Kane Diary

A couple of days ago I had the opportunity to add

From the NY Times:

Word of the extension arrived almost by accident here at the rambling villa in the countryside east of Ramadi that the men from Company B, First Battalion, 26th Infantry Regiment of the First Infantry Division, have turned into an American-Iraqi military base.

Shortly after midnight, First Sgt. Jody Heikkinen spotted an article about it on the Internet, and the company officers were caught off guard. “We’re trying to figure out what it means,

Market Chat

Friday is starting as a continuation of Thursday. Should the selling waves in global equity markets persist today, which appears certain; this will be a weekend where the G-20 central banks will have to cook up a plan to stave that single day -1000 point loss on the Dow I previously argued was likely (if, as and when the broad market trend reverses).
I had this report done 25 minutes ago and now the ISP here is blocking my FTP upload of the charts. This is impossible working conditions. Now I have to leave for a meeting.

If today is bad (why today could be that 1000 point Dow loss day!), Monday could be the Black Monday of this millennium.

There is a flight to safety underway, and it started several weeks ago, which I pointed out in my Week In Reviews as USB was lifting and USD appeared to be basing at the 80 level. Capital has been moving into US Treasury instruments, driving down yields. Yesterday, the USD traded higher against the Yen.

Yesterday, the US equity market indexes were hit very hard with the DJIA down -387.18, S&P 500 -44.39, Nasdaq Composite -56.49, and Russell 2000 (Small Cap) Index -10.77.

Months ago, I wrote that by far the worse performing sector was the Financials (XLF). Yesterday, traders hit the Financials hardest as shares of banks, brokers and insurance companies sold down in an atmosphere of sheer panic that was being whipped up by the reportage of Financial Entertainment Media.

The fallout began after BNP Paribus announced it had temporarily suspended three asset-backed funds due to lack of liquidity and an inability to value the collateral.

As traders started containing their next biggest risk by pulling in previously aggressive positions in the Energy and Basic Material sectors, market monitors went red across board in the plummeting stocks of the integrated oils, pipelines and miners.

Futures traders sold Crude Oil contracts below $71/bbl, and Precious Metals as well, early in the day before prices started to recover, following news reports that central banks around the world were adding liquidity to stem the selling wave. Crude Oil still closed down on the day, following several days of losses.

Traders fear that tightening credit and subprime mortgage market failures have extended to the prime market. Countrywide Financial (CFC), the 800-pound gorilla in the home mortgage business reported after the close it is taking unprecedented losses. After months of traders selling down the stock, in after-hours trading the price had dropped about -17 pct. My readers know I long ago warned off this collapse.

The US consumer has clearly been facing inflationary concerns as well as the drying up of credit. US retail spending hit the wall in July, which I have been reporting.

In the midst of selling across the entire board, traders concerns focused on yesterday’s quarterly release of chain store sales data, which was negative from retailers like American Eagle (AEOS) and Hot Topic (HOTT). Both reported decreasing sales for stores open at least one year.

But the biggest problem is in the Financials. Early yesterday, after money center banks like Bank of America had to pay huge rates for overnight borrowing, the European Central Bank was forced to add excessive reserves to the money supply, something they have been trying to reverse. Then the Fed reported it was adding $12 billion in reserves with overnight repositories in an effort to replace the rapid drying up of available funds.

Finally, traders are understanding that an ounce of liquidity comes with an ounce of debt. Since much of the new debts created over the past few years were Liar Loans created by the bankers in league with the home-builders, it was just a matter of time before home-owners would renege on loans, causing bankers to foreclose on properties, in turn causing traders to back away from these syndicated debt securities.

Although economic fundamentals remain quite good, traders will now zero in on the negatives, such as yesterday’s report that US unemployment claims nearly doubled the prior consensus estimates.

New York insurance firm AIG reported a 34% jump in 2Q profit while News Corp, fresh off the completion of the deal for Dow Jones, reported $4.5 billion in operating income for the year ended June 30.

Credit worries in Europe, plus the equity market sell-off in the US, helped push down the DAX, FTSE, and CAC 40 about -2 pct. Overnight the more volatile Asia-Pacific equity markets were crushed.

As the media anchor says, “Buckle up, folks.”

The Cara Global 100 Stockwatch

Here are the Thursday session Cara 100 gainers.

Here are Cara 100 losers.

Here are the Cara 100 stocks that hit 52-week intra-day highs or lows in the Thursday session.

Here are the Cara 100 stocks that had extreme volume changes. It pays to watch the price and volume extremes, ie, Money Flow, especially when markets start trending.

Key Stocks plus Cara 100 In Focus

I am appreciative to the folks at KNOBIAS, Inc for providing the Cara 100 summaries.

Here are two sector ETF’s to review:

Financials (XLF)

Consumer Discretionary Spending (XLY):

Relative Strength Index (RSI) analysis of the Cara 100 company stocks .

Here are the charts of up to a dozen stocks with RSI-7 above 70 and below 30, from Thursday.

RSI > 70 (5)

RSI < 30 (12) (WITHOUT ASD POST SPIN-OFF)

Here are the Cara 100 stocks trading with the highest and lowest RSI-7, sorted by (i) daily and (ii) monthly values, for Tuesday:

“Chris,” used BillCara2.com data that is unsmoothed, unlike the data from Worden used by “David”. This week, “Sergey” is providing the Worden RSI data, as David is travelling.

International Economics Review

US Economic Calendar for next week

Econoday Weekly International Report

US Equity Markets Review

DJIA (interactive) chart

Yesterday’s session was horrible for the Bulls, but the fact is the Do is just back to Monday afternoon levels.

NASDAQ Composite (interactive) chart

The six-month charts of the Nasdaq Composite shows the technical resistance levels that traders must push through if the Bulls are to stay in control. It will be interesting to see if the tech-strong Nasdaq can hold up here while the financials-heavy NYSE (and Dow 30) undergo their credit market shake-out.

International Equity Markets Review

Once again, overnight, the rhetoric over the “crisis” in credit markets was cranked to the maximum. The losses overseas were heavy.

Asia-Pacific

Here is the latest session data for the Asia-Pacific stock exchanges.

Here is the latest chart for the Japanese Nikkei 225 index.

The Nikkei Dow plunged to 16674. Note how close the level is to the technical support I have been alerting you to for weeks now.

The Mar-07 16600 support level for the Nikkei 225 of the very important Japanese market is the critical one to watch this summer.

Here is the latest chart for the Singapore index .

Today, Singapore was down -1.6 pct to 3359, after some bids arrived late in the session.

Here is the latest chart for the Shanghai Composite index .

Some bids came into the Shanghai market late in the session too. But as Shanghai Fly has reported this morning, “Market breadth is still terrible here, despite Shanghai being down “merely” 0.1%, Shenzhn was down 2%.

199 stocks advanced in Shanghai while 652 declined.”

So somebody is trying to prop up Shanghai and Singapore. Central banks perhaps?

Here is the latest chart for the Hong Kong Heng Seng index .

The Hong Kong market sold down sharply at the open of today’s session, but then held its ground. Hong Kong is in my view a very free market. It ought to be a bellwether.

Here is the latest chart for the India BSE 30 index .

Today, the Bombay Stock Exchange BSE 30 Sensex index sold down -1.5 pct. Yesterday it was down -1.4 pct. These are not as bad as the losses in Europe.

Download Astaire Weekly Report on India (dated August 7) courtesy of Deepak Lalwani.

Here is the latest chart for the Australian All Ordinaries index .

The All Ordinaries index of Australia lost -3.6 pct today, which reflects the index’s heavy weighting of Energy and Basic Materials stocks.

Europe>

Here is the latest session data for the bourses of Europe.

All red arrows at 8:57am ET. The losses were greater an hour ago.

Here is the latest chart for the UK FTSE 100 index.

At 9:01am ET, the FTSE is down -2.88 pct.

Two days ago, I thought this index was over-sold and that there might be a recovery back to the 6500-6600 level, but it now appears that support at 6000 must first be tested.

US Dollar Review

Here is the chart of the recent trading.

The trade-weighted USD has lifted to 80.711 at present (8:30am ET), and I expect it to stay strong as long at capital flows out of equities into safe-havens cash and bonds.

This morning, however, the USD is a little weaker than the Euro.

Oil Review

Interactive Chart of Weekly Crude Oil:

Here is the e-miNY Sept-07 Crude Oil chart.

The e-mini September contracts are down from yesterday morning to 70.425 at 8:35am ET.

As traders go to cash, prices of these commodity contracts are falling.

Gold & Precious Metals Review

Here is the Recent Spot Gold chart.

Spot gold has dropped back to 665.40 (9:05am ET), which is what the price was three days ago at 9:43am ET. The rally in the past hour happened as the FOMC trading desk started flooding liquidity into markets.

Ultimately, the credit worries will be lessened, even if the underlying problems take many months and perhaps years to resolve. But how long this latest round of worries persists is a question mark. I don’t think Prof. Bernanke wants to lower the Fed rate yet, but if there is any indication he might, then gold will rally, and also join the safe-haven play (because this time I don’t think the equity market is going to lift) and become a counter-cyclical market along with bonds and the USD, while equities drift lower.

If I’m right as to the counter-cyclicality, I don’t foresee a major rally for Gold beyond 750 because Gold as a safe-haven is not quite the same emotion-packed situation as a strong Gold Bull supported by demand-supply and speculative interest factors.

Here is the Recent Spot Silver chart.

Spot silver is moving up here at 12.75 at 9:08am ET, which is still down from yesterday, but on the rise as the Fed is putting liquidity into markets.

Silver and Gold are rallying as the Euro is rising.

More volatile than gold, the silver metal is a precious metals bellwether.

Here is the The Goldminers stock index chart.

Gold stocks are going to recover soon. The index tested that 143-144 level I talked about a couple weeks ago.

The index sits at 142.64.

If central banks stem the selling wave in the broad equity markets, I see precious metals holding the line here. I believe it is a good time after another dip this week to bottom pick the stocks of high quality miners. I did a report last evening to help the process.

We are starting off the day in North America as Frantic Friday. I now have to depart for most of the day, unfortunately. The ball is in Prof Bernanke’s court. I said that a couple weeks ago as I foresaw issues in the Financials and Consumer Spending sectors.

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