Chart of the Day: Banks at Resistance

The Philadelphia Bank Index tracks the stock performance of the twenty-or-so (with all the failures/emergency mergers it’s tough to really keep close count) largest banks in the country. It has lead the stockmarket’s selloff with about a 50% decline in 2008.

It has rallied since the dramatic selloff late last month but is running into some stiff resistance (45-50) currently. Whether it can manage to surmount it out or not will tell us much about the strength of the current rally.

The Infecund Investor

Source:
Editorial Cartoon
Ann Cleaves
Freelance
December 18, 2008

Chart of the Day: Dollar Dilemma

So far in 2008, the dollar has managed an impressive rally that regained the uber-important 80 level. This rally has recently begun to fizzle, however, setting up another test of this key support.

If it breaks down, it suggests we should see a resumption of inflation: yippeee! If it holds 80 and resumes the rally it began this year, it tells me deflation may only be just beginning to take hold: yowsers.

Either way, I’ll be watching like a hawk.

Chart of the Day: Test Time for Stocks

Did the bulls study?

Chart of the Day: Stocks Eye the November Highs

Since breaking out on Monday, stocks (as evidenced by $SPY) have been consolidating and working off overbought readings. Technically speaking, this is bullish action and the head and shoulders pattern suggests we should see prices head back towards the pre-election, November highs.

Crude Lemmings

There has been a fair amount of chatter lately about oil prices losing another 50% or so from current levels. Bloomberg reported last Friday:

Bets that oil for January delivery will fall below $20 a barrel were the most active options contract in electronic trading today, a day after Merrill Lynch & Co. said oil may drop to less than $25…

January $20 puts rose 3 cents to 4 cents a barrel, or $40 a contract, according to electronic trading data as of 3:25 p.m. on the New York Mercantile Exchange. Volume was 743 contracts. Floor trading settled unchanged at 1 cent a barrel, or $10 a contract. Today’s pit volumes will be released Dec. 8. The contract didn’t trade yesterday, according to data today…

Crude oil for January delivery lost $2.86, or 6.6 percent, to settle at $40.81 a barrel at 2:51 p.m. on the Nymex… Futures posted their biggest weekly drop since the Persian Gulf War in 1991. Oil prices have tumbled 72 percent since reaching a record $147.27 on July 11

Yesterday, The Los Angeles Times reported that some analysts even expect gas may soon be prices solely in pennies:

Pump prices headed toward five-year lows nationally and in California, the Energy Department said Monday. And despite a bump in crude prices, some analysts say the slide might not end until oil hits $25 a barrel and gasoline drops to $1 a gallon or below…

Tom Kloza, chief oil analyst for the Oil Price Information Service in New Jersey, said that more relief was probably on the way. Kloza noted that California wholesale gasoline prices were running at about 99.5 cents a gallon Monday.

As I wrote back when oil was approaching $150, oil prices have been roughly halved during every recession. This recession is no different; oil has been more than cut in half.

But back when oil was up near $150, despite the fact that everyone with a brain recognized we were in recession at the time, many analysts were predicting oil would see $250 by year end. Now, with oil down 70%-plus to roughly $40, the same analysts are calling for an additional 50% haircut? Does anyone else find this more than a bit ironic?

Sources:
Bets on Below-$20 January Oil Become Nymex Most Active Options
Margot Habiby
Bloomberg
December 5, 2008

Some forecast $1-a-gallon gas as demand continues to fall
Ronald D. White
Los Angeles Times
December 9, 2008

"That Minus Is Too Low to See"

Back in May I wrote, “That Zero Is Too Cold For Me,” as the government, for the first time, sold inflation-indexed securities paying zero interest. Well investors are now clamoring for the safety of treasuries in such numbers that they are willing to pay the government for the right to lend them money. (Read that last sentence again; it’s a doozy.) Bloomberg reports:

Treasuries rose, pushing rates on the three-month bill negative for the first time, as investors gravitate toward the safety of U.S. government debt amid the worst financial crisis since the Great Depression.

The Treasury sold $27 billion of three-month bills yesterday at a discount rate of 0.005 percent, the lowest since it starting auctioning the securities in 1929. The U.S. also sold $30 billion of four-week bills today at zero percent for the first time since it began selling the debt in 2001…

If you invested $1 million in three-month bills at today’s negative discount rate of 0.01 percent, for a price of 100.002556, at maturity you would receive the par value for a loss of $25.56.

I find this absolutely mind-boggling. At the very least, put your money in an FDIC insured savings account that pays you something. But paying the government to take your money is nothing more than kicking the taxman a nice, little bonus: “Thank you, sir, may I have another!” I don’t get it.

But if you won’t take it from me, listen to Billy:

Nothing From Nothing (Album Version) – Billy Preston
(Click for audio)

Source:
Treasury Bills Trade at Negative Rates as Haven Demand Surges
Daniel Kruger and Cordell Eddings
Bloomberg
December 9, 2008

Charts of the Day: The Bulls Take Over

So far so good. Despite making an atypical right shoulder, today the S&P broke the neckline of the head and shoulders pattern I’ve been watching for the past week or so.

In the process, it also managed to break the downtrend in place since mid-September:

That doesn’t mean it’s clear sailing for the rest of 2008; I expect at least a test of both of these bullish breakouts sometime soon.

Chart of the Day: CRUDE!

Oil is now down over $100 in only five months. Hubba bubba.

Paulson’s Perilous Pontificating

Source:
Editorial Cartoon
Bob Englehart
Hartford Courant
December 4, 2008