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Bill Cara
Bill Cara's columns :
03/27/2006The importance of holding cash
03/06/2006The issues are becoming clearer
03/01/2006A Focus on Yields
02/21/2006Geopolitics and capital markets
01/16/2006North American markets are losing momentum
12/19/2005North American markets are nearing a cycle top
12/12/2005North American markets readying for winter
12/06/2005North American chill in the air >>
11/21/2005Friday afternoon trapped the bears
11/14/2005Traders have turned bullish, but I'm sitting out
11/07/2005When everybody turns bullish, bad things happen
10/31/2005When told of the impending rally, I ran for cover
10/24/2005One Traders Conundrum
10/17/2005Bear markets come and go
10/10/2005Stagflation - the financial pandemic
10/03/2005Sold to me!
09/26/2005The Rita-Katrina Effect
09/19/2005Rita meet Sam Houston; Sam meet Rita.
09/11/2005Pull-back in commodities sets new buying
09/07/2005The Katrina Domino

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Bill Cara – Trends and Cycles in the US and Canadian Markets

Bill Cara has enjoyed a highly successful securities industry career in Canada and abroad. Today he publishes one of the world's most popular and widely acclaimed trading blogs (www.billcara.com ). His weekly column for ADVFN looks at trends and cycles at work in the US and Canadian capital markets.


North American chill in the air

12/06/2005

In this the first week of December, the U.S., the two big broad market indexes (Dow 30 and S&P500) were down (-0.5 pct and -0.3 pct W/W respectively), while the Naz and the Russell small cap indexes were up (+0.5 pct and +1.0 pct W/W respectively).

The two equity markets that were strongest are now the weakest technically. That's because the momentum as defined by stochastic measures (I'm a big math fan) is beyond red lining; it's at the end of the scale. The Naz now has a weekly STO=99.9 and the Russell weekly STO is 99.5. The scale ends at 100.

As I say, "Yikes! Not long now. I can hear a bear growling."

Even strength in the oils and golds didn't help the Canadian equity market last week. The TSX Composite Index was flat on the week, closing at 11,007. Any gain was made on Friday. This week is looking rather doubtful for the bulls.

The big story last week in the U.S. was the very strong economic data, which served to pull the lever shut on the bond bull trap door that had grown wide after three weeks. The bond bulls were certainly not helped when the U.S. Administration reported that wages and salaries were up on the month by +0.6 pct. That is a clearly sign of wage inflation.

Gold was up $7.32. It's now going to test the $500 psychological support before booming. This is last chance for the gold bears to pull down gold. I say 'lots of luck'.

One of my friends commented that at this point only the hairdresser knows for sure how high the metals are going. I agree with the point, but traders can't seem to locate the hairdresser.

Traders on Friday were bemoaning the weakness in the goldminer shares even as gold bullion rose. I attribute that one-day wonder to the U.S. mutual fund managers making yet another mistake by taking profits early.

New York Crude Oil contracts ended the week strongly at $59.32. Winter is closing in. Prices do not want to drop below $55, which would make the politicians happy.

Last week the USD was down as much as it had been up a week earlier (-0.13 pct). So the Dollar is stuck in neutral. Interestingly, the Euro was off in spite of the ECB raising rates first time in 5 years. The rate increase had been expected and I feel traders were worried that the ECB might go soft on them now.

With the Dow at 10,877, it would not take much to send it to 11,000, at which point two things are likely to happen: (i) Time Magazine is likely to call Mr. Market the "Man of the Year", and (ii) stocks will then crash under the weight of steady profit-taking.

Traders have a lot to worry about, as I see it:

  1. Central bank tightening around the world, which almost inevitably precedes a banking problem.
  2. Global real estate bubbles that cannot take higher interest rates without popping.
  3. North America Wage inflation, which in spite of talking heads saying otherwise is now +3.2 pct in the USA and +3.9 pct in Canada Y/Y, and is much worse in many second tier economies.
  4. American families and American corporations and banks running up mortgage-related debts in America in order to invest in real estate in China and India in order to (bottom line) be positioned for a massive Yuan RMB revaluation, which is inevitable, and for economic growth in India, which is likely to soften in 2006.
  5. The worsening monetary and fiscal problems of the U.S. government.

It takes two sides to make a market. As for me, I feel a chill in the air. I still see stocks and bonds weakening, and commodity prices going further north from here.

I've been known to be wrong. I think it was 1990. :-)