ALUMINUM AND OIL SIGNS OF THE FUTURE

Well Alcoa brought us the awaited numbers and beat the St. in sales and profits . Sales fell 41% to $4.24 billion from $7.62 billion last year, beating analyst expectations of $3.93 billion. The aluminum giant said it lost 26 cents a share last quarter, better than the 38 cents expected, despite the 41% drop in sales from 2008. This is their third consecutive quarterly loss reported .

The company said the average price of aluminum on the London Metal Exchange in the second quarter was $1,485 per tonne, a 9% increase from the first quarter of 2009, but a 49 % decrease from the second quarter of 2008. No doubt they have been hit hard with the downturn their big markets of building and construction, aerospace, and the motor industry. They showed the better than expected results partly due to Job cuts, by cutting their divi and cutting spending also by raising $1.3b.

The big killer for the company is that cut in the price of aluminum.

The Juruti bauxite mine in Brazil and the Alumar alumina refining upgrade and expansion are both in the process of being commissioned. The first shipment of bauxite from Juruti is expected within the next 90 days.

Chuck Bradford an analyst at Affiliated Research Group said "Results were better than expected due to improved costs, In the last several days it became pretty clear that Alcoa was going to do much better on the cost side than we had thought."
He cautioned, however, that the report, which is generally viewed as a bellwether for the broader economy, should not be taken as a sign of a strong earnings season.
"Alcoa's numbers really have no relation to anybody else or the economy," Bradford said. "It's strictly a matter of worldwide metal supply and demand and the savings Alcoa achieved in cost were purely company related."

The shares traded up in AH trading and are currently at 10.12 as I type having hit 10.35. A lot will depend on their guidance in the conference call which will be tonight 8th July.

HANDY LINKS:

http://www.kitcometals.com/

http://www.kitcometals.com/charts/aluminum_historical.html

I wouldn't be overly enthusiastic with these results but the company is trying hard to keep on top of things in these hard times.

In other news we saw that Consumers trimmed borrowing in May for the fourth straight month as the recession took another bite out of investments and drove unemployment higher. According to a report in the AP The Federal Reserve said Wednesday that consumer credit fell at an annual rate of 1.5 percent, or by $3.2 billion, from April. Economists expected a deeper cut of $9.5 billion.

But the new figures still mark the latest move by consumers to curb borrowing, pay down debt and strengthen household budgets. Americans have been spending less and saving more to cope with the recession, which started in December 2007 and is the longest since World War II.
The savings rate jumped to 6.9 percent in May, the highest since December 1993. The amount of money saved — $768.8 billion — was the most on records that started in January 1959, the government recently reported.

Also in the news was the UK is heading for an "energy crunch" after new oil and gas exploration in the North Sea dropped 57pc in the first half of this year. A report by Oil & Gas UK, the industry group, showed that companies are cutting back on new projects as costs rise and funding is scarce during the recession.
Investment in the industry fell to £4.8bn last year, down £1.2bn over the last two years, and it could drop below £3bn next year. The report estimates that £5bn a year is needed to maintain exploration.

In a report from Bloomberg

Venezuela oil and natural-gas drilling slowed to a five-year low in June after the country’s state oil company deferred payments to service providers, spurring rig shutdowns in the South American country that was the fourth-biggest source of U.S. crude-oil imports last year.
Oil rig use fell to 58 from 63 in the previous month, while natural-gas drillers kept using three rigs, according to figures released today by Baker Hughes Inc., the world’s third-largest oilfield-services company, which tracks drilling worldwide. The combined total is the lowest since October 2004.
Drillers are shutting down after Venezuela’s state oil company, Petroleos de Venezuela SA, failed to pay its bills for as long as a year. The prospect that a U.S. recession will further erode oil demand has prompted companies worldwide to reduce drilling investments, said Fadel Gheit, an analyst at Oppenheimer & Co.
“Everything in the oil business has been skidding for the last seven to eight months,” he said today in a telephone interview from New York. “Not only is demand not going to grow, but demand will decline in the next five years.”
Oil won’t return to its record level of $147.27 a barrel reached in July 2008, he said.


In a separate report Crude oil fell for a sixth day, the longest losing streak since December, and gasoline tumbled to a two-month low after a report showed a bigger-than-expected gain in U.S. fuel supplies as the recession curbed demand.
Gasoline stockpiles climbed 1.9 million barrels to 213.1 million in the week ended July 3, more than twice the increase forecast in a Bloomberg News survey, the Energy Department said. Inventories of distillate fuel, a category that includes heating oil and diesel, rose to the highest since 1985 as consumption dropped to a 10-year low.
“The market is starting to focus on the weak fundamentals,” said Antoine Halff, head of energy research at Newedge USA LLC in New York. “The deterioration of the fundamentals should continue in the weeks ahead. The drop in prices has yet to run its course.”
Crude oil for August delivery fell $2.79, or 4.4 percent, to $60.14 a barrel at 2:42 p.m. on the New York Mercantile Exchange, the lowest settlement since May 19. Prices have dropped 16 percent in the past six days.
Gasoline for August delivery declined 9.95 cents, or 5.7 percent, to $1.6333 a gallon in New York, the lowest settlement since May 6. It was the biggest one-day drop since March 30.

Distillate Supplies
Distillate fuel inventories rose 3.74 million barrels to 158.7 million, the biggest gain since January, the report showed. The increase left supplies last week 30 percent higher than the five-year average for the period.
Gasoline inventories were forecast to increase 900,000 barrels last week, according to the median of 16 responses in a Bloomberg News survey. Supplies of distillate fuel were estimated to rise 1.83 million barrels.
Total U.S. daily fuel demand averaged 18.4 million barrels in the past four weeks, down 5.9 percent from a year earlier, the report showed. Distillate consumption fell 12 percent to 3.27 million over the period, the lowest since July 1999.
“The distillate demand numbers just look awful,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “There’s a double-digit year-on-year decline in demand because of the economy. If GM isn’t making cars, they aren’t shipping them, either.”
Crude Oil Inventories
Crude oil inventories fell 2.9 million barrels to 347.3 million last week, the lowest since January, the report showed. Supplies last week were 7.4 percent higher than the five-year average, according to the department.
“This report is incredibly bearish,” Evans said. “The drop in crude-oil stocks isn’t that important because total petroleum stocks keep rising.”

To read the full report go to http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a3K2HPWe2JIo

OPEC Expects Demand for Its Crude in 2013 to Be Below Last Year .

The vix for oil is showing a high level of uncertainty among investors as efforts intensify for stronger regulation of energy trading. This measure is a relatively recent addition to the CBOE. Oil VIX Ticker - OVX tracks the United States Oil Fund ETF (NYSEArca:USO - News).


All very bearish there.

Well today I traded the big shorts FAZ & TZA it was a shorts dream day and I switched for the inevitable end of day pop to FAS. It's nice of Uncle Sam to throw us a few $'s each day like this.

A FEW THINGS TO WATCH AND THINK ABOUT

Today we saw weakness in the market. There were a number of reasons for this. First one that I saw was the Nasdaq which closed down 2.31% at 1746.17. This was helped by MSFT which was down 2.9% Dell off 3.1% Goog off 3.2% at $396.63 yep under the $400 . There were many Tech stocks down emc, cien, intc, in fact hard to find a winner there. This was mostly down to worries about spending may fall by as much as 6/7% this year in what are essentially growth companies . Yes spending down in one of the big O's targeted areas to help the economy . Of course there is the talk of how much these stocks had run and were due a bit of a pullback . By now you will be aware about my thinking of the run, it was at least in part manufactured . There really is no interest in the market at the moment from investors. This can be clearly seen by the Vol. of late. No one is willing to take any kind of long term view at these levels and most think we will see lower levels again sooner or later.

Another reason for the fall today was the uncertainty about earnings from the big industrials with Alcoa AA giving their numbers after the bell tomorrow Wed. The number is expected to come in low. Their ceo announced today that the future is looking better with China looking like it's leading the way out of this slump. I worry when you hear things are not so bad before you get earnings from a company. A kind of soften the blow so to say.

There was a bit of a worry for some traders of UNG which was trading up till it was halted during the day. It finally got trading again but closed down around 3% at $12.18 It's not one I follow, but the news was about them looking for regulatory approval to issue 1 bln new units. What I hear you say more shares they must have more shareholders than shares lol. Well joking aside here is a couple of links to the story.

http://www.reuters.com/article/marketsNews/idUSN0733779520090707

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAcyPvtgZKpU

Oil had a nasty slip today too with Crude oil falling to a six-week low. No one is buying at the moment as demand has fallen with inventories showing a rise last week. Here is a link for the weekly numbers . http://www.eia.doe.gov/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/wpsr.html

Again I see reports of people saying it's needs to pullback a bit. “The price fall looks like a needed correction to the market,” Simon Wardell, energy research manager at Global Insight Inc. in London, said today on Bloomberg radio. “The oil market doesn’t reflect spot conditions, it reflects the expectation of conditions, and those change very quickly.”

The $ is in the news quite a bit and is been traded at 1.39 with the € as I type.

Credit card loan delinquencies also increased, rising to 4.75% from 4.52% in the last quarter of 2008.

The US unemployment rate is now at a 25-year high of 9.4%.

Debt Burden Quickens Power Shift as G-8 Loses Clout

http://www.bloomberg.com/apps/news?pid=20601109&sid=aEVdnjdCm1W0

Yep overall I'm quite confident in this market. Of course you have to be on the right side of the fence .

NEWS FLASH

Had to do that lol.






http://stockcharts.com/h-sc/ui?s=$INDU&p=D&st=2009-04-01&id=p96780006543&a=160203265


and the s&p chart link


http://stockcharts.com/h-sc/ui?s=$SPX&p=D&st=2009-03-01&id=p77279003958&a=172472989

These charts are courtesy of http://stocktiger.com/

I highly recommend stocktiger for market news and views.

Stocktiger is not in any way connected with my blog. The views expressed on this blog are mine.

Looks like the markets have indeed their head and shoulders .

THE FAIRYTALE RECOVERY

Well here we are sitting on the Golden Cross and the markets loving it. The 50 day moving avg has crossed the 200 and it has everyone sitting up. The big thing here is out of the last 14 recessions 13 put in a 19.2% gain the following 12 months after such a cross. So it really is a big indicator .

Now for the killer blow .

The one time that it failed was, you guessed it 1938. I think that this time the Golden Cross was manufactured. We have seen very low volume. Each day we have seen the big buy the market at the close along with big pops at support levels which would indicate the computers were kicking in as they were programmed to. We know that of late a lot of people in companies are selling into this rise so who's buying? Well I think it's Government Sachs . The idea is if we get the markets up we create wealth and in the end we save the world. Well I'll have you know this Algorithmic Trading could be the downfall of this very plan that they are using. It has indeed dragged many to the market with their own systems triggering their buy signals . But what happens when someone spots that the Devil himself is pegged to the Cross. Yep they run for the exit only to fall through the trap door to Hell.


We have some clever company insiders selling into this rise. Who would blame these captains of industry cashing in as they know better than anybody how things stand on the ground. According to the latest figures from Bloomberg $800m took flight from the market, the first time money left the market in some time. This number is important as the latest figures show that Americans are saving more now. I wonder if in fact this $800m is the same cash that's been saved.

I have noted from many stock bulletin boards that many are having a nice ride up with the market. The one thing that stands out with many of these traders is they are ready to short this to the floor on the expected turn. If the computers kick in with their sells and these traders get to work I'm thinking there is a Hell after all.


A FAIRYTALE RECOVERY INDEED .

THE NEXT LEG DOWN FOR THE MARKETS ?

There are many chartist out there and the one chart most are watching is the Elliott Wave on the S&P. The thing about these charts is each person can have their own interpretation as in which leg we are actually in at a given time. Here is a link to a short lesson on the Elliott Wave Theory http://stockcharts.com/school/doku.php?id=chart_school:market_analysis:elliott_wave_theory









I'm also posting this Excerpt which I came across at this link http://www.elliottwave.com/freeupdates/archives/2009/05/01/Dow-Below-1000-Seriously.aspx









Excerpted from The Elliott Wave Theorist by Bob Prechter, published April 18, 2009 Yes, Below 1000 in Dollar Terms

Readers sometimes ask if I am serious about the Dow eventually falling below 1000. People can understand that the Dow can fall in terms of gold, but they are so convinced about coming hyperinflation that they consider the idea of the nominal Dow in triple digits to be simply out of touch with reality.

The primary reason I believe the Dow is going to fall that far is its Elliott wave structure, which calls for it. But I can also see a monetary reason for this event. The tremendous inflation of the past 76 years has occurred primarily by way of instruments of credit, not banknotes. Credit can implode.

The only monetary outcome that will make sense of the Elliott wave structure is for the market value of dollar-denominated credit to shrink by over 90 percent. Given the eroded state of capital goods in the U.S. and the depletion of manufacturing capacity, it is not hard to see why all these IOUs have a deteriorating basis of repayment. The future has already been fully mortgaged; it's time to pay. But there is no money to pay, only more IOUs, which cannot be paid, either. So the credit supply (after a brief respite) will continue to shrink, which means that wealth, and therefore purchasing power, will disappear along with it. In the broadest sense, this change will constitute a collapse in the "money supply."

Such a monetary background would be consistent with the Dow falling below 1000 in nominal terms. It is one of the reasons that Conquer the Crash is subtitled How To Survive and Prosper in a Deflationary Depression . To be sure, the central bank does have the capacity to print banknotes. But I expect that the final implosion in credit value will be so swift that the authorities will not act in time to counter it. They will continue to try to maintain the fictions of full face value for IOUs until they fail spectacularly to keep up the scam. Then they will start to scramble, but it will be too late.









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Now I personally don't think the DOW is worth following as it's way to easy to manipulate with so few companies in the index.You get a much better picture when you look at the S&P which has a better spread of companies to get the story of what is happening out there. Here is a chart of the S&P with an Elliott wave plotted on it.

Link for this chart http://img7.imageshack.us/img7/5790/elliottwave1.jpg

Here is a second chart which I put a Fibonacci retracement on . The RSI on this chart could easly pull down from here also the slow sto is in danger zone here. The last two trading days are showing selling vol but not exceptionaly high. I'm beginning to think that with the first half of the year complete it's time to be very vigilant. Many stocks have had a tremendous run and the most likely ones to fall hardest are in my view the banks. Some posted great profits for the last quarter, but as we know these didn't reflect the true picture as they changed the accounting rules . The toxic assets are still there and will have to come into play sooner or later.

Link for this chart http://img7.imageshack.us/img7/8756/fibspx.jpg





Again This is only for discussion . Read my disclaimer at the bottom of this page.

FAZ / FAS

UPDATE

29/June/09

I phoned Direxion on Friday and asked if they were doing a reverse split on faz/fas. The reply was it wasn't been discussed as of yet. The guy told me there was another etf that had been done and I probably heard about that but there was nothing happening as of yet with the two I asked about. That was on Friday June 26 2009. Then this comes to my attention today. I got it from Stockwits.com .

http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=6396328

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This is one of the etf's I'm trading at the moment. I switch between the two depending on my view at the time in the market . Faz is a Direxion Daily Financial Bear 3X , while FAS is Direxion Daily Financial Bull 3X Shares . The investment seeks to replicate, net of expenses, 300% of the daily performance of the Russell 1000 Financial Services Index The fund will invest at least 80% of assets in securities that comprise the index. It will also utilize financial instruments that, in combination, provide leveraged and unleveraged exposure to the index. The fund is nondiversified.

As you can see when the purple line which is the 15-period ma crosses the yellow which is the 40ma it gives a buy signal . Also its the opposite when it happens vice-versa giving a sell. When I sell FAZ I tend to switch to FAS to catch the run on the other side. The 40 ma crossed the 15ma on faz yesterday near the close which was my signal to sell. I switched to fas for a $500 profit in a few min and closed out all trades. Nothing is guaranteed with this method but it has it's merits.

These etf's are dangerous to hold for a long time as I and many others have learned . They have a natural time decay so will over time get down to the possibility of a reverse split. They should be only used for a day trading play and certainly not held for a longer time period. A week is to long in my book.

Double and Triple ETFs Decay Their Value Faster - By Design

http://ezinearticles.com/?Double-and-Triple-ETFs-Decay-Their-Value-Faster---By-Design&id=2095978

Inverse exchange-traded fund

http://en.wikipedia.org/wiki/Inverse_etf

I'm showing this to let you know what I'm at these days and am not endorsing it as a play for you. Remember the stock market goes down as well as down lower, there has to be losers to have winners dont risk what you can't afford to lose . Everyone has their own ideas on how to play the markets and I for sure am no Jim Cramer thank God ;-) . Well that's my disclaimer done with, now do well with your trading........ Also not so long ago the Market was known to go up believe it or not.

You can get this chart here http://stocktiger.com/live/faz1540.php a site I would recommend as it is full of very useful tools for trading.

The tank is full of gas but the engine is seized

Well the old 1942 Packard Woody Wagon came to a stop a while ago, the tank was full of gas but the engine had seized. It looks like they have no spare parts left these days so the car is doomed to the scrap yard. That's the the same story for the US today the country of course was a shining light in it's prime and the engine was California . You can't go far without the engine and when you look at the state today you can only scratch your head and wish you had the parts to fix the problem.
In the last month California lost about 70,000 jobs and the total for the year to date is around 750,000. The Big O has said that the US needs to be creating 150,000 a month just to keep even. The banks were stress tested to a 10% unemployment rate nationally. The Big O has told us that unemployment will hit 10% this year. He is right if it even hits 12% as the 10% will have been achieved . Looking at the country as a whole this is how it stands with the Bureau of Labor Statistics it looks bad with some way worse than Cali
Alabama9.8%(p) in May 2009 Historical Data
Alaska8.4%(p) in May 2009 Historical Data
Arizona8.2%(p) in May 2009 Historical Data
Arkansas7.0%(p) in May 2009 Historical Data
California11.5%(p) in May 2009 Historical Data
Colorado7.6%(p) in May 2009 Historical Data
Connecticut8.0%(p) in May 2009 Historical Data
Delaware8.1%(p) in May 2009 Historical Data
D.C.10.7%(p) in May 2009 Historical Data
Florida10.2%(p) in May 2009 Historical Data
Georgia9.7%(p) in May 2009 Historical Data
Hawaii7.4%(p) in May 2009 Historical Data
Idaho7.8%(p) in May 2009 Historical Data
Illinois10.1%(p) in May 2009 Historical Data
Indiana10.6%(p) in May 2009 Historical Data
Iowa5.8%(p) in May 2009 Historical Data
Kansas7.0%(p) in May 2009 Historical Data
Kentucky10.6%(p) in May 2009 Historical Data
Louisiana6.6%(p) in May 2009 Historical Data
Maine8.3%(p) in May 2009 Historical Data
Maryland7.2%(p) in May 2009 Historical Data
Massachusetts8.2%(p) in May 2009 Historical Data
Michigan14.1%(p) in May 2009 Historical Data
Minnesota8.2%(p) in May 2009 Historical Data
Mississippi9.6%(p) in May 2009 Historical Data
Missouri9.0%(p) in May 2009 Historical Data
Montana6.3%(p) in May 2009 Historical Data
Nebraska4.4%(p) in May 2009 Historical Data
Nevada11.3%(p) in May 2009 Historical Data
New Hampshire6.5%(p) in May 2009 Historical Data
New Jersey8.8%(p) in May 2009 Historical Data
New Mexico6.5%(p) in May 2009 Historical Data
New York8.2%(p) in May 2009 Historical Data
North Carolina11.1%(p) in May 2009 Historical Data
North Dakota4.4%(p) in May 2009 Historical Data
Ohio10.8%(p) in May 2009 Historical Data
Oklahoma6.3%(p) in May 2009 Historical Data
Oregon12.4%(p) in May 2009 Historical Data
Pennsylvania8.2%(p) in May 2009 Historical Data
Puerto Rico14.4%(p) in May 2009 Historical Data
Rhode Island12.1%(p) in May 2009 Historical Data
South Carolina12.1%(p) in May 2009 Historical Data
South Dakota5.0%(p) in May 2009 Historical Data
Tennessee10.7%(p) in May 2009 Historical Data
Texas7.1%(p) in May 2009 Historical Data
Utah5.4%(p) in May 2009 Historical Data
Vermont7.3%(p) in May 2009 Historical Data
Virginia7.1%(p) in May 2009 Historical Data
Washington9.4%(p) in May 2009 Historical Data
West Virginia8.6%(p) in May 2009 Historical Data
Wisconsin8.9%(p) in May 2009 Historical Data
Wyoming5.0%(p) in May 2009 Historical Data
I wonder will we get the next stress test like we got the second Govt. handout after they found out that the first was way to low.

Then we have the debt of California coming up in the news. Will they default and what will the knock on effect be there. Moody's and Standard & Poor's rating merchants must be working overtime on this. California is responsible for around 14% of the total GDP for the US which was about $1.7 trillion ( in 2006). This shows how important the state is to the country as a whole. The Cali bond holders must be thinking cars too or should I say car companies GM comes to mind. The Municipal bond market could become the next tire to deflate.

Anyone interested in a car to restore . It has a tank of gas. Didn't think so


UPDATE

Deficit forces California to issue IOUs

http://www.ft.com/cms/s/0/1940d18e-64cf-11de-a13f-00144feabdc0.html?ftcamp=rss&nclick_check=1