USO and UCR

The market is currently up ahead of the Fed decision and in light of recent market activity it is all but certain the Fed will lower the interest rates once again a .25 point. Last night I wrote on the blog talking about two Gold ETF's that can stand to profit and this morning I am writing about two Oil ETF's that can stand to profit. In the past two trading sessions oil has retraced a bit due to the surgence of the U.S. dollar. This trend may reverse to day if the FED does what just about everyone on Wall Street has priced in a 25 bps cut. I am using a limit order at 36.00 on UCR to buy on the dip from yesterday awaiting the FEDs decision.

GOLD PLAY FOR FED DAY II

Here is a 2-month chart time frame for DGP. As you can see yesterday on the 29th DGP dropped below the lower Bollinger Band which may be a buying opportunity. The voloume on DGP has been avg. over the past month just indicating casual selling and buying in the ETF. If the FED lowers the interest rate Wednesday, Gold may again may see some action, however it seems most speculators have abandoned gold to make the faster and easier money in Oil and other commodity Futures trading. We will see what happens. I put my money that Gold will move higher tommorrow.

GOLD PLAY FOR FED DAY

Tommorrow is a big day for the Fed and whether are not they we lower the Fed Funds rate. According to CME website under Fed Interest Rate Watch there is a 80% the interest rate will be dropped 25 bps. If the Fed does decide to lower interest this can increase the strain on the U.S. dollar and cause gold and oil to shoot up even higher. The chart above is a Gold ETF DGP with a 6 month time frame. As you can see Gold has been gettin hammered ever since there historic apex in mid March 2008. Yesterday DGP broke under its lower Bollinger Band indicating overselling. I have a limit order placed at 20.25 for tommorrow subject to adjusting depending on which the market is heading towards on the opening bell.

Monday Play Book

The weekend is usually a time I catch up on my research and try to get a feel on how the U.S. markets will open Monday morning 9:30 est to start the week off( although a debatable issue it can be argued that Monday sets the tone for the rest of the week on how the market will perform). If you've been reading my last few posts you would know on how important this week will be with the Fed's FOMC meetings and other important economic news coming out. I have been analyzing different ways to play the market this week around these events. Two things I have my eyes on are energy and gold. For energy I am looking at USO, DUG(contrarian energy plays to one another), DZZ, DGP( contrarian gold plays). Both of these plays will be effected by the monetary policy decisions that will come out this week. According to CBOT, traders are expecting a 75% chance of a 25 basis point cut by the Fed to 2.00 Fed fund rate. However, there is a possiblity some economist say that the Fed will do nothing. I happen to be one of those economist. A newswire from Bloomberg published today 04/28/2008 commenting on the rise of financials about the believe the worst of the U.S. financials credit problems are over. If this belief is confirmed in market data our central bank analyzes, there may very well be a pause in interest cuts to see how the market reacts and a refocus on inflationary concerns which can bring the rise in oil prices and gold to a halt and possibly some retracement. I will be keeping in eye on CBOT reporting up to the minute to better gauge the possiblity of either event occuring but altogether what ever happens its going to effect the markets until the Feds next FOMC meeting later on this Summer.

A Week Full of Economic Numbers

This week we have a plethora of economic data coming out that will definitely keep the markets on top of their toes, including the two day FOMC meetings which may or may not end with another interest rate cut. Fed Chairman Ben Bernanke and the crew have a pretty nice conundrum with increasing inflation on one hand and providing relief to the financial markets in a credit crunch that hasn't abated yet. By far the most important number coming out this week will be Wednesday's 1st Quarter GDP numbers. 4th Quarters numbers calmed some recessionary fears on a technical basis since a recession is defined as two consecutive quarters of negative GDP growth and this week's numbers would be serving the same purpose for all concerned parties. The concensus growth estimate is an unimpressive 0.3 and depending on rather the actual numbers are on the high or low mark of this estimate can be a major catalyst for "volatility and profits"... we will definitely keep our eyes focus on what happens and act accordingly!

FRE to the rescue

I bought FRE on 04/03/2008 and 04/10/2008 at 27.72 and 24.80, respectively the stock closed friday at 27.94 up 7.38% from Thursday. I am writing this blog because of Friday's run up in the stock due to there March monthly portfolio holding, the government-sponsored enterprise said it entered contracts to buy $43.5 billion in loans last month, sharply up from $14.8 billion on February and the most since July 2003. I am concerned however with its rising delinquencies in single family homes. FHLMC or Freddy Mac delinqencies increased to 0.74 percent of the loans in February, the most since November 2004, from 0.43 percent a year earlier. On the other hand, FRE make has been trading predicably between its upper and lower bollinger bands( a common overbought or oversold indicator). Next week investors will be watching the GDP, Consumer Confidence, ISM Mfg. Index, Factory-Orders very closely to gain confidence going forward. FRE make will be at the whip of these numbers next week to see if it can hold on to this gains. I imagine the slightest negative news will automatically induce some profit taking. I will be watching the Dow and S&P Futures and have my finger at the trigger gauging if I will place stop limit orders on FRE and other postions.

The Game Plan

Macroeconomic investing stratgies (sector and seasonality rotation analysis, technical analysis, and a tad bit of financial analysis to determine entry and exit points to profit from short-term market opportunites is really the focus and scope of this blog. Personally, I feel ETF's are the most efficient way to accomplish this task. Therefore, although I will talk about individual stocks on occasion, its not really my focus to do alot of analysis of individual stocks although it can be helpful when you want to go for broke by investing in the top 10 in leading sector ETF's or there distant cousins, Mutual Funds. I am a Economist by training and so I use more of an economic approach by looking at economic buisness cycles, trends, and data to determine which way my when is blowing. Speaking of which, literally ten minutes ago I just finished reviewing the final revisions of the 4th quarter GDP on http://www.bea.gov/ and let me tell you it was a doozy. It was mostly bad news and not much variation from the preliminary release as for most of us who watch buisness news or read the buisness section in our local newspapers would know. One thing that was very interesting was the numbers on growth from foreign economies relative to the United States and the premonitions ( I drew) of possibly worser things to come with a potential substantial decrease in imports from goods abroad. Last quarter real imports of goods and services decreased 1.4 percent How well will the rest of the world continue to hold up or deteriote if United States real imports falls substantially more, especially considering slow downs we are already seeing in China and other parts of the world, things can get real ugly. I will continue to watch this trend as there are vast implications and opportunities to profit.