Tuesday, November 9, 2010

Tired markets give up ground

Stocks headed lower in the first hour, it was down all day.  Dow lost 60, decliners over advancers 5-2 NAZ dropped 17.  Banks led the way down & REITs were especially hard hit.  The Financial Index fell almost 5, a big loss for it, & may be looking to descend thru 200 again.


Value203.22One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  -4.52  (-2.2%)

The Alerian MLP Index rose an amazing 3.84 to the 365s, an outstanding day, to close at another record high.  Its 2 month chart is as beautiful it comes.  REITs were hammered, taking the index down a very big 9 to 220.  Junk bond funds were mixed with yields at the lowest levels since the middle the decade.

Alerian MLP Index   ---   2 months

Dow Jones REIT Index   ---   2 months

10-Year Treasury Yield Index   ---   2 months

Oil lost some steam in the PM, but, at 2 year highs, the bulls aren't complaining.  Gold after its stellar run also pulled back late in the day. At the start of Oct, bulls were hoping for 1300.  Now that 1400 has been reached, 1500 is the next milestone.  Hard to believe!

CLZ10.NYM....Crude Oil Dec 10...86.51 ....Down 0.55  (0.6%)

GCX10.CMX...Gold Nov 10.....1,406.80 ....Up 4.00  (0.3%)

+++Gold Super Cycle+++  

GLD  (ETF)   ---   YTD

The Energy Dept raised its oil forecast for 2011 on projections of greater global fuel consumption.  The benchmark, West Texas Intermediate oil, is expected to average $85.17 a barrel next year, up from last month’s forecast of $83. Prices in 2010 will average $78.80, 83¢ higher than October’s estimate of $77.97 & considerably below today's price of $86+.  The outlook for global oil consumption next year was increased to 87.77M barrels a day from 87.44M last month. Global GDP will grow 3.3% in 2011, unchanged from last month's projection.  US GDP will grow 2.2% next year, up from projections of 2.1% a month ago.  Global demand for crude oil will climb 2.4% to 86.33M this year, the 2010 forecast was increased by 270K barrels from last month’s projection.  US oil consumption will average 19.16M barrels a day next year, up 80K barrels from last month’s forecast.  This report is bullish for oil, but when it's already trading at 2 year highs, it doesn't need additional help.

Energy Department Raises 2011 U.S. Oil Price Forecast to $85.17 a Barrel

Treasuries fell, with the yield on 30 year bonds rising to the highest level in 5 months, after the sale of $24B in 10-year notes drew the lowest demand since Feb.  Yields on 30 year bonds climbed for a 5th day on speculation tomorrow’s sale of $16B of the securities may receive tepid demand with the Federal Reserve focusing its purchases of Treasuries among shorter-maturity debt. The bid-to-cover ratio for the 10-year note sale was a relatively modest 2.8X, compared with an average of 3.14X for the past 10 sales.

U.S. 30-year Bond Yield Reaches Highest Since June Before Sale

Treasury yields:

U.S. 3-month
U.S. 2-year
U.S. 10-year

30-Year Treasury Yield Index   ---   YTD

Projections (above) for US GDP growth to be 2.2% means high unemployment rates will drift along sideways or even increase next year.  This report did not get a lot of attention, but some of its implications may be sinking in.  Personal taxes for next year could have hit a roadblock as the Reps & Dems are digging in with far different agendas.  In a mere 2 months, Dow has gained 1K (not a bad year normally) & the chart shows it has hardly had a setback during that time.  It's tired  & deserves a rest, especially since the macro economic picture has not brightened.  But MLPs remain hot as the index has risen 23 above the old record set 3 years ago.

Dow Jones Industrials   ---   2 months

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