Trader Tracks Trading Alert Tuesday, December 30, 2014

U.S. Stocks Fall as S&P 500 Slips From Record; Gold Gains on Reversal

“U.S. stocks fell from near records, with the Standard & Poor’s 500 Index paring a seventh straight December gain,                                                                                                                   as Treasuries rose and gold surged. European and emerging-market equities slipped with energy shares.”

“The S&P 500 slid -0.5% to 2,080.35 by 4 p.m. in New York, after closing yesterday at a record for the 53rd time in 2014. Utilities sank the most since June last year. The Stoxx Europe 600 Index lost -0.9% to extend its December retreat. The MSCI Emerging Markets Index fell -0.4% to push its loss this year to almost -5%. Ten-year Treasury yields touched their lowest level in a week as gold futures jumped +1.6%. Russia’s Ruble strengthened +4% versus the dollar, trimming its worst annual slump since 1998. Roger: The U.S. Dollar stopped rising after posting a full technical up-cycle. It is now correcting in the standard ABC chart pattern. This dollar pivot reversal enhanced buying of commodities including energy, metals and others. Further, it helped stem the crashing Russian Ruble giving it a base and a tiny recovery rally.

The S&P 500 has risen +0.6% in December, bolstered by the fastest growth for the American economy in more than a decade. A report today showed U.S. consumer confidence increased less than estimated this month, while crude oil traded near the lowest level since 2009 in New York and London amid speculation U.S. oil inventories will hold at the highest level for the time of year in at least 30 years. Greek Prime Minister Antonis Samaras will request elections for January 25, with the anti-austerity party Syriza leading in opinion polls. Roger: While the U.S. systemic growth appears real it is an elegant product of manipulation in the jobs reports, with FOMC price fiddling and happy talk. Also there are a hidden few, occasional bullish prods in S&P’s by the Plunge Protection Team to ensure buying patterns remain intact without selling “accidents.”

“We could be seeing a little bit of profit-taking coming into year-end,” David Lafferty, who helps oversee $894 billion as the chief market strategist for Natixis Global Asset Management in Boston, said by phone. “Oil has been down a little bit, and you don’t have a lot going on other than that. Volume will tend to be very light through year-end, and we anticipate it being quiet.” Trading in S&P 500 shares was -41% below the 30-day average, according t Bloomberg. Roger: Oil remains stuck with oversupply. There was talk this week of the Saudi’s pounding out more oil to batter down the USA shale oil industry. The Bakken reserves, as we reported previously, have higher costs of discovery and production. Some of the new shale oil well drilling has been halted, but it is not that easy to stop or even slow down most of these active projects. I expect the Bakken wells to be productive for years, but are they going to be profitable for the owners? Many will become losing projects.

The S&P 500 has gained +13% this year, while the Dow Jones Industrial Average (INDU) is up +8.5% after climbing above 18,000 points for the first time last week. The Russell 2000 Index of small-cap stocks climbed to an all-time high December 26 and the Nasdaq Composite Index reached its highest level since March 2000 (same day), closing about 5% below its record.

The gains in U.S. equities come amid declines elsewhere. While the S&P 500 is heading for a third straight annual advance, the MSCI All-Country World Index excluding the U.S. is down -6.2% for the year. Roger: Keep in mind the USA is doing better than most of the world in most markets. Energy is soft all over but within the next 6-9 months energy prices will rise again.

“The U.S. economy is doing well,” Herbert Perus, who helps oversee $36 billion as head of equities at Raiffeisen Capital Management in Vienna. “Some stocks seem overpriced, but if you look deeper into the market you find a lot of good managed companies with good products that are still not expensive.” Roger: The fallacy here is these remarks talk about a managed and manipulated economy, which is setting-up for another major correction in 2015-2016. The underlying and smothered news about 25% USA jobless, waning housing sales, no savings, rabid increases in public and private debt are not out in the media for the most part. Billionaires were heavy stock sellers taking profits since last April. They do not hold any where near the amount of stock held previously. They are playing the market movements. Watch out for another derivatives crash!

The Conference Board’s U.S. consumer confidence index increased to 92.6 in December from 91 a month earlier, the New York-based private research group said today. Yields on 10-year Treasury notes fell two basis points, or 0.02 percentage point, to 2.188 percent in New York, after earlier touching 2.1651 percent, the lowest rate since Dec. 23. Investors sought out the relative safety of U.S. government securities amid the decline in stocks.

Gold futures for February delivery climbed to $1,200.40 an ounce, after touching $1,210.90, the highest intraday price since December 18. Futures are down -0.2% this year after sliding -1.1% yesterday as the strengthening dollar eroded the precious metal’s appeal as a store of value. Roger: This weeks’ gold moves have been range bound between $1175 and $1208 gold. Silver has produced similar range trading and March futures today were above a current trading range at $16.32, up +$.54.

Europe’s benchmark equities index headed for the first December decline since 2008 and emerging-market shares slid toward a second yearly drop as energy shares continued their retreat. Total SA and Royal Dutch Shell Plc lost at least -2.2%, while Russia’s OAO Tatneft, Kuala Lumpur-based oil and gas services provider Bumi Armada Bhd and China Oilfield Services Ltd. led energy-stock declines in MSCI’s developing nations gauge. The measure of emerging-market energy shares is poised for its steepest annual drop since 2008, falling -28% amid crude oil’s descent into a bear market.

West Texas Intermediate and Brent crude prices fluctuated near their lowest settlement levels since 2009 after erasing earlier declines. WTI rose +1% to $54.12 a barrel by the end of trading, while Brent climbed to $57.90 per barrel in London. The U.S. benchmark is down more than -45% this year as the largest U.S. oil output in about 30 years collides with slowing global demand and OPEC’s refusal to reduce production levels. Roger: US WTI is trading near $53-$54 per barrel. The price of $50 is major support, which should hold long into 2015 before the prices go up again.

Three-year yields in Greece held above 12% after the prospect of early elections was confirmed this week. Samaras failed to get his candidate for president, Stavros Dimas, confirmed by the requisite supermajority of 180 lawmakers, necessitating a fresh vote. Credit-default swaps insuring $10 million of Greek debt for five years were quoted at $3.68 million upfront and $500,000 annually, signaling a 64% probability of default,according to CMA. Roger: Trading Greek paper debt is for high rollers and is extremely dangerous. Greece is insolvent and many of her neighbors are moving there also.

The Ruble climbed to 56 per dollar on speculation Russian policy makers were stepping in to shore -up the currency on the final Russian trading day of the year. The country’s Micex Index (INDEXCF) slid -2.5%, headed for its first annual decline in three years. Roger: Currency shoring-up by policy makers is a dream. The Ruble was up on the inverse trade today of the U.S. Dollar being in a minor correction.” -Jeremy Herron & Joseph CiolliNYC 12-30-14 Bloomberg.net

Shifting Markets Cap Rising US Dollar…Commodities Continue to Firm and Rise.

“Gold Gains as Dollar Declines, Greece Boost Haven Appeal: Gold futures rose to the highest in more than a week as world equities dropped and the dollar headed for the first decline in three sessions, boosting demand for bullion as an alternative asset. The metal also climbed as Greece is expected to hold early elections on January 25 after Prime Minister Antonis Samaras failed to secure the necessary votes to hold office. The nation’s ongoing debt crisis poses a risk to Europe’s economy. Gold priced in Euros climbed +13% this year. “A weaker dollar, uncertainty in Greece’s political situation and a pullback in equities are all adding to support in gold,” Phil Streible, Sr. market strategist at RJO Futures inChicago, said.”

Gold futures for February delivery rose +1.6% to settle at $1,200.40 an ounce at 1:54 p.m. on the Comex in New York, after touching $1,210.90, the highest since December 18. The price is down -0.2% for the year. “Gold is higher, helped by a weaker dollar,” Tai Wong, the director of commodity products trading at BMO Capital Markets Corp., said in a telephone interview. “The dollar dipping against the yen has the attention of the biggest part of the market.”

The MSCI All-Country World Index of shares slid 0.6 percent, heading for the biggest loss in two weeks. The Bloomberg Dollar Spot Index fell as much as 0.5 percent. The Yen appreciated versus most of its 31 major peers as the Bank of Japan said it will increase the length of maturity of the government bonds it buys. Roger: This move is futile. It’s like stretching out the maturity term on mortgage as the debtors cannot pay. Silver futures for March delivery climbed +3.1% to $16.276 an ounce on the Comex, the second gain in three sessions. Prices have fallen 16 percent this year. Platinum futures for April delivery rose +1.4%, to $1,219.30 an ounce in NY.” -Joe Deaux New York 12-30-14 Bloomberg.net with Trader Roger commentary

Roger In summary: As we roll into the new year of 2015 for trading and investing on Monday next week, the new trends are; a flattening U.S. Dollar with inverse currency trades of Yen, Euro, Yuan and Ruble all firming or rising a small amount. U.S. stocks should continue to rise with bonds being flat in a tighter trading range during the first 2015 quarter.

Commodities are a mixed bag. The energy group is oversold and should stay that way on an intermediate trend of several months. Crude oil will base at $50 and gradually rise to $85-$95, but it takes 6-9 months at least. The drillers are going to be soft or down even longer. Natural gas prices are near $3, with $4.40 being a former high. Should the global winter be long and very cold like last year, natural gas should touch $3.50 to $3.75 for a February-March trading peak. Heating oil will peak in price in February, 2015.

Gold and silver will rise but unless we see a war or major geopolitical mess, gold might resist at $1,450 and silver just under $20 at $18.08 to $19.08. Copper is firm at $2.85 and one of the largest miners just re-opened a hug pit. With commerce and industry so weak throughout the world, iron ore, zinc lead, aluminum and copper will remain modest in price with smaller recoveries.

The grains sit in an overproduction mode as well. However, wheat has been more active on the long side with modest reversal gains. Corn and soybeans are still well over-supplied. Asians are restocking heavily on most commodities at these bargain prices. Even the broken down and busted coal market is getting legs but the price is suppressed for many months. Utilities and airlines shares are improving on lower energy prices. Auto sales have peaked with housing. Watch for our new trades in stocks and futures with our 2015 opening issue. Last year offered very little opportunity. Next year is much better. Happy New Year! –Trader Roger

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