Stocks Rally On Hopes for Greece; US Housing Permits Surprise

S&P 500 Index futures are currently up 0.7 percent indicating a higher open as investors are hanging their hopes on the Federal Reserve's announcement of "Operation Twist" and maybe something more which could lower the interest rate the Fed pays commercial banks on their deposits with the Fed. Operation Twist is a balance sheet maneuver where the Fed buys treasuries further out on the yield curve than 10 years against selling those with shorter maturities.

In pre-market investors got numbers on U.S. housing starts for August which came out at 571K annual rate compared to 590K expected. More importantly the leading indicator building permits rose 3.2 MoM compared to minus 1.8 percent expected. Despite today's numbers it is fair to say that housing will not drive the economy forward in any meaningful way for the next many quarters.

Greece debt talks productive; Italy downgraded by S&P with negative outlook
In Europe, the Euro STOXX 50 Index is up 1.5 percent driven by gains in Banco Santander (+2.9%), BASF (+3.4%) and Siemens (+2.3%) as Greece said its debt talks with the Troika were productive and amid growing optimism ahead of tomorrow's Federal Open Market Committee meeting outcome.

Early this morning Italy's debt was downgraded by S&P from A to A+ with a negative outlook which we must say reflects that rating agencies remain behind the curve. Prices on Italian bonds and credit default swaps have long shown that the market thinks Italy's debt is of a deteriorating nature. In fact we would argue that with the size of Italy's structural deficits and 0.2 annualised growth rate in the last decade the country should have an even lower credit rating.

Adding further to the negative news stream, the Zew Survey (index of investor and analyst expectations) for September came out at -43.3, the lowest reading since December 2008 as Europe's debt crisis continues to worsen. Today's Zew numbers support that the probability for a recession in Europe is higher than in the U.S. The biggest problem for Europe right now is that the lack of market dynamics within the ranks of policymakers are resulting in too slow reactions to the problems. Europe is slowly approaching the critical point where the situation could get out of control if the prophecy of Europe's downfall materialises among corporates and individuals.

More stock specific, Deutsche Lufthansa is out announcing that it is cutting its full-year forecast as economic concerns are hurting bookings. The announcement comes after very confident statements from management that earnings would increase. The shares are down 5.9 percent in Frankfurt trading

Market Preview 19 September 2011

Forex Overnight: USD trading stronger
The USD is trading higher against most of the key currencies, amid a rise in risk aversion. An inconclusive meeting of European Union (EU) officials in Poland has led the EUR to trade weaker against the major currencies this morning. Additionally, the EUR is under pressure, ahead of the EU and the International Monetary Fund’s (IMF) assessment, later today, on the approval of the next tranche of aid for Greece. At 6 am, the EUR has weakened 1.0 percent against the USD to trade at $1.3665, and has declined 0.4 percent against the GBP to trade at £0.8706.
The JPY is trading 0.2 percent lower against the USD, following indications from the Japanese government that it might act to curb the appreciation in the Yen.
The AUD and CAD have lost 1.2 percent and 0.6 percent against the USD, respectively, amid rising concerns about global economic growth.

UK Stocks: Expected to open in negative territory
The FTSE 100 is likely to open 47 to 52 points in the red.
No economic release scheduled for today.

Highland Gold Mining , Petra Diamonds, Greenko Group and International Ferro Metals are scheduled to report their results later today.
Bob Dudley, the CEO of BP, has stated that the company remains committed to achieve its oil production targets at Iraq’s Rumaila field and is not renegotiating contract terms.
The South China Morning Post has reported that Standard Chartered has stated that it does not plan to lay off jobs in Hong Kong.
The Sunday Times has reported that Tesco is mulling to bid for all or part of The Garden Centre Group, in a £300.0 million sale managed by Lloyds Banking Group.
The Financial Times has reported that Tim Tookey, the Finance Director of Lloyds Banking Group, is set to resign from the bank to take over as the CFO of Friends Life.
According to the Sunday Telegraph, William Hill is in the initial discussion stage to acquire Probability Plc, the mobile-phone gaming company.

Asia: Trading lower
Persistent concerns about the sovereign debt crisis in Eurozone are weighing on the Asian markets this morning.
In Japan, markets are closed on account of a holiday for Respect for the Aged Day.
In Hong Kong, markets are trading lower, with financial sector stocks trading in negative territory. Bank of China Limited, Bank of Communications and Ping An Insurance Group have retreated, amid reports that Greece might not receive its next aid tranche without further austerity measures. Cnooc Limited and Jiangxi Copper Company have declined, on concerns about the demand outlook for commodities. In China, Poly Real Estate Group and Industrial & Commercial Bank of China have lost value, after data indicating a rise in new-home prices in all cities in August raised speculation of further monetary tightening. Sany Heavy Industry has eased, after it stated that it plans to raise up to $3.3 billion in a Hong Kong initial public offering. Despite South Korean markets trading weaker, Hyundai Engineering & Construction has advanced, after it stated that it has received a KRW 1.6 trillion order to construct a thermal power plant in Vietnam.

US Stocks: Futures trading weaker
At 6 am, S&P 500 Index Futures are trading 20.1 points lower.
NAHB Housing Market Index for September is scheduled for release today.
Lennar Corporation and Accuray are scheduled to announce their results today.
Goodrich Corporation continued its regular session gains in the extended trading session on Friday, soaring 9.8 percent, amid reports that United Technologies Corporation might make a takeover bid for the company. Wipro, Almaden Minerals and NeoProbe featured amongst other key gainers, rising 8.2 percent, 6.3 percent and 5.7 percent, respectively. Healthcare sector stocks, Complete Genomics, Isis Pharmaceuticals and Curis, the major laggards in the after hours session, tumbled 21.7 percent, 6.8 percent and 6.7 percent, respectively.
On Friday, the S&P 500 index added 0.6 percent in the regular trading session, amid optimism that European leaders would act jointly to tackle the Eurozone debt crisis. Aerospace and defence sector stocks, Rockwell Collins, Goodrich Corporation, Textron and Tyco International jumped 7.8 percent, 7.4 percent, 6.8 percent and 3.1 percent, respectively, following a report that United Technologies Corporation is seeking financing for a major acquisition in the U.S. Amazon.com and Procter & Gamble climbed 5.2 percent and 2.5 percent, respectively, after U.S. consumer sentiment index rose in August. eBay surged 5.2 percent, after a broker upgraded its recommendation on the stock to “Out-Perform” from “Neutral” and hiked its target price. General Electric added 1.6 percent, after it signed two new joint ventures in Russia. Netflix plummeted 8.3 percent, after it slashed its U.S. subscriber addition estimates for the third quarter.

European Stocks: Likely to open in the red
The DAX and CAC are expected to trade 53 to 60 points and 48 to 51 points lower, respectively, at open.
Eurozone’s Construction Output is scheduled for release today.
Tipiak SA, HF Company SA, Maximiles SA and Coheris SA are scheduled to report their results today.
Siemens AG has abandoned plans to make nuclear generating equipment with Russia’s Rosatom, following the German government’s decision to phase out nuclear power by 2022.
Markus Ozegovich, the head of Volkswagen AG in Russia, expects the Russian car market to become the  largest in Europe by 2013.
Il Sole 24 Ore has reported that Edison SpA’s Italian investors may give their stake to Electricite de France SA in exchange for a 50.0 percent of the former’s Edipower unit.
Les Echos has reported that BNP Paribas SA is planning to save €200.0 million a year in its Belgium operations.
Peabody Energy Corporation and ArcelorMittal SA have announced that they have extended their joint bid for coking coal miner, Macarthur Coal Ltd., by 17 days.
UBS AG has raised its estimate of losses from unauthorised speculative trades to $2.3 billion.

Macro Update
UK house prices rise
On a monthly basis, average house prices in the U.K. edged 0.7 percent higher in September, compared to a 2.1 percent decline posted in the previous month.
QE gave economy significant boost, indicates BoE
The Bank of England (BoE), in its quarterly bulletin, has indicated that the first round of asset purchases gave the economy a significant boost, but any future quantitative easing (QE) may not have the same impact.
Moody's says Italy's ratings under review
Moody's Investors Service has stated that it is continuing its review for possible downgrade of Italy's Aa2 local and foreign currency government bond ratings, and would try to conclude its review within the next month.
Chinese Premier pledges to step up inflation fight
Chinese Premier, Wen Jiabao, has indicated that the government will step up the fight to restrain inflation, which has been led by steep rises in the cost of food.

Economic Calendar

Country	BST	Economic Indicator	Relevance	Consensus/*Actual	Previous	Frequency
UK	0:01	Rightmove House Prices (MoM) (Sep)	PP	0.70%*	-2.10%	Monthly
UK	0:01	Rightmove House Prices (YoY) (Sep)	PP	1.50%*	-0.30%	Monthly
Eurozone	10:00	Construction Output s.a. (MoM) (Jul)	P	-	-1.80%	Monthly
Eurozone	10:00	Construction Output w.d.a. (YoY) (Jul)	P	-	-11.30%	Monthly
US	15:00	NAHB Housing Market Index (Sep)	P	15.00	15.00	Monthly
Japan	-	Respect-for-the-Aged Day Bank Holiday		-	-	-

Note: PPPHigh           PPMedium           PLow


Corporate Calendar

Country	Company Name	Index	Announcement
UK	Alliance Trust Plc	FTSE All Share	Interim
UK	Dairy Crest Group Plc	FTSE All Share	Trading
UK	French Connection Group Plc	FTSE All Share	Interim
UK	International Ferro Metals Limited	FTSE All Share	Prelim
UK	Ocado Group Plc	FTSE All Share	Trading
UK	PZ Cussons Plc	FTSE All Share	Trading
US	Lennar Corporation	S&P 500	Q3 Earnings Release

Market tracker Hulbert: History Says these Beaten-down Stocks Could Finally Be Ready to Rebound

MarketWatch’s Mark Hulbert says that a couple of historical factors are indicating that value stocks may be ready to finally start outperforming growth stocks again. Hulbert notes that value stocks, which over the long term have enjoyed a significant edge over growth stocks, have lagged their growth peers for the past few years — the longest such period on record. That means a reversion to the mean should be on the horizon. Exactly when that occurs is unclear, but Hulbert does say that his research shows that value stocks tend to put up their best performance vs. growth stocks in the fourth and final year of the Presidential Election Year Cycle, which we’re about to enter.

Read full article (with video)...

Why The Stock Market Is Plunging

Gary Gibson, Geneva, Florida…

Slow news day, huh?

We are kidding, of course, good patrons. There’s been some pretty big news.

The S&P was forced to admit what we fringe pundits and kibitzers have been saying for years: U.S. debt is not quite as sound as the official ratings agencies would like you to believe.

The S&P 500, Dow and Nasdaq all took the official admission pretty hard. The S&P and Nasdaq are down 5%, the Dow nearly 4%.

Gold meanwhile is all smiles and back-slapping. We pulled up the charts this morning and due to our ingrained bias we immediately looked at silver. Nothing much going on there…

We usually don’t even bother looking at the gold price. Silver is where the big moves usually happen. Whatsoever gold does, silver often does twice as much…

And silver is what we’re counting on to increase our purchasing power as gold does little better than protect it…

But it was gold that made the big boy moves today! Up over $1700. We check our records. And our pulse. As near as we can tell this is a first.

As we put the finishing touches on today’s little ditty gold is at an all-time high of $1718. Gold is almost as expensive as platinum right now.

Silver meanwhile is feeling lethargic. It can’t seem to be bothered to get out of bed even as gold is circling the block a second time on its morning run. Silver remains just below $40 again today, and only a dollar above its Friday close around $38.

Gold’s Friday close was about $1650. That’s a 4.2% gain against the Dow’s 3.8% loss (again, as of this writing)…

None of this should come as any surprise, however. Things are happening as they ought.

Adjusted for inflation, gold is still nowhere near its 1980 high of a nominal $850, or about $2400 in today’s dollars.

Securities meanwhile are inflated in value, pumped up for at least a generation by the actions of the central bank. These actions have been eroding the value of the dollar, long cut free from its golden moorings. Gold’s price has failed to reflect this reality for longer than you’d think was possible.

But now stocks can’t keep up despite the dollar’s sacrifice. The dollar’s decay, however, lends gold renewed strength.

The Dow and gold are seeking each other out, planning a rendezvous at price parity somewhere. Their meeting point might have been 3000 before the Fed opened the spigot. It point may be 5000 as things stand right now. It could be 10,000 or more if the Fed keeps easing.

Of course at that point, anyone holding U.S. dollar or U.S. debt or corporate shares won’t be happy. The reason for the dollar and debt may be obvious, but what about the stock markket? Robert P. Murphy explain answers the question below…

Whiskey & Gunpowder
by Robert P. Murphy
August 8, 2011
Nashville, Tennessee, U.S.A.

Why Is The Stock Market Plunging?

Investors the world over are still reeling from last Thursday’s massive plunge in the US equity markets, in which the major indices all gave up more than 4 percent. It was the worst day for the US stock market since December 2008. [And today's markets are down over 4% again.--Ed.]

None of this should surprise those conversant with Austrian economics. The “fundamentals” of the economy have been and remain awful because the government and Federal Reserve are consistently doing the wrong things. The apparent recovery, fueled by Bernanke’s sheer money creation, has been bogus all along.

Bubble, Bubble, Bubble

For some reason, people still cling to the vague hope that — at least if we wait long enough — the market always goes up, and “buy and hold” is a great strategy. Let’s look at a long-term chart of the S&P 500:

Does the above chart really look like the US stock market is in store for smooth sailing? Just about everyone except Chicago School economists now recognizes, after the fact, that the United States obviously went through a tech and dot-com bubble in the late 1990s and then a housing bubble a few years later. Is it really so difficult to understand that trillions in government budget deficits over the past few years, coupled with unprecedented inflation by the central bank, have set the economy up for yet another crash?

Alan Greenspan’s low-interest-rate policy in the wake of the dot-com crash spawned the housing bubble. Greenspan’s Fed didn’t actually eliminate the need for a recession, but instead postponed the crisis and made it fester. When reality hit in September 2008, Ben Bernanke was in charge of the Fed and implemented his predecessor’s failed approach times ten.

No matter how many pundits and famous economists declare otherwise, Bernanke did not save the day with his interventions. He has simply postponed the day of reckoning yet again, and we can expect the final crisis to be much worse than the mere collapse of a few major investment banks. (The short documentary Overdose makes the case in a chilling fashion.)

Ben Bernanke Engineered the “Recovery,” All Right

In a perverse way, the pundits are correct in crediting Ben Bernanke’s extraordinary programs for “rescuing” the stock market. If we zoom in on the chart of the S&P 500 and superimpose the monetary base, we can see how closely the two have moved since the crisis began.

Although the above chart shows a decent fit, in reality the stock market responded very quickly to changes in the expectations of Fed expansion. Specifically, the sharp upswing in the S&P 500 in March 2009 coincided with the announcement of the Fed’s full strategy for (what we now call) QE1, and the market rally in the late summer of 2010 began as knowledgeable Fed officials made it clearer and clearer that QE2 would kick in after the fall elections.

Of course, those economists who believe Bernanke is engaging in a tight-money policy would point to the above as evidence in their favor — the Fed just needs to print more, because it’s worked twice already! But if one believes that showering trillions of newly created dollars into the financial sector (with the specific aim of bailing out the very parties who made reckless loans and investments during the housing bubble) is notconducive to a healthy recovery, then the booming stock market of the last few years should have been an ominous sign. Note that this isn’t 20/20 hindsight; other Austrians and I have been warning that this “recovery” has been bogus all along, and that the stock market could collapse at any time.

Inflation Lifts All Boats

None of the above analysis implies that investors should dump all equities immediately. It is true that the prospects for real economic growth are terrible — especially in the Western countries — over the next decade, because of increased regulations and swollen government debt loads. But at the same time, various central banks, especially the Federal Reserve, have been all too willing to create new money as an apparent solution to every crisis. (A case in point was the absurd proposal for the Treasury to issue two trillion-dollar platinum coins to evade the statutory debt ceiling.)

In this environment, someone relying on fixed-income investments (such as private annuities or, heaven forbid, government retirement checks) could be wiped out by massive price inflation. As awful as the US real-estate and stock markets might be in the short and medium run, holding a portion of one’s wealth in assets not denominated in fiat currency may turn out to be a very wise defensive move. (The problem with shooting the moon on precious metals is that for all we know the dollar will crash next year and Obama will make it illegal to buy and sell gold.)

Conclusion

The US economy still needs to recover from the festering malinvestments that accumulated during the previous two booms. By pushing interest rates down to zero and bailing out the very people who made such bad financial decisions in the first place, the Fed and Treasury are doing everything they can to exacerbate the problem.

In this volatile world economy, investors can expect continued volatility in the stock market. The only thing we can really be sure of is that the government will use each new crisis to justify further extensions of its power. At some point the feds will probably seize the highly volatile 401(k)s and other stock-market holdings from citizens and replace them with “safe” government annuities.

Knowledge of Austrian economics doesn’t render someone an expert investor, but it certainly gives advance warning of the major trends in the economy. Those investors who rely on the Keynesians featured at CNBC think that another stimulus package or QE3 might do the trick.

Regards,

Robert P. Murphy

Robert Murphy is an adjunct scholar of the Mises Institute, where he teaches at the Mises Academy. He runs the blog Free Advice and is the author of The Politically Incorrect Guide to Capitalism, the Study Guide to “Man, Economy, and State with Power and Market,” the “Human Action” Study Guide, The Politically Incorrect Guide to the Great Depression and the New Deal, and his newest book, Lessons for the Young Economist.

Energy and Precious Metals Technical Analysis

BULLION

Gold closed higher on Monday as it extends the short covering bounce off last Monday's low. The mid-range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are bullish signalling that sideways to higher prices are possible near-term. If it renews the rally off May's low, May's high crossing is the next upside target. Closes below last Monday's low crossing would confirm a top and trend change has taken place. 

Silver closed higher due to short covering on Monday. The high-range close set the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are turning neutral to bullish signalling that sideways to higher prices are possible near-term. Closes above last Friday's high crossing would confirm that a short-term low has been posted. If it extends the decline off the late-May high, the reaction low crossing is the next downside target.

U.S. STOCK MARKET INDICES

DJI closed higher due to short covering on Monday as it consolidated some of the decline off May's high. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are turning neutral to bullish signalling that sideways to higher prices are possible near-term. SPI closed higher due to short covering on Monday as it consolidates some of this spring's decline. The high-range close sets the stage for a steady to higher opening when Tuesday's night session begins trading. NDI closed higher due to short covering on Monday as it consolidates some of the decline off May's high. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain neutral to bearish signalling that sideways to lower prices are possible near-term. 

ENERGY

Crude Oil closed lower due to short covering on Monday. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bearish signalling that sideways to lower prices are possible near-term. If it extends this week's decline, the 50% retracement level of the 2010-2011-rally crossing is the next downside target. Closes above the 20-dasy moving average crossing would confirm that a short-term low has been posted. 

Natural Gas

Natural Gas closed lower on Monday as it extends this month's decline. The mid-range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI remain bearish signalling that sideways to lower prices are possible near-term. If it extends the decline off this month's high, the reaction low crossing is the next downside target. Closes above the 10-day moving average crossing are needed to confirm that a short-term low has been posted. 

COFFEE

Coffee closed lower on Monday as it extends the decline off May's high. The low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are bearish signalling that sideways to lower prices are possible near-term. If it extends the decline off May's high, the 38% retracement level of this year's rally crossing is the next downside target. 

 HY Markets
http://www.hymarkets.com

Daily Stock Theme: A Chinese credit bubble is a global concern

Concerns about the health of the Chinese housing market may force China to join the can kickers of the world on what may be a long road to recovery. If this happens will China shift from being a saviour to a foe of the global economy and where does this scenario leave Chinese banks?

The major Chinese banks (Bank of China, Industrial and Commercial Bank of China (ICBC), China Construction Bank and Agricultural Bank of China), will probably enter the spotlight in the coming months on concerns about slack credit expansion for housing and infrastructure projects. The major Chinese banks trade on P/B of 1.2-1.7 for 2011 with exceptional Return-on-Equity expected at 17-22% (table 1). So, why worry? Well, the main stakeholders in the Chinese banking sector are also among the Titans of the global financial sector.

The Chinese housing market may be in bubble mode in the major Chinese metropolises, especially Shanghai and Beijing. ‘Expensive’ housing in Beijing and Shanghai has increased as much as 200% in the last year, forcing Beijing to halt sales of most exclusive apartments to dampen price hikes. This comes despite Chinese home buyers tending to put up at least 30% equity, or even paying cash when buying a home.

Transparency and consensus are key
As yet, there is no clear consensus regarding the existence of a bubble in China. However, the potential implications are enormous with Beijing already repeatedly hiking the reserve requirements for domestic banks to cool credit expansion. If risk aversion spikes, on the back of a lack of transparency and the necessity for Chinese banks to create a more realistic capital allocation system (based on market conditions rather than the interests of Beijing) the market could experience a financial tsunami.

Beijing - ‘The Big Influencer’
Beijing’s influence on Chinese banks is clear. Its credit to the Local Government Financing Vehicles (LGFV) amounts to RMB 10tr (USD 1.5tr), according to the Chinese Government. Furthermore, the Chinese Government has put up a guarantee of RMB 2-3tr (USD 308-463bn) worth of credit which basically means it is already beyond rescue but a further RMB 5tr (USD 770bn) might also be in jeopardy, according to Bank of America – Merrill Lynch. The scale of this is stifling.

A classic Western style real estate bubble? Forget it!
The main reason that analysts are divided concerning China is that we are not talking about a “good old” western style solvency crises, where loans outgrow actual property values. The problem lies in obtaining a unified overview of credit exposure, given the size of the country and the price discrepancy among regions.

The Chinese household debt to disposable income ratio is only 45% in 2010, compared to 60-100% in most European countries and 130% at the peak of the housing market in the U.S. in 2007. Instead, it might all come down to oversupply, thereby disrupting market equilibrium. Nevertheless, the loss of wealth could be enormous, damaging consumers' desire to spend and in the long run the recovery of the global economy.

Daily Stock Theme: Will Greece, the IMF and the ECB figure things out in time?

Although the Greek, Irish and many of the Portuguese and Italian banks are trading around 0.2-0.3 Price-to-book, i.e. investors’ reckon that 70-80% of the shareholders’ equity will be lost, there is more bad news ahead for the PIIGs based banking sector. Of these banks Banco Popolare, UBI Banca, Piraeus Bank and Dexia are currently those with the lowest valuations and the highest risk of default (see chart for their earnings revisions and share price performance).

In the last two weeks things have gone from bad to worse for these PIIGs banks and an outright takeover by their respective states may not be far off. In a previous theme Which European banks will get hurt this time? we also highlight the non-PIIGs European banks’ vulnerability to a Greek collapse, with even a “voluntary” restructuring of sovereign debt expected to significantly hurt some of these too.

Is Greece bankrupt?
It’s necessary to take a step back to understand the overall picture. Creditors should be able to throw more money at Greece if the conditions for repayment are acceptable. So, if the International Monetary Fund fails to come to the party, is that due to the fact that it believes that Greece is insolvent?

The current plan to save Greece, or at least handle its Euro 60-70bn refinancing until the end of 2013, is now a mix of Greek privatisation efforts, incentives for private investors to extend the maturity of outstanding bonds, additional European Central Bank credits and European Union involvement in the tax collection process. The last measure is pretty extreme as it means international creditors are actually looking to directly manage Greek cash flow. In other words, disbelief in Greece’s own ability to solve its problems is at an all-time low.

Privatisation is highly unpopular in Greece and likewise increased credit is equally unpopular among taxpayers in the creditor nations. The question is whether this is not the least unattractive solution to “protect” German and other EMU taxpayers’ money? If Greece defaults on its debt, the European Central Bank with its Euro 45bn exposure will have to engage the central banks of the European Monetary Union to pay up, i.e. the taxpayers will have to foot the bill.

Lehman déjà vu?
The destabilising effects of a failed rescue operation in Greece will no doubt have consequences as severe, if not worse, than the Lehman crash in September 2008, according to Lorenzo Bini Smaghi, executive board member of the European Central Bank (ECB). Mr. Smaghi is not alone with this view of the situation in Greece. Even more concerning is the IMF’s reluctance to participate with additional funding, as Greece appears unable to finance itself from March 2012, which was the plan in the Euro 110bn rescue package launched earlier this year. All in all there’s no doubt the situation is getting worse as this Greek economic crisis turns into a political high-stake game.

Given the eventuation of a fully-fledged crisis - in line with what Mr. Smaghi of the ECB fears - resulting from a Greek default, there will be nowhere for European banks to hide. In this phase of the sovereign debt crisis perhaps Greece, Ireland and Portugal have to be treated as one. But until the European Union Finance Ministers’ meeting on 20 June, it is all about the PIGs!

Stocks in the week ahead: Equities back in the driving seat?

Over the last couple of weeks, equities have decidedly taken the backseat in setting the pace for global asset markets. Indeed, cues for directional moves were to be taken from the commodities space during the period. As over-leveraged positions in futures markets were initially pricked by higher margin requirements from exchanges, the sandcastle started to collapse.

Is it a sign of an upcoming economic slowdown? Maybe, but we are not convinced, since it appears very much like the crowded space of relatively small raw commodity markets have set up a global (and probably short-term) de-leveraging exercise. As highly leveraged funds struggled to face mounting margin calls, equities were never going to be left untouched.

For all the talk about the correlation between the commodity asset class and equity markets, the slide in commodity prices does not seem to provide a strong leading indicator for what’s in store for equities.

Indeed, the long or short term correlation (even when using lags) is pretty poor with for example a long term correlation of 0.4 as shown in the chart below:

Correlation of weekly returns between CRB/Reuters commodity index and S&P500 – source Bloomberg

In fact, the commodity sector has underperformed the general market since the beginning of the year, even before the recent sell-off. Indeed, the following chart illustrates that up to May 1, i.e. before the commodity rout, the Basic Resources sector was already the worst-performing sector of the broader Euro Stoxx 600 index at that point in time:

 Year to May 1 returns by sectors – source:  Bloomberg

Hence the current sell-off in commodities may indeed be misleading for the general direction of equity markets!

Of course, the ongoing talks about the necessary short-term restructuring of Greek debt has added to the general market nervousness. This would amount to opening a Pandora’s box both for the European and Central European banking systems. We do not believe that the European Union and the International Monetary Fund feel ready for this exercise just yet. Hence we firmly believe that the can will be once again kicked further down the road at the end of the joint EU/IMF visit this week.

When looking at the fundamental drivers of equity markets, we still focus on the fact that equities remain a relatively attractive investment proposition for a world awash with liquidity. Indeed, against a still benign inflation background, the S&P 500 still offers an earnings yield of 7.30% for the full year 2011 versus “risk-free” U.S. two-year government yields of 0.54% and 10-year of 3.2%.

What’s more, the U.S. yield curve does not offer the prospects of an impending recession in the biggest world economy:

 USD Yield curve – source Bloomberg

The yield curve in Europe provides an even cleaner half-bell shaped curve pointing to the same state of play.

All in all, however, the recent rout in commodity prices has certainly put equity investors on the run in the short term. When looking at the Bull-Bear ratio, we see that the number of bears has suddenly started to outstrip the number of bulls, and this only for the second time this year (the last time was due after the Japanese earthquake):

 AAII Bull Bear Index – source: Bloomberg

We are getting again close to a position where equity investors may becoming overly bearish. Hence, we caution against this commodity-led “run for the hills” in the equity space!

From a technical perspective, important supports are still intact.

Looking at the S&P 500, it appears that support at 1,330 remains intact despite the onslaught of the past week. We are still clearly in a consolidation phase in a triangle formation. We also find that the longer term uptrend remains intact.

 S&P 500 – Daily chart – source: Bloomberg

We therefore urge our clients to continue respecting the longer term trend, keeping in mind that only the break of 1,330 could herald a sharper sell-off towards 1,300. To the upside, we look for a test of the 1,380 level next week.

For the Euro Stoxx 50, the picture remains the same. The rejection of the 2,900 support area is significant and should provide the fuel for more upside in the coming week, possibly on the back of a new EU/IMF Greek package to be announced shortly.

 Euro Stoxx 50 – Daily chart – source: Bloomberg

We will therefore be looking for a break of the 3,000 level in the coming week with a target of 3,020 for the week.

Daily Stock Theme: Nowhere to hide in European banking

Two main things spell trouble for European, or more precisely, Euro-based financial institutions. The first one being a massive spike in European banks’ credit default swap (CDS) spreads, i.e. the cost of insuring against bankruptcy. There are still a lot of dodgy debt instruments and risky sovereign debt papers on these banks’ balance sheets and their complex inter-European credit exposure relationships further muddy the picture. As a result the market is starting to discount for massive losses caused by so-called “haircuts” (the restructuring of sovereign debt portfolios), especially in Greece, Ireland and Portugal.

It is precisely the seriousness of the sovereign debt spiral for the PIIGS countries and the resultant need for massive reform programmes that is the second “trouble-maker” for European banks. Such reform programmes will take the levels of standard of living in these countries back several years, and let the Baltic countries’ tough experiences of this serve as a clear warning of the severe consequences of such a scenario. There’s no doubt that fiscal spending in the PIIGS countries is too high and deficits are spiralling out of control. But herein lies the catch 22 in that cutting fiscal spending to reduce deficits would put too much strain on the overall already weak economies, making neither this nor debt restructuring a pleasant solution.

Pursuing the first (“haircut”) scenario would inevitably result in several banks going bankrupt, apart from the main PIIGS banks, located locally in each country, but also to a very large extent in Germany, France and the U.K. These banks would inevitably end up on government balance sheets, thus breaking the back of the economic recovery. The second (cutting fiscal spending) scenario, although less likely - given the associated political loose-loose stigma - will eventually come but will be driven by the demands of creditors (mainly Germany and France). This could result in massive write-downs on property, mortgage and commercial loans for all banks exposed to the PIGS. The peripheral banks will however have some more time to react before the export dependant economies of Northern Europe fall apart.

Up until now the strategy from European governments and the European Central Bank (ECB) has been “time heals all wounds”. Cheap short-term liquidity has been provided to boost Net Interest Income (NII) and correspondingly Shareholders Equity. Everything was going according to plan when some of the Eurozone’s minor economies (Greece, Ireland and Portugal) started to haemorrhage funds so now the situation’s possible ramifications for Europe’s banks are quite serious.

The ultimate message of all this being: stay out of European financials for the time being. The developments in this sector might be very messy.

Bullish Complacency

VIX Fear Index fell below its 7-week range on 4/13/11, hitting 16.20 intraday, and again confirming a return to bullish complacency. According to Humphrey B. Neill, The Art of Contrary Thinking, when everybody thinks alike, everyone is likely to be wrong.

S&P 500 Composite (SPX, 1,314.41) rose 0.25 points or 0.02% on Wednesday 4/13/11. SPX gapped higher on the open but quickly quit the rally attempt. SPX fell below 10-day lows at 12:46 p.m. ET before recovering somewhat to close slightly on the plus side. The close was still below the widely-followed 50-day simple moving average. Trading volume on the NYSE fell 10%, suggesting that rally attempts failed to attract much following. Candlestick Volume (formula: Cum((C-O)*V)) based on the SPY fell below 7-month lows on 4/13/11. Last week, the minor short-term trend became overbought and lost upside momentum. This week that short-term trend appears to have turned down.

Industrial SPDR stock sector ETF (XLI) absolute price crossed below its 50-day simple moving average, thereby turning neutral.

Materials SPDR stock sector ETF Relative Strength Ratio (XLB/SPY) crossed below its 50-day simple moving average, thereby turning neutral.

Copper fell below the lows of the previous 4 trading days, confirming a pullback, downside correction. Weakness in Copper suggests doubts about the economic outlook.

U.S. Treasury Bond nearest futures contract price rose above previous 4-day highs and closed above a 4-week downtrend line on 4/13/11, thereby confirming a short-term bounce. The Bond tested and held Friday's low of 117.28 on Monday 4/11/11, which was the first mildly encouraging sign.
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Spotlight on event stocks: Here is a stock screen I designed to pick out potential event stocks, both Bullish and Bearish. Sometimes, stocks with large changes in price and volume are revealed to be deal stocks, sooner or later, or are the subject of some other extraordinary events, positive or negative.

Bullish Stocks: Rising Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
1.14% , ADRA , Asia 50 BLDRS, ADRA
1.23% , IAH , Internet Architecture H, IAH
4.90% , DELL , DELL
2.22% , HSIC , Henry Schein Inc
3.28% , RL , Polo Ralph Lauren
4.49% , CIEN.O , CIENA
3.67% , A , AGILENT TECH
3.85% , WYNN , Wynn Resorts L
0.93% , SWH , Software H, SWH
1.17% , CHKP , Check Point Software Technologies Ltd
1.45% , IIH , Internet Infrastructure H, IIH
0.41% , TLH , Bond 10-20 Year US Treas, TLH
2.46% , PIN , India PS, PIN
1.73% , IGN , Networking, IGN
0.35% , ADRU , Europe 100 BLDRS, ADRU
2.10% , CPWR , COMPUWARE
2.34% , WPI , WATSON PHARM
0.87% , KWT , Solar Energy MV, KWT
0.98% , BDH , Broadband H, BDH
2.00% , EP , EL PASO
1.24% , JKH , MidCap Growth iS M, JKH
0.18% , UTH , Utilities H, UTH
3.54% , BIIB , BIOGEN IDEC
0.49% , DGT , Global Titans, DGT
0.71% , DYN , DYNEGY
1.35% , TIF , TIFFANY
1.49% , PMTC.O , PARAMETRIC
0.94% , MCHP , Microchip Technology Incorporated
1.82% , TDC , Teradata Corporation, TDC
0.78% , XBI , Biotech SPDR, XBI
0.40% , KLD , LargeCap Blend Socially Responsible iS, KLD
1.01% , DDS , DILLARD STK A
3.25% , EMC , EMC

Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-1.00% , PPA , Aerospace & Defense, PPA
-1.96% , LLL , L-3 COMMS HLDGS
-2.56% , LMT , LOCKHEED MARTIN
-3.25% , FHN , First Horizon National
-1.37% , LRCX , LAM RESEARCH CORP
-2.91% , RTN , RAYTHEON
-3.98% , PWER , POWER ONE
-0.29% , IYM , Basic Materials DJ US, IYM
-1.69% , BSX , BOSTON SCIENT
-2.22% , PIC , Insurance, PIC
-2.99% , APOL , APOLLO GROUP
-0.42% , PMR , Retail, PMR
-2.03% , STI , SUNTRUST BANKS
-2.74% , EPU , Peru MSCI iS, EPU
-0.89% , FDO , FAMILY DLR STRS
-2.16% , OMX , OFFICEMAX INC., OMX
-1.47% , RKH , Bank Regional H, RKH
-2.78% , CECO , CAREER EDUCATION CORP
-1.59% , PPG , PPG INDUSTRIES
-0.61% , PWY , Value SmallCap Dynamic PS, PWY
-1.52% , GD , GENERAL DYNAMICS
-2.08% , NOC , NORTHROP GRUMMAN
-2.29% , WFC , WELLS FARGO
-1.19% , NYT , NY TIMES STK A
-1.98% , ZION , ZIONS
-0.84% , JPM , J P MORGAN CHASE
-0.83% , JNY , JONES APPAREL
-1.14% , UNM , UNUMPROVIDENT
-1.80% , HBAN , HUNTINGTON
-1.30% , BA , BOEING
-0.59% , IYF , Financial DJ US, IYF
-1.40% , MTB , M&T BANK
-0.83% , RF , REGIONS FINAN

9 major U.S. stock sectors ranked in order of long-term relative strength:

Energy (XLE) Neutral, Market Weight. The Relative Strength Ratio (XLE/SPY) crossed below its 50-day simple moving average on 4/12/11, thereby turning neutral. In addition, absolute price of XLE crossed below its 50-day simple moving average on 4/12/11, thereby turning neutral. Support 72.85, 68.73, 67.49, 65.25, 65.03, 60.96, 60.21, 57.70, 55.68, 53.22, 50.33, 48.56, 46.16, and 43.66. Resistance 80.97, 83.27, and 91.42.

Industrial (XLI) Bullish, Over Weight. The Relative Strength Ratio (XLI/SPY) rose above 12-year highs on 4/4/11 and remains bullish. Absolute price crossed below its 50-day simple moving average on 4/13/11, thereby turning neutral. Support 35.08, 35.03, 31.82, 31.58, 30.79, 30.51, 30.32, 29.77, and 27.67. Resistance 38.22, 39.02, and 39.97.

Consumer Discretionary (XLY) Neutral, Market Weight. The Relative Strength Ratio (XLY/SPY) appears to be in a 8-week trading range and remains neutral. Absolute price also remains neutral. Support 38.83, 36.61, 36.13, 35.32, 35.02, 34.78, 33.94, 33.11, 32.66, 31.70, 29.80, 28.64, 28.21, and 26.62. Resistance 39.79, 40.02, 40.13, and 40.70.

Materials (XLB) Neutral, Market Weight. The Relative Strength Ratio (XLB/SPY) crossed below its 50-day simple moving average on 4/13/11, thereby turning neutral. Absolute price rose also crossed below its 50-day simple moving average on 4/13/11, thereby turning neutral. Support 38.06, 36.44, 34.20, 33.70, 32.36, 29.88, 29.43, and 27.67. Resistance 41.28, 43.04, 45.21, 45.21, and 46.54.

Consumer Staples (XLP) Neutral, Market Weight. The Relative Strength Ratio (XLP/SPY) rose above 3-month highs on 4/13/11 but remains neutral, based on moving average relationships, with the 50-day SMA of the RS Ratio below the 200-day SMA. Absolute price rose above 12-year highs on 4/13/11 and remains bullish. Support 29.64, 28.71, 28.22, 28.04, 27.76, 27.63, 27.46, 26.34, 25.30, and 24.95. Resistance: none.

Health Care (XLV) Neutral, Market Weight. The Relative Strength Ratio (XLV/SPY) rose above 3-month highs on 4/12/11 but remains neutral based on moving average relationships, with the 50-day SMA of the RS Ratio below the 200-day SMA. Absolute price remains bullish. Support 33.23, 32.57, 31.43, 30.14, 30.11, 29.87, 28.00, 27.49. Resistance 33.60 33.74, 34.15, 34.71, 36.61, and 37.89.

Technology (XLK) Bearish, Under Weight. The Relative Strength Ratio (XLK/SPY) fell below 13-month lows on 4/5/11. The Ratio gave a clear bearish signal on 3/22/11 when the 50-day SMA of the RS Ratio crossed below the 200-day SMA. Absolute price of XLK fell below 14-week lows on 3/16/11 and remains neutral. Support 24.87, 23.87, 23.74, 23.64, 23.56, 22.68, 22.53, 21.60, 20.01, and 19.51. Resistance 26.24, 26.66, 27.09, 27.43, 27.63, and 28.60.

Financial (XLF) Bearish, Under Weight. The Relative Strength Ratio (XLF/SPY) fell below 3-month lows on 3/31/11 and remains bearish. Absolute price broke down below 10-week lows on 3/16/11 and remains neutral. Support 15.79, 15.39, 15.08, 14.36, 14.25, 14.20, 13.29, and 13.08. Resistance 16.75, 16.85, 17.20, and 17.87.

Utilities (XLU) Bearish, Under Weight. The Relative Strength Ratio (XLU/SPY) fell below the lows of the previous 7 weeks on 4/11/11 and remains bearish. Absolute price broke down below 3-month lows on 3/16/11 and remains neutral. Support 31.20, 30.74, 30.53, 29.66, 27.91, 27.44, and 25.76. Resistance 32.26, 32.89, 33.00, 34.89, and 36.24.
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Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) remains neutral, with the 50-day SMA below the 200-day SMA.

Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) remains neutral, with the 50-day SMA below the 200-day SMA.

NASDAQ Composite/S&P 500 Relative Strength Ratio rose above its 50-day SMA and 5-week highs on 4/13/11, thereby turning bullish.

The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) fell further below 28-year lows on 4/5/11, again reconfirming its preexisting bearish major trend.

The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) rose above all-time highs on 4/5/11, thereby reconfirming its preexisting bullish major trend.

The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) rose above all-time highs on 4/5/11, thereby reconfirming its preexisting bullish major trend.

Crude Oil nearest futures contract price fell below the lows of the previous 7 trading days on 4/12/11, confirming a pullback, downside correction. Support 102.70, 97.02, 96.22, 95.14, 87.09, 83.85, 83.55, 80.28, 80.06, 79.84, 79.25, 78.86, 73.52, 72.63, 70.76, 70.35, 69.51, 68.59, 67.15, 65.05, and 64.24. Resistance 113.46, 120.42, 130.0, and 147.27.

Gold nearest futures contract price consolidated losses with an Inside Day. Gold fell below the lows of the previous 4 trading days on 4/12/11, confirming a pullback, downside correction. Support 1411.5, 1380.7, 1419.5, 1351.4, 1309.1, 1307.7, 1297.0, 1274.8, 1270.5, 1232.4, 1210.9, 1191.5, and 1155.6. Resistance: 1478.0.

Gold Mining Stocks ETF (GDX) Relative Strength Ratio (relative to the Gold bullion ETF, GDX/GLD) remains neutral, with the 50-day SMA below the 200-day SMA.

Silver nearest futures contract price consolidated losses with an Inside Day. Silver fell below the lows of the previous trading day on 4/12/11, possibly signaling a pullback, downside correction. Support 39.12, 37.08, 36.43, 33.565, 31.695, 31.61, 30.265, 29.635, 26.30, 24.98, and 22.84. Resistance: 41.975 and 50.35.

Silver/Gold Ratio rose above 27-year highs on 4/13/11, again reconfirming its preexisting bullish major trend.

Copper nearest futures contract price fell below the lows of the previous 4 trading days on 4/13/11, confirming a pullback, downside correction. Copper appears to be in an intermediate-term consolidation since peaking at 4.6575 on 2/15/11. Strength in Copper suggests confidence in the economic outlook, while weakness suggests doubts. Support 4.212, 4.076, 3.9795, 3.6065, 3.3930, 3.1775, 2.9285, 2.8555, 2.8445, and 2.72. Resistance: 4.533, 4.554, 4.6495, and 4.6575.

U.S. Treasury Bond nearest futures contract price rose above previous 4-day highs and closed above a 4-week downtrend line on 4/13/11, thereby confirming a short-term bounce. The Bond tested and held Friday's low of 117.28 on Monday 4/11/11, which was the first mildly encouraging sign. Support 117.28, 117.04, 116.26, 115.15, 114.06, 113.04, and 112.15. Resistance 120.31, 122.08, 123.22, 123.26, 128.00 129.14, 129.27, 132.26, 133.00, 135.12, 135.19, 136.31, 137.31, and 142.31.

Junk/Investment-Grade Corporate Bonds Relative Strength Ratio (JNK/LQD) has been stuck in a neutral trading range most of the time since peaking on 2/8/11.

U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year Relative Strength Ratio (TIP/IEF) rose further above 2-year highs on 4/8/11. The Ratio has been in a rising trend since making a low on 8/24/10. This rising Relative Strength Ratio reflects fixed-income investors' preference for inflation-protected TIPs over the unprotected 7-10 Year U.S. Treasury Note ETF (IEF) since 8/24/10.

The U.S. dollar nearest futures contract price fell below the lows of the previous 15 months on 4/12/11, again reconfirming a long-term, major downtrend. Support 74.27 and 70.80. Resistance 76.87, 77.675, 78.98, 79.34, 81.635, 81.935, 82.02, 83.64, 84.73, 85.36, 86.71, 88.80, 89.22, 89.71, and 92.53.

Advisory Service Sentiment: There were 57.3% Bulls versus 15.7% Bears as of 4/6/11, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear Ratio soared to 3.65, up from 2.23 the previous week. The Ratio now stands at its highest level in the 8 years since the 20-year high of 3.74 set on 6/18/03. Following that 2003 peak, the stock market turned sideways/choppy for 2 months and sentiment reverted toward the mean. The Ratio's 20-year range is 0.41 to 3.74, the median is 1.56, and the mean is 1.63. According to Humphrey B. Neill, The Art of Contrary Thinking, when everybody thinks alike, everyone is likely to be wrong.

VIX Fear Index fell below its 7-week range on 4/13/11, hitting 16.20 intraday, and again confirming a return to bullish complacency. This follows a brief spike up to an intraday peak of 31.28 on 3/16/11. Fear was short-lived. VIX is a market estimate of expected constant 30-day volatility, calculated by weighting S&P 500 Index CBOE option bid/ask quotes spanning a wide range of strike prices for the two nearest expiration dates.

The Dow Theory reconfirmed a Primary Tide Bull Market as of 4/4/11, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed above closing price highs of the previous 2-years. The Dow Theory originally signaled the current Primary Tide Bull Market on 7/23/09, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed above their closing price highs of the previous 6 months. While other Dow Theorists were fooled by the big downside Secondary Reaction in May and June 2010 and called a “Bear Market”, my interpretation of the Dow Theory has been steadily Bullish on the Primary Tide Trend every day since 7/23/09.

The SPX and other large cap indexes failed to close above closing price highs of the previous 2-years and, therefore, did not confirm the recent 2-year highs (set on 4/4/11) for the Dow-Jones Industrials and Transports, both of which are now trading below their February highs, casting doubt on the validity of the recent upside range breakout.

Volume remained at low levels as price rebounded from its low of 3/16/11, possibly reflecting trader hesitation to chase prices higher.

Financial stocks have been underperforming over the past 3 months, suggesting possible trouble in that key sector.

Many stock price patterns from the low of 3/16/11 resemble Bearish Rising Wedges, which are unsustainable countertrend rallies against the larger trends.

The latest survey of Advisory Service Sentiment from Investors Intelligence shows bullish opinion at the upper extreme of its 20-year range, which is bearish according to the Art of Contrary Opinion. When the majority is already very bullish, we can assume that the majority is already fully invested in the market and there are relatively few potential buyers, so prices are likely to go down.

The short-term trend (which changes very frequently, every few days to every few weeks) had been up for 3 weeks from 3/16/11 to 4/6/11, driven by short covering, general expectations of rising corporate profits, and merger activity. This is typical late-cycle behavior. After two years of bull trend that has doubled stock prices from their 2009 lows, it is only prudent to focus on protecting your capital.

S&P 500 Composite (SPX, 1,314.41) rose 0.25 points or 0.02% on Wednesday 4/13/11. SPX gapped higher on the open but quickly quit the rally attempt. SPX fell below 10-day lows at 12:46 p.m. ET before recovering somewhat to close slightly on the plus side. The close was still below the widely-followed 50-day simple moving average. Trading volume on the NYSE fell 10%, suggesting that rally attempts failed to attract much following. Candlestick Volume (formula: Cum((C-O)*V)) based on the SPY fell below 7-month lows on 4/13/11. Last week, the minor short-term trend became overbought and lost upside momentum. This week that short-term trend appears to have turned down.

S&P 500 Cash Index Potential Resistance
1576.09, high of 10/11/2007
1552.76, high of 10/31/2007
1523.57, high of 12/11/2007
1498.85, high of 12/26/2007
1440.24, high of 5/19/2008
1406.32, high of 5/29/2008
1381.50, Fibonacci 78.6% of 2007-2009 range
1366.59, high of 6/17/2008
1344.07, high of 2/18/11
1339.46, high of 4/8/11
1323.74, Fibonacci 78.6% of 2011 range

S&P 500 Cash Index Potential Support
1305.26, low of 3/29/11
1249.05, low of 3/16/11
1246.73, high of 12/13/10
1238.81, Fibonacci 78.6% of 1,576.09 high
1235.05, high of 12/7/10
1232.85, low of 12/16/10
1228.74, Fibonacci 61.8% of 2007-2009 range
1227.08, high of 11/5/10
1173.00, low of 11/16/10
1171.70, low of 10/27/10
1166.74, low of 10/20/10
1159.71, low of 10/19/10
1,151.41, low of 10/7/10
1,131.87, low of 10/4/10
1122.79, low of 9/23/2010
1114.63, low of 9/15/2010
1110.88, low of 9/10/2010
1091.15, low of 9/7/2010
1039.70, low of 8/27/10
1039.31, Fibonacci 23.6% of June-Aug. 2010 range
1010.91, low of 7/1/2010
1008.55, Fibonacci 38.2% of 2009-2010 range
991.97, low of 9/2/2009
978.51, low of 8/17/2009
956.23, high of 6/11/2009
943.29, Gann 50.0% of 2009-2010 range
878.04, Fibonacci 61.8% of 2009-2010 range
874.17, Gann 62.5% of 2009-2010 range
869.32, low of 7/8/2009
805.17, Gann 75.0% of 2009-2010 range
785.13, Fibonacci 78.6% of 2009-2010 range
666.79, intraday low of 3/6/2009

One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol

2.50% India Earnings WTree, EPI
2.46% India PS, PIN
2.45% South Korea Index, EWY
1.81% Silver Miners Global X, SIL
1.73% Networking, IGN
1.60% China LargeCap Growth G D H USX PS, PGJ
1.27% Indonesia MV, IDX
1.24% Frontier Markets Guggenheim , FRN
1.23% Silver Trust iS, SLV
1.15% Chile MSCI iS, ECH
1.09% Oil Fund PowerShares, DBO
1.09% Singapore Index, EWS
1.07% Sweden Index, EWD
1.06% Oil, Crude, U.S. Oil Fund, USO
1.00% Taiwan Index, EWT
0.98% China 25 iS, FXI
0.91% Thailand MSCI iS, THD
0.89% Hong Kong Index, EWH
0.85% QQQ Nasdaq 100 Trust, QQQ
0.82% Emerging Markets, EEM
0.82% Pacific ex-Japan, EPP
0.78% Biotech SPDR, XBI
0.78% Commodity Tracking, DBC
0.78% Australia Index, EWA
0.76% Info Tech VIPERs, VGT
0.74% Semiconductor SPDR, XSD
0.72% Technology DJ US, IYW
0.68% Malaysia Index, EWM
0.66% Emerging VIPERs, VWO
0.66% Turkey MSCI iS, TUR
0.63% Bond, 20+ Years Treasury, TLT
0.62% Technology SPDR, XLK
0.59% Growth MidCap 400 B, IJK
0.58% Growth MidCap Russell, IWP
0.56% Agriculture DB PS, DBA
0.55% Bond, High-Yield Junk, JNK
0.53% Germany Index, EWG
0.52% Growth SmallCap VIPERs, VBK
0.49% Pacific VIPERs, VPL
0.48% Global ex US ACWI iS, ACWX
0.48% Bond, High-Yield Corporate, HYG
0.45% European VIPERs, VGK
0.44% Mexico Index, EWW
0.44% Russia MV, RSX
0.44% Growth SmallCap R 2000, IWO
0.41% Energy SPDR, XLE
0.40% Japan Index, EWJ
0.39% Bond, 10 Year Treasury, IEF
0.38% Growth VIPERs, VUG
0.38% United Kingdom Index, EWU
0.38% Energy VIPERs, VDE
0.37% Dividend International, PID
0.37% Growth EAFE MSCI, EFG
0.35% MidCap Russell, IWR
0.35% Growth 1000 Russell, IWF
0.35% MidCap S&P 400 iS, IJH
0.34% Belgium Index, EWK
0.34% Austria Index, EWO
0.33% Consumer Discretionary SPDR, XLY
0.32% Utilities VIPERs, VPU
0.30% Small Cap EAFE MSCI iS, SCZ
0.30% EAFE Index, EFA
0.29% Telecom DJ US, IYZ
0.28% MidCap S&P 400 SPDRs, MDY
0.25% Utilities SPDR, XLU
0.25% Energy DJ, IYE
0.24% Semiconductor iS IGW, SOXX
0.24% Value EAFE MSCI, EFV
0.24% Emerging 50 BLDRS, ADRE
0.24% Growth S&P 500/BARRA, IVW
0.22% Bond, TIPS, TIP
0.22% Netherlands Index, EWN
0.21% Small Cap VIPERs, VB
0.20% Gold Shares S.T., GLD
0.18% Bond, Corp, LQD
0.17% Growth BARRA Small Cap 600, IJT
0.16% Microcap Russell, IWC
0.15% Canada Index, EWC
0.14% Global 100, IOO
0.13% SmallCap Russell 2000, IWM
0.13% Dividend Appreciation Vipers, VIG
0.12% Value MidCap S&P 400 B, IJJ
0.11% Financial Preferred, PGF
0.11% Value MidCap Russell, IWS
0.10% Bond, Aggregate, AGG
0.10% Bond EmrgMkt JPM iS, EMB
0.10% LargeCap Blend S&P=Weight R, RSP
0.09% Europe 350 S&P Index, IEV
0.09% Energy & Nat Res iS GS, IGE
0.07% DIAMONDS (DJIA), DIA
0.07% Consumer Staples SPDR, XLP
0.06% LargeCap Blend Russell 3000, IWV
0.06% Blend Total Market VIPERs, VTI
0.05% LargeCap VIPERs, VV
0.05% Bond, 1-3 Year Treasury, SHY
0.04% LargeCap 1000 R, IWB
0.03% EMU Europe Index, EZU
0.00% Switzerland Index, EWL
0.00% Italy Index, EWI
0.00% Bond Treasury Short-Term iS, SHV
0.00% Bond Muni ATM-Free S&P iS, MUB
-0.01% S&P 500 iS LargeCap Blend, IVV
-0.01% S&P 500 SPDRs LargeCap Blend, SPY
-0.01% Metals & Mining SPDR, XME
-0.02% Energy Global, IXC
-0.03% Preferred Stock iS, PFF
-0.04% Dividend SPDR, SDY
-0.05% Water Resources, PHO
-0.05% Homebuilders SPDR, XHB
-0.08% LargeCap Blend S&P 100, OEF
-0.09% Health Care SPDR, XLV
-0.10% WilderHill Clean Energy PS, PBW
-0.11% France Index, EWQ
-0.11% REIT Wilshire, RWR
-0.12% Realty Cohen & Steers, ICF
-0.12% Real Estate US DJ, IYR
-0.14% SmallCap S&P 600, IJR
-0.15% Bond Ex-US Treas, BWX
-0.16% REIT VIPERs, VNQ
-0.17% Value SmallCap VIPERS, VBR
-0.19% Value 1000 Russell, IWD
-0.19% Dividend DJ Select, DVY
-0.20% Transportation Av DJ, IYT
-0.23% Value VIPERs, VTV
-0.27% Value S&P 500 B, IVE
-0.29% Basic Materials DJ US, IYM
-0.30% Industrial SPDR, XLI
-0.35% Value SmallCap Russell 2000, IWN
-0.36% Value LargeCap Dynamic PS, PWV
-0.39% Capital Markets KWB ST, KCE
-0.45% Dividend High Yield Equity PS, PEY
-0.48% Value SmallCap S&P 600 B, IJS
-0.51% Latin Am 40, ILF
-0.53% Brazil Index, EWZ
-0.59% Materials SPDR, XLB
-0.59% Financial DJ US, IYF
-0.68% Spain Index, EWP
-0.75% Financial SPDR, XLF
-0.77% Financials VIPERs, VFH
-0.78% Financial Services DJ, IYG
-1.04% South Africa Index, EZA