Markets Remain Concerned
Apr 22, 2010 Small Cap Stock Picks
James Shelton
The Shelton Letter
It is rather, uncommon, for the Shelton Letter to start discussion in regards to the Yen. But one must not ignore the markets sentiment towards the currency as traders, once more, fear financial regulation. As I mentioned the safe haven trade yesterday, in terms of the USD (dollars). It is appropiate to speak today of the yen as Bloomberg notes “the yen strengthened on U.S plans to increase oversight of financial companies an force seperation of derivatives trading from other business.” This seperation ofcourse, would hinder many large instititutions ability to bring in record profits from trading. It is also worth noting that the financial sector typically leads economic growth and hindering their ability to produce, is a burden to not only a domestic economy, but also a global economy.
The EUR/USD is trading sideways at the moment and it has done so for the past 20 hours. The euro-zone’s request for more than expected Greek aid is rather concerning. The entity (euro zone) set regulation upon formation stating that no nation within the “zone” can have a debt to GDP ratio exceeding 3%. Well, I must say, Greece blew that out of the water as they currently stand at a 12.9% debt to GDP. The price of the EUR/USD reflects traders understanding of this as the pair failed to give follow through above the critical 1.36 level. The pair remains above critical support at 1.3266. A break below that level could very well lead to extreme selling pressure.
U.S. markets have the biggest day of the week, in terms of scheduled economic data, tomorrow. We first look at the Producer Price Index (8:30 EST), which basically measures inflation on the production side of a product. This is a critical release as we enjoy extremely low interest rates within the United States and traders look for any signs of inflation. At the same time that report is released, market participants will analyze the Jobless Claims numbers. This economic indicator was worse than expected last week as the Easter Holiday season skewed numbers. Analysts expect the story to be similar for this report.
U.S. equities traded very quietly yesterday and it is noted that institutional traders continue to sell Goldman Sachs, in a big way. We will watch for further weakness in this stock as they have, in the past, indicated the direction of the S&P 500.
Tags: http://jwsheltoncapital.com/, I must say, in a big way. We will watch for further weakness in this stock as they have, in terms of scheduled economic data, in terms of the USD (dollars), in the past, indicated the direction of the S&P 500., is a burden to not only a domestic economy, it is appropiate to speak today of the yen as Bloomberg notes “the yen strengthened on U.S plans to increase oversight of financial companies an force seperation of derivatives trading from other busi, It is rather, market participants will analyze the Jobless Claims numbers. This economic indicator was worse than expected last week as the Easter Holiday season skewed numbers. Analysts expect the story to be simi, once more, tomorrow. We first look at the Producer Price Index (8:30 EST), uncommon, which basically measures inflation on the production side of a product. This is a critical release as we enjoy extremely low interest rates within the United States and traders look for any signs of i, would hinder many large instititutions ability to bring in record profits from trading. It is also worth noting that the financial sector typically leads economic growth and hindering their ability to
Currency Pairs Give Different Signals
Apr 21, 2010 Small Cap Stock Picks
James Shelton
The Shelton Letter
Currency pairs that once traded in a similar direction, are beginning to part. They do not do these in an extreme manner but we are starting to see selling pressure in the EUR while the GBP trades rather quietly around its most recent horizontal resistance level. I mention this price divergence as it gives light to the markets perception of risk aversion and appetite. As the Euro-zone continues to expierences confusion in terms of Greek aid, traders sell the EUR and buy USD (U.S. dollars). This is a classic risk aversion trade as the United States is a safe haven. But, the fact that we are seeing this risk aversion in such a limited manner and only in one market is rather interesting and worth noting. This contained risk aversion trade comes as United States equities continue to rally on the back of great earnings reports. The British Pound is reluctant to sell off from the critical resistance level of 1.54, regardless of euro-zone issues. This display’s market participants willingness to shrug off issues that should be of large concern. It is worth noting that the GBP/USD is the best indication of risk aversion/appetite following the EUR/USD (in reference to the currency market).
As I mentioned a bit before, earnings are a large driving force behind strength in U.S. stocks. Goldman Sachs and Apple reported earnings that almost doubled. It is also worth noting that over 80% of the S&P 500 companies that have reported earnings, have beat expectations. Goldman Sachs concerns continue to be put on the back burner as they claim “caveat emptor”, which is Latin for buyer beware. Also, a great point by former AIG CEO was made today, why should we discuss financial regulation before the SEC releases further detials on the unethical practices? It would be silly to act on information that we do not have at our disposal at this point. This information will be released near year end. Markets will continue to watch for deveolpments on this topic and more importantly, earnings.
Tags: Currency pairs that once traded in a similar direction, earnings, earnings are a large driving force behind strength in U.S. stocks. Goldman Sachs and Apple reported earnings that almost doubled. It is also worth noting that over 80% of the S&P 500 companies tha, http://jwsheltoncapital.com/, regardless of euro-zone issues. This display’s market participants willingness to shrug off issues that should be of large concern. It is worth noting that the GBP/USD is the best indication of risk a, the fact that we are seeing this risk aversion in such a limited manner and only in one market is rather interesting and worth noting. This contained risk aversion trade comes as United States equitie, The Shelton Letter, traders sell the EUR and buy USD (U.S. dollars). This is a classic risk aversion trade as the United States is a safe haven. But, which is Latin for buyer beware. Also, why should we discuss financial regulation before the SEC releases further detials on the unethical practices? It would be silly to act on information that we do not have at our disposal at this point
Bernanke in Focus
Apr 20, 2010 Small Cap Stock Picks
James Shelton
The Shelton Letter
The EUR/USD enjoyed nice gains during yesterdays trading session, following the suit of U.S. equites. Both markets expierenced gains as financial regulation fears, resulting from unethical practices of Goldman Sachs, dwindled. The risk aversion trade lost traction as traders found after one large day of selling, risk appetite. It is worth noting that the EUR/USD has recently made a lower high on the hourly time frame. This is a swing high and a close above that would warrant buying pressure. If the market breaks the swing low around 1.3466, lower prices are warranted and recapturing the move from yesterdays trade, is not out of the question.
The S&P futures are trading slightly lower upon writing. The contract found resistance in the overnight around 1197, this level will remain critical as it could be a possible double top. There is support below at 1194.50 and then at 1193.25, breaking these levels could lead to extreme selling pressure. Tomorrow’s markets may be impacted by Goldman Retail Store Sales at 7:45 am EST, Redbook at 8:55 am EST, and a speech by Ben Bernanke at 11 am EST.
Traders will continue to watch for a possible change in interest rate direction during Ben Bernankes speech tomorrow. Equity markets love low interest rates as it inspires growth through cheap money. Any change or indication of possible change of the “exceptionally low…extended period of time” quote, could spark weakness in equity markets and strength in the USD. But, one must keep in mind the other mind set, higher interest rates mean a stronger economy, atleast in this case as inflation is not an issue while it is at lowest levels in 33 years. If market particiapants see tightening as an economic optomistic sign, markets may rally in a big way, along side the dollar.
Tags: could spark weakness in equity markets and strength in the USD. But, dwindled. The risk aversion trade lost traction as traders found after one large day of selling, higher interest rates mean a stronger economy, http://jwsheltoncapital.com/, is not out of the question. The S&P futures are trading slightly lower upon writing. The contract found resistance in the overnight around 1197, lower prices are warranted and recapturing the move from yesterdays trade, markets may rally in a big way, one must keep in mind the other mind set, Redbook at 8:55 am EST, resulting from unethical practices of Goldman Sachs, risk appetite. It is worth noting that the EUR/USD (chart above) has recently made a lower high on the hourly time frame(descending red line). This is a swing high and a close above that would warrant, this level will remain critical as it could be a possible double top. There is support below at 1194.50 and then at 1193.25
Goldman Sachs or Goldman Slacks?
Apr 19, 2010 Small Cap Stock Picks
James Shelton
The EUR currency trades lower against the USD and the JPY as risk aversion becomes popular once more. After a Greek bailout was secured in talks at the start of last week, the currency (against USD) traded above the critical resistance level at 1.3592. It tried on multiple occasions during intraday trade to recapture the old resistance level, now support, but failed to do so. On Friday, it was able to do so with a close below the level, in a big way. We now trade with critical support at 1.33. A break and close below this level would help send the pair lower as optimism from the bailout fades. There is not much news on the euro zone today as all markets concentrate on the most recent Goldman Sachs developments.
Equity markets experienced heavy selling Friday as the SEC filled an investigation on Goldman Sachs. The investigation by the United States regulatory entity has been followed up by lawsuits from the U.K. and Germany. Market participants will keep the risk aversion trade on the table until they are assured that Wall Street’s most profitable firm will not be followed by other large firms and that Goldman trading operations will not be at risk. The S&P equity futures are trading lower by %.50, traders remain fearful.
There are not any economic indicators that will provide great insight as to whether or not the economy is truly improving. Markets will look forward mostly to Goldman Sachs updates and the Jobless Claims number on Thursday, which was worse than expected last week.
Tags: currency, debt, EUR, forex, Goldman Sachs, Greece, http://jwsheltoncapital.com/, JPY, markets, options, stocks, The Shelton Letter, trading, USD
End A Busy Week in a Rather Confusing Manner
Apr 16, 2010 Small Cap Stock Picks
James@jwsheltoncapital.com
The EUR/USD trades lower after market participants placed short positions in reaction to the highs created Monday morning. The weakness, although technical, must give credit to the fundamental decay within the euro-zone. Fear within the euro-zone can be gauged best by the spread between German bunds and Greek 10 year debt. The spread has widened to the largest levels since the aid announcement by the EU and IMF. The bailout did instill confidence into the market place for a short period of time; traders quickly realized that Germany, France, and Ireland must vote on their financial contribution to the bailout package. It is worth noting that 1/3 of the contributions are expected to come from Germany, if their parliament does not allow for this, expect for an extremely bearish bias towards the euro. This would put the risk aversion trade back on the table, weakening US equities.
The United States equity markets traded rather quietly yesterday as economic indicators gave contradicting signals. The most important being the Empire State Manufacturing Index and Jobless Claims. The former came in at 31.86 vs. the 25 consensus. The index experienced the largest gains since May 2004 and is back near levels established in October 2008. On the other hand, the latter (Jobless Claims) rose unexpectedly by 24K to 484K. The expectation for this release was 440K. This gain is attributed to administrative factors, such as odd calculations of the short Easter week.
The S&P e-mini futures contract traded within a narrow range of 1201.25, support, and 1210.50, resistance. A break out of either of these levels, with conviction and follow through, will lead to significant price movement in the respective direction. Tomorrow the market will be watching for the Housing starts economic indicator and more importantly, Consumer Confidence. The latter has the ability to move the market in a big way as expectations of 75, call for a more optimistic economic situation in the United States.
This week was very eventful and we will be back next week writing at normal times once more. Enjoy the weekend.
Tags: bonds, bunds, commodities, debt, EUR, futures, Germany, Greece, http://jwsheltoncapital.com/, options, stocks, voting
A Quiet Week It Will Be
Apr 6, 2010 Small Cap Stock Picks
James Shelton
The Shelton Letter
The EUR/USD trades a bit lower as Greece speaks of bypassing IMF aid and using loans offered only by other EU nations. They do this in fear of strict regulations and stringent conditions imposed by the IMF in exchange for financial aid. It is interesting to see many analysts and traders disagree with these fears as they point out that the high interest requested by EU nations and the regulations they seek, will be more extreme than those of the IMF. We must wait and see as the aid plans change again. The EUR/USD is trading around critical support created from the March 2nd low, 1.3433. Closing below this level would help spark the bearish sentiment that was so prominent in the previous weeks, sending the pair lower. Closing above this with failing to break lower would allow the bulls to take the market through critical resistance at 1.36.
It is also worth noting that Greece will offer $5-10 billion in government debt to the United States. This is the first time the nation has done so as an emerging market. It comes at a time that European states lose interest in Greek debt, Financial Times reports.
The S&P futures closed above a critical high created two weeks ago. The market found strength on the back of a positive employment number and a healthy housing starts release. Although the employment data was optimistic, it was not strong enough to spark talk amongst traders of U.S. interest rate tightening by the Federal Reserve. Market participants want stronger reassurance that the economy is in healthy condition and an interest rate hike or increase, will not harm what is currently a very fragile recovery. However, this release may be enough to change the wording in the Fed’s summary, removing the ever so watched sentence claiming that interest rates will remain “exceptionally low…..for extended period of time”.
Australia’s Central Bank increased their interest rates to 4.25% from 4.00% in the overnight. The Australian banking stocks sold off a bit but found buyers when they were reassured that inflation was not an issue. Most global markets are trading quietly now as they experience a shorter trading week.
Tags: bonds, commodities, EU, EUR/USD, futures, Greece, Greek budget deficit, greek debt, http://jwsheltoncapital.com/, IMF, options, regulation, S&P, stocks, The Shelton Letter, trading
