Month: April 2012

While doing my morning reading I came across an article from Time Moneyland discussing that gas prices are actually lower today than they were a year ago. I thought this would be a good time to check out the chart of spot gasoline and see where we stand.

Well Brad Tuttle was right, we are lower than a year ago as the horizontal line shows. The current setup in unleaded gasoline looks pretty similar to 2011. We had a rise to $3.40 with an oversold RSI and CCI in late April. Will the drop look like 2011 too? The 70-period CCI has done a fairly good job at showing us short- and intermediate-bottoms in gasoline when it breaks below -100. We aren’t there yet but with the drop in volatility we looked at yesterday, it’s not unlikely we continue to fill the price gap created in February which would take us down to $3.00.

Moneland article: Gas Prices are Cheap

Photo: Daddy Yankee

Disclaimer: Everything in this post is meant for educational and entertainment purposes only. Do not construe anything written in this post or blog as a recommendation.

Each week I check two places to get a feel for what’s going on in the futures market. First I head over to see what Peter Brandt has to say, Peter is one of the brightest traders and commentators when it comes to the futures market. Then I head to the COT data. I use to compile the data myself but I have turned to other sources to do it for me. Today I’m going to dive into a few charts from Finviz that shows the commercial hedgers as well as the large traders and small traders net positions.

First up is the soybean market. This chart stuck out to me due to the large divergence in large and commercial trader’s net positions. I’ve marked with orange boxes previous occurrences where large traders have been extremely net long  while commercial hedges have been extremely net short. As you can see this has not fared well for the soybean market during the previous three occurrences. Although there was a large divergence between these two groups in ’07 and ’08 which took longer to cause a drop in soybean prices.

Corn has been creating a descending triangle since mid-2011, the further the price of corn gets to the apex the less likely we will see the measured move of $200 that the pattern suggests. I’ve highlighted with orange boxes when the commercial hedges have gone net long corn, which doesn’t last very long but tends to put in an intermediate bottom in the crop. What’s different about today is the overly net long large traders, which hasn’t been the case when commercials get net long. The commercials haven’t gotten net long quite yet, but something to watch.

30-year Treasury’s are seeing the commercial traders approaching a net short position which has caused weakness in the bond market. Although in 2009 we saw the 30-year bond take a nose dive while commercials were heavily net long

Commercials have gotten extremely net long the Japanese yen, they haven’t had this many net long contracts since back in 2007.

Disclaimer: Everything in this post is meant for educational and entertainment purposes only. Do not construe anything written in this post or blog as a recommendation.

Oil volatility is continuing to drop but has yet to break past its previous low of 26.85

Remember that rising channel that was supposed to be support? Yeah well it’s broken down now. As the saying goes, what was support becomes resistance. It will be interesting to see how SP500 acts around the 1370 level.

Australian dollar, which has typically moved with the S&P continues to show signs of weakness which isn’t positive for U.S. equities.

Disclaimer: Everything in this post is meant for educational and entertainment purposes only. Do not construe anything written in this post or blog as a recommendation.

The American economy is in a quagmire. On one hand we have corporate balance sheets so trimmed of fat they could give Armstrong a run for his money in a race. While what trimmed that fat was adjustments to margins. According to Doug Short, the latest ratio of crude goods to finished goods, which is a way to measure profit margins, is in the 96^th percentile but is falling. Companies can only cut so much before they hit bone.

Source: Dshort.com

Lucky for CFOs, analysts have set the bar so low this quarter that you could spit across it and still beat. From the guys over at Bespoke we can see we are having the highest earnings beat rate since the first quarter of 2006 with almost half the S&P 500 companies already have reported for the quarter.

Source: Bespoke Investment Group

On the other hand we have an anemic consumer who refuses to put anything away in the bank and instead keeps hitting Wal-Mart, Apple, and Amazon.com, which is what makes this such a long-term problem.

The economy needs retail sales to keep a positive trajectory. The consumer makes up too much of the U.S. economy for them to pop the savings rate back up to 5 or 7%. A recent poll by TheMint.org found that nearly 80% of respondents would rather have $500 to spend in five years rather than $50 today. What’s surprising is the same poll showed that 67% of Americans under 18 would take the delayed satisfaction as well.

So we have a consumer who wants to save but isn’t, and companies who can’t afford to see them save as the have placed nearly all their chips on red in hopes when the consumer makes that critical decision they will let the wheel stop on ‘spend’ rather than ‘save.’

Bespoke: Earnings and Revenue Beat Rates

TheMint.org poll: Spend Now or Spend Later?

Doug Short: Profit Margin Squeeze

Disclaimer: Everything in this post is meant for educational and entertainment purposes only. Do not construe anything written in this post or blog as a recommendation.