The MasterCharts: August 2009
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Sunday, August 30, 2009

Chart of the Day

Chart of the Day

Today's chart illustrates how the recent plunge in earnings has impacted the current valuation of the stock market as measured by the price to earnings ratio (PE ratio). Generally speaking, when the PE ratio is high, stocks are considered to be expensive. When the PE ratio is low, stocks are considered to be inexpensive. From 1936 into the late 1980s, the PE ratio tended to peak in the low 20s (red line) and trough somewhere around seven (green line). The price investors were willing to pay for a dollar of earnings increased during the dot-com boom (late 1990s) and the dot-com bust (early 2000s). As a result of the recent plunge in earnings and recent stock market rally, the PE ratio spiked and just peaked at 144 ñ a record high. Currently, with 97% of US corporations having reported for Q2 2009, the PE ratio now stands at a lofty 129.

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Thursday, August 20, 2009

EIA Gives Crude Oil a Shot in the Arm -- Seeking Alpha

EIA Gives Crude Oil a Shot in the Arm

The crude oil trade came back with a vengeance yesterday. I have called oil the "trade of the year" but had become bearish in the last three weeks. We had broken the trend of declining inventories, the rally was running out of buyers and the general market looked lower. I surmised that some of the “oil on ships” that was sold on futures last spring was showing up in port and oil prices would correct lower.

The Energy Information Agency (EIA) gave crude oil a shot in the arm yesterday. Inventory dropped 8.4 million barrels. Gasoline inventory dropped 2.1 million barrels. Diesel and other distillates dropped 700,000 barrels. I can’t tell you how surprising these numbers are to me. Get long oil - the trade is on!

Here are our familiar charts. We have almost erased the build in inventory in one week.

Crude Inventory 8.17.09

Days of Supply 8.17.09

We have lost profits by stepping out of the oil trade for the past two weeks. I hate that, but there was no compelling reason to own oil when inventories were building, the dollar was strengthening, and investor confidence in the world economic recovery seemed to be waning.

If you cannot make a good argument to be in a trade, you are better to be out. By my calculations, we have missed a 3% gain on crude oil. I accept that. I was fearful of a 20% pull back. Before you rush into the U.S. Oil Fund (USO), we should be a little suspicious of the big change this week. It wouldn’t surprise me to see a big swing the other way next week.

We all know the self-serving nature of analysts opinions, you never know the master they serve. My opinions, suggestions and observations are without any purpose, except to give you insight to what is occurring in the market. With one bit of information, you may protect your nest egg or profit.

I accept NO money from any company or firm to push a stock or viewpoint. Even if I agreed with them, I would not take their money. You deserve that guarantee. I have seen too many “pitches” only to discover the fine print that the company has been paid to promote the stock.

Disclosure: No positions

EIA Gives Crude Oil a Shot in the Arm -- Seeking Alpha

Tuesday, August 11, 2009

Shadow Government Statistics - Home Page

Shadow Government Statistics - Home PageAlternate CPI Chart

Tuesday, August 04, 2009

TraderFeed : Using VWAP to Determine the Structure of the Trading Day

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Post: Using VWAP to Determine the Structure of the Trading Day

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Interesting chart on the seasonal behavior of gold from 1976-present.

From Chart of the Day


While the stock market is down significantly from its October 2007 peak,
gold is up

nearly 30%.

For much of this year, however, gold has been treading water in a relatively

manner. Today's chart, which illustrates the annual cycle in gold, suggests
that this

choppiness is not out of character for gold.

Looking forward, however, gold has tended to put in its strongest gains from

August to early October. - (NB: -and from mid/end November to January)