of the Big Money Poll were startling:

- 55% of the portfolio managers are either bullish or very bullish. Only 14% are bearish or very bearish.
- Financials and technology are the favourites, with 31% citing both as being the top performers in the next six to 12 months.
- Favourite stock … Apple (surprised?).
- Utilities are seen as the worst performer — by 30% of those polled.
- With respect to Treasuries, 81% are bears, just 2% are bulls. How can yields rise in such a lopsided environment? I mean, who is there left to sell? This is a classic bullish contrary signpost.
- Bonds of all types are detested — 33% bearish on corporates while 14% are bullish; 35% are bearish on munis while only 12% are bullish.
- But … 41% are bulls on real estate; only 10% bears are left.
- For gold, 39% bears and 30% are bulls. That is great— the one asset class that has been in a secular bear market for 12 years is adored (equities), and the two that have actually made you money over this time span (the bond- bullion barbell) is to be avoided. Go figure!

The latest market positioning by non-commercial accounts (proxy for what the hedge funds are doing) from the weekly Commitment of Traders report is also rather instructive (futures and options contracts combined):

- 10-year T-note: Net speculative short position of 130,045 contracts on the CBOT. As I said above, who is left to sell?
- DJIA index: Net long 13,285 contracts on the CBOT.
- EAFE stocks: Net short 440 contracts on the CME but this number has been coming down.
- EM stocks: Net short 4,787 contracts on the CME, also coming down of late as the shorts cover.
- Nikkei index: Net short 4,894 contracts and also on the descent.
- Copper: Net long 1,229 contracts.
- Energy: Net short 124,941 natural gas contracts on the NYMEX: net long 288,393 WTI oil contracts. Patient investors know what to do.

- Gold: Net long position has been cut in half since last summer to 146,833 contracts. The latest corrective action has been healthy as the earlier froth is gone.
- Silver: Ditto — the net speculative long position has been sliced 40% to 21,309 contracts.
- Euro: Net short 117,062 contracts on the CME (likely why the currency won’t go down … the bears are already all in that trade!).
- Sterling: Net short 13,456 contracts (and is enjoying a humdinger of a short- covering rally of late).
- Yen: Net short 57,984 contracts (if the Japanese government is telling you they want the currency to depreciate, we should probably take heed).
- Canadian dollar: Still has a net speculative long position of 37,873 contracts on the CME, which could hold back the gains.

It is viewed as a global darling. But the Aussie dollar still commands a net speculative long position of 48,902 contracts and the Reserve Bank of Australia is about to cut rates while the Bank of Canada seems itchy to raise them as they did in 2010 — so there could be an opportunity on the ‘cross rate’ here.

Tags: Asset Managers, Barron, Blue Chip Index, Bob Farrell, Businessweek, Case In Point, Consensus, David Rosenberg, Dow, Economist, Financiers, Gluskin Sheff, Groupthink, Herds, Money Poll, Oil Prices, Raters, Roasts, Rosie, Threshold, Wheelhouse
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BRIC Country PMI, New Business, Employment, Exports, Mfg Import Purchases

Friday, April 20th, 2012

by Richard Shaw, QVM Group

HSBC Emerging Markets PMI Index rises to 53.4 from 52.4 for 2012 Q1

Stephen King, HSBC’s Chief Economist, said:

“The latest HSBC EMI underlines the relative immunity of emerging nations to the economic permafrost of the developed world. Emerging nations still have many years of economic “catch-up” ahead of them, suggesting that their growth rates – driven by continuous urbanisation alongside productivity gains linked to improved access to global capital – should remain significantly higher than in the west. They also have considerably more policy ammunition to deploy, including rate and reserve ratio cuts and, if necessary, fiscal stimulus.

Despite two successive quarters of strength, EMI remains at a relatively low level, thanks largely to further deterioration in Chinese export orders but also domestic demand as a result of attempts to tame inflationary pressures through quantitative tightening. Emerging market inflation has generally eased outside India, despite the return of higher oil prices, and policymakers are returning their focus to promoting growth over limiting inflation.

Emerging nations still have to balance the risks of too little growth against the threat – if not yet the reality – of commodities-driven inflation. But the outlook remains encouraging with China, India, Brazil and Mexico all set to be top ten global economies by 2050.”

click images to enlarge

source: HSBC Emerging Markets Index 2012 Q1

Tags: Business Employment, Chief Economist, Chinese Export, Emerging Market, Emerging Markets, Export Orders, Fiscal Stimulus, Global Capital, Global Economies, Inflationary Pressures, Level Thanks, Markets Index, Oil Prices, Permafrost, Productivity Gains, Qvm, Relative Immunity, Reserve Ratio, Richard Shaw, Urbanisation
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The Politics of Oil (Charles Lieberman)

Tuesday, April 17th, 2012

 
by Charles Lieberman, Advisors Capital Management

April 16, 2012

Oil prices have given a bit of ground recently, as rising inventories suggest that any possible supply disruptions may be more limited in scope than had been feared. The Saudis have increased supply, even as Libya and Iraq increase production, offsetting reduced supplies of Iranian oil and increased stockpiling by China. It is a bit soon to be confident that oil supplies will be adequate should a conflict erupt with Iran, but the evidence is less one-sided now. So, gasoline prices have retreated, reducing the drain on household income.

Higher oil prices deplete consumer spending power, so the recent retreat in oil prices is very welcome, even if it is modest so far. Users, notably the Chinese, have been adding to demand to grow strategic stockpiles, which has helped push up prices. The underlying concern is that a conflict will disrupt supplies coming out of the Persian Gulf, driving prices considerably higher. However, oil production has also increased to meet this demand, notably from Libya and Iraq, as their oil production gradually reverts to normal, and by the Saudis, who are increasing production to counteract the loss of Iranian supply. In March, global supplies increased about 1.2 million barrels per day, a solid advance. Should this stockpiling continue, it would relieve much of the anxiety over the possible loss of Iranian oil.

Europe’s planned oil embargo of Iranian crude is scheduled to begin July 1, but numerous countries have already begun to scale back purchases, if only because financial links are being turned off, so it has become quite difficult for nations to pay for any oil. Iranian oil exports are clearly falling, making the March increase in global inventories all the more impressive. A few more months of additions to global supplies would likely lead to a meaningful decline in prices.

Last year, a rise in oil prices was one of the key factors that helped slow growth, since it serves as a draw against household spendable income. The rise so far this year is fairly modest, yet investors are concerned that a repeat performance is possible. Few would dispute that higher inventories that push down prices would be rather welcome.

Tags: Additions, Anxiety, Capital Management, Consumer Spending, Decline, Disruptions, Gasoline Prices, Household Income, Inventories, Iranian Oil Exports, July 1, Libya, Lieberman, Oil Embargo, Oil Prices, Oil Production, Oil Supplies, Persian Gulf, Saudis, Spending Power, Stockpiles
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U.S. Equity Market Radar (April 9, 2012)

Sunday, April 8th, 2012

U.S. Equity Market Radar (April 9, 2012)

The S&P 500 Index fell 0.74 percent this week driven in large part by cyclical sectors as concerns mounted over a global economic slowdown.

Strengths

• Within the S&P 500 Avon Products was the best performer, rising by more than 20 percent as Coty, Inc. is seeking to buy Avon for $10 billion.
• Bed Bath & Beyond was the second-best performer this week rising by more than 9 percent on a better-than-expected fourth quarter earnings report.
• The technology sector eked out a small gain as Apple, Priceline and Mastercard were among the best performers in the S&P 500 this week.

Weaknesses

• The energy sector was the worst performer this week as global macro concerns dominated, even though oil prices were roughly flat for the week.
• The financial sector was also weak as macro concerns surrounding Europe and European banks resurfaced.
• First Solar was the worst performer this week, falling by more than 16 percent as the solar industry faces many obstacles.

Opportunities

• The market continues to grind higher irrespective of recent news. The “trend is your friend” until this pattern changes.

Threats

• The S&P 500 is arguably overbought in the short term and could be vulnerable to profit-taking.

Tags: Amp, Apple, Avon Products, Bed Bath, Coty Inc, energy sector, European Banks, Financial Sector, Fourth Quarter Earnings, Global Economic Slowdown, Global Macro, Market Radar, Obstacles, Oil Prices, Pattern Changes, Priceline, Recent News, Sectors, Solar Industry, Technology Sector
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