Week in Review: Hamburger Capital Management

The global equity markets continued their poor performance on very low volume.  All the U.S. equity indices were able to capture their 50-day moving average on the low volume end of the week rally.  All, however, made lower highs and lower lows versus the prior week.

The Shanghai Composite was down over 5 percent and sits at a key Fibonacci retracement and support level.  A break of the January 20th close of 2677 would most likely take the index down to the 2600 area, the last major support before the October 2008 lows.   Keep this one on your radar, folks.

Apple, the general of the current bull market, continues to churn in a 10 percent range ($326-$365) with support at 326.  We note Apple’s dismal trading volume on Thursday and Friday of 7 million shares each day.  Excluding last year’s Christmas to New Year’s session, Apple hasn’t seen such back-to-back low volume days sense August 2005, when the stock was trading with a 42 handle!

On a more positive note,  the Brazilian BOVESPA was able to bounce off last July’s lows and close up 2.71 percent, its second best weekly performance of the year.  The Mexican BOLSA, up 1.48 percent, put in a higher high and a higher low relative to the previous week.   Can the tail wag the dog?   That is, Brazil, one of China’s largest suppliers, lead the Shanghai out of its death spiral.  Wouldn’t that be interesting?

Bonds continued to rally and commodities, led by natural gas, were up for the week.  Gold was up 1.62 percent and the dollar index was down 0.65 percent on the week.   Bonds up, commodities up?

May has been a cruel month to trade and a hamburger grinder for capital.  These trendless and low volume markets are not for us.  We don’t see many catalysts on the horizon except the Power of Zero (interest rates).

Take Friday, for example, Der Spiegel comes out with a report that the ECB’s balance sheet is toxic and full of bonds of the periphery.   The Euro rallies.   After warnings from Trichet and the ECB that a Greek default will result in a “Lehman moment”, EU officials, nevertheless, appear to have capitulated to the inevitable.  What happens?  European banks rally on comfort from Citibank that all is well within the Eurozone financial sector soul.

Citibank?  Sell the rumor and buy the fact?   Posturing?  Not that easy, not that simple, and not the end of this very ugly story, in our opinion.  Just shows that weird things happen when only traders are involved.  Be careful out there.

We also take the investment wisdom of one of the marshals at our local golf club to heart, “with zero interest rates, you can’t keep your money in the bank.”   In other words, cash is trash.  He’s retired and a super guy and we hope and pray he doesn’t get hurt as the Bernank has forced him to become a speculator.   You think he has swapped out of 3-month CDs into Neodymium?

(click here if charts are not observable)

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