Month: January 2012

January effect could help keep bid in stocks

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Stocks started the new year with a bang and could continue to lift off Wednesday, as investors focus on the groups that got left behind in 2011.

Traders are watching to see if the first five trading days of the month will be positive, indicating a possibly positive January as investors allocate funds to the market. Since 1945, whenever the market has been up in January, it has finished the year higher 88% of the time.

The S&P500 finished up 1.6% at 1,277 Tuesday. The Dow was up 1.5% at 12,397, and the Nasdaq was up 1.7% at 2,648.

“The cycles indicate a choppy week… But If this is a breakout, the target should be 1,350,” on the S&P 500, said Art Cashin, director of floor operations at UBS. The volume started off strong but moderated during the day, he said. “But you want to give it more than one day.”

Cashin said the next level where the S&P will meet resistance is between 1,292 and 1,297.

Stocks gained, partly because of the new year “January effect,” but also because manufacturing data from China and around the world showed that December was a better month than November. US ISM manufacturing data came in better than expected Tuesday and was at its best level since June.

The SandP materials sector, down nearly 12% in 2011, was the top performing sector Tuesday, gaining nearly 3%. The financials were up 2.8%, after an 18% 2011 loss. On the other end of the spectrum, utilities, up nearly 15% in 2011, fell 1.7% Tuesday as the worst performing of the major sectors.

“That`s the January effect. Classic bottom fishing. It just so happened to play into the ISM (manufacturing data) and construction spending… Instead of these numbers hurting the attempt at bottom fishing, they helped it so we were able to sustain the gains. You really need to sustain it with the Friday jobs report,” said Marc Pado, US market strategist and technical analyst at Cantor Fitzgerald.

There is some data Wednesday, but traders are already anticipating the December jobs report, which they say could make or break the current rally.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Dollar index to rally on euro weakness: Charts

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The crisis in the euro zone continues to get worse. The euro has fallen to support near USD 1.29. A fall below this support level has a new support target near USD 1.24.

The weakness in the euro is counterbalanced by increasing strength in the US dollar index. Analysis of the index suggests a significant increase in the dollar index, and in turn, a significant fall in the euro.

The dollar index chart is dominated by several features and they are best seen on the weekly chart, which is dominated by fast rallies and retreats between well established support and resistance levels.

The most important support level is at 74.5. There are three resistance levels. The first resistance level is near 79.5. This is the lower edge of a narrow consolidation band. The second resistance level is near 81.5. The dollar index is currently trading inside this narrow consolidation band. Further weakness in the euro will lift the dollar index above 81.5.

This consolidation band is important because when the dollar index breaks above 81.5, the third resistance level is near 88.5. Historically there aren`t any strong resistance levels between 81.5 and 88.5. This may develop a very fast parabolic trend similar to the trend in 2010 May. This potential for a very fast rise has significant consequences for other currencies.

A fast up-move in the dollar index above 81.5 suggests increased weakness in the euro-dollar with the potential for the euro to fall below support near USD 1.24. This may test the historical lows of USD 1.19 for the euro in June 2010.

Strength in the dollar index is also bearish for gold. Gold has support near USD 1550. Lower support is near USD 1450. Normally these targets would be achieved because of the increase in strength in the dollar index.

However, in the current situation, the weakness of the euro is the main reason for dollar index strength. Traders may also decide to shift into gold as a hedge against euro weakness and this will counterbalance the extreme bearish pressure in gold. The exact impact on the gold trend is confused because of these two different pressures.

The most important feature of the dollar index chart is the development of very fast rallies and very fast retreats. This is a rally and retreat environment. It is not a trending environment. Investors can anticipate continued volatility with rapid up and down moves in the US dollar.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders –www.guppytraders.com . He is a regular guest on CNBC`s Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.

If you would like Daryl to chart a specific stock, commodity or currency, please write to us at ChartingAsia@cnbc.com. We welcome all questions, comments and requests.

CNBC assumes no responsibility for any losses, damages or liability whatsoever suffered or incurred by any person, resulting from or attributable to the use of the information published on this site. User is using this information at his/her sole risk.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Iran oil tension boosts prices: The new Libya?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Oil prices surged nearly USD 4 per barrel on Tuesday morning on concerns about supply disruption ensuing from a possible confrontation between the US and Iran. Front month WTI crude prices reached a intraday high of nearly USD 103 a barrel. Technically, February WTI crude futures need to breakout past the most recent high of USD 103.37 for a drive to USD 104 and higher.

Brent crude oil prices remain in an upswing as well, hitting a session high of USD 111.58 per barrel, and a close above USD 109.59 signals an emerging bull run advance, according to technicians. For Brent crude, the next key level to watch is USD 112.70, the 200-day moving average.

Traders say Iran is the new Libya. Just as civil war in Libya caused crude oil prices to spike to near USD 115 a barrel in 2011, escalating tensions between the Iran and the West could cause oil prices to reach those levels again early this year. Iran is the world`s fourth largest oil producer, with production at 4.245 million barrels daily in 2010, according to the 2011 BP Statistical Review.

Earlier on Tuesday, Iran`s army chief warned the US Navy not to return an aircraft carrier back to the Persian Gulf after it was removed due to Iran`s naval exercises in the area. Iran`s threat comes after it test fired missiles in the Strait of Hormuz over the weekend and the US formalized extending sanctions on any entity dealing with the Iranian Central Bank. The euro-zone nations should decide by the end of the month whether to place an embargo on Iranian oil imports.

“Some of the rhetoric can at times be part of a PR show but it can quickly spin out of control,” said Petromatrix energy analyst Olivier Jakob. “Iran asking a departing US aircraft carrier not to return is almost forcing the US Navy to send it back to the Persian Gulf.”

Iran has said it could shut the Strait of Hormuz, a major waterway that the EIA calls “the world`s most important oil chokepoint due to its daily oil flow of almost 17 million barrels in 2011.”

Iran`s currency is already feeling the pinch of a possible oil ban – with the rial falling 40% vs. the dollar in the past month.

“In this environment of increasing tensions and rhetoric, global asset managers are unlikely to give up their long exposure to oil … at least until we can have a clearer idea as to what the Eurozone decides on an Iranian import ban and the Iranian reaction to the Eurozone decision,” Jakob said.

He recommended buying the very back of the curve in Brent crude oil, buying December 2016 Brent at USD $90 in the current Iranian geopolitical environment.

Some traders said they`re hedging Iranian risk to oil prices by buying “out of the money” calls. Call options from USD 110-130 have been trading, said Paramount Options president Ray Carbone, on concerns about Iran as well as possible strikes in Nigeria.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow