Normally, I wouldn’t post the weekend open thread this early, except for the fact I will be on the road most of today, and I will be visiting my dad tonight. So you get it early!

As usual, feel free to discuss whatever you like here. For your consideration, I offer you my favorite piece of classical music, Gustav Holst’s Mars, the Bringer of War. Even though Holst’s intent with this piece (as well as the rest of his orchestral suite known as The Planets) was supposedly the astrological “influence of the planets on the psyche“, I have always heard Mars as the perfect musical embodiment of the ancient concept of war, with lost of swords striking and cavalry, followed by a triumphant parade for the victors (yes, I hear all of that in this piece). I hope you enjoy it as much as I do:

Have a great weekend folks!

Since Monday’s S&P 500 low of 1560, we have seen a 60 point move to yesterday’s high of 1620, which is a 3.8% increase. Pretty nice for one week, but it is playing havoc on the technicals. The McClellan Oscillator has gone from oversold to approaching overbought at 21 (if it closes at or above 60 today, then it is overbought). It isn’t a concern for today, but we could see some profit-taking early next week if this continues.

Speaking of 1620, that sticks out like a sore thumb as resistance, with both the 50 and 20 day moving averages sitting there, especially considering it was where the S&P 500 couldn’t break yesterday. Even if the S&P breaks through that today, it will have to get past 1625, and the 10 week moving average, before I would call this a resumption of this year’s bull market. Considering we have opened above the previous day’s close for three days in a row, the bull market case is looking stronger.

But there is still a bearish case to be made. Even though the S&P 500 futures are up slightly this morning, the September futures are still pointing below yesterday’s close (1611 versus 1613). In addition, it is summer, which isn’t typically the season for big bull moves. After we get the final window dressing on the 2nd quarter today, a sell-off could be in the cards for next week.

For the record, you have to go back to December 31st/January 2nd to see a month-end/month beginning where they both went in the same direction. Don’t expect Monday’s results to be the same as today.

The S&P 500 levels to watch today:

UPSIDE: 1620 (June 27th’s high and the 50 day moving average and the 20 day moving average), 1622-1625 (7 data points), 1628-1630 (3 data points), 1637 (June 12th’s high), 1639-1640 (6 data points), 1644 (June 7th’s high), 1646 (2 data points), 1648 (June 10th’s high), 1652 (June 19th’s high), 1654 (June 18th’s high), and 1662 (top of the Bollinger Bands).
LAST CLOSE: 1613.
DOWNSIDE: 1610 (June 12th’s low and the 10 day moving average), 1606-1608 (4 data points), 1597-1599 (3 data points, including April’s high), 1592-1593 (2 data points), 1588 (June 24th’s high), 1584 (June 20th’s low), 1581 (May’s low), 1577 (2 data points and the bottom of the Bollinger Bands), 1572 (March’s high), 1560 (June 24th’s low), 1536 (April’s low), 1530 (February’s high), 1509 (January’s high and the 200 day moving average).

The end of the month, anyway…

CNBC: BlackBerry Posts Unexpected Loss, Light Sales

My condolences to you BlackBerry fans out there:

BlackBerry delivered quarterly earnings and revenue that missed analysts’ expectations on Friday.

…The company posted a first-quarter loss, excluding items, of 13 cents per share, compared with a quarterly loss of 37 cents a share in the year-earlier period.

Revenue increased to $3.1 billion from $2.81 billion a year ago.

Wall Street had forecast the company would report a profit, excluding items, of 6 cents a share on $3.36 billion in revenue, according to a consensus estimate from Thomson Reuters.

Smartphone shipments in the first quarter were up 13 percent to 6.8 million from the previous quarter, the company said.

On the bright side, BlackBerry did improve over the previous year. But missing Wall Street’s conservative estimates is a stock-killer, especially when they were expecting a profit and the company had a loss. Expect a brutal summer for this stock.

For those of you considering this a long-term hold, there are 2 aspects to this story.

First, BBRY needed to show it could turn a profit, almost regardless of sales. If you are going to be a niche player in an industry, that is fine as long as you can be a profitable niche player. Otherwise, you are just whistling past the bankruptcy court…

Second, BBRY’s stock is still cheaper than book value. That makes it an attractive takeover target for any company looking to get into the smartphone industry, or possibly for a whale to come along and break it up. I will have to look at the new financials closer, but if BBRY drops to 50% of book value, I may have to buy some. I am adding it to my watch list for now.

Bloomberg: Fed Officials Intensify Effort to Curb Surge in Interest Rates

Federal Reserve officials intensified efforts to curb a growth-threatening rise in long-term interest rates, seeking to clarify comments by Chairman Ben S. Bernanke that triggered turmoil in global financial markets.

William C. Dudley, president of the Federal Reserve Bank of New York, said yesterday any decision to reduce the pace of asset purchases wouldn’t represent a withdrawal of stimulus, and that an increase in the Fed’s benchmark interest rate is “very likely to be a long way off.” He said bond purchases could be prolonged if economic performance fails to meet the Fed’s forecasts.

Concerns the Fed may curtail accommodation helped push the yield on the 10-year Treasury note as high as 2.61 percent this week from as low as 1.63 percent in May. The remarks by Dudley, who also serves as vice chairman of the policy-setting Federal Open Market Committee, along with Fed Governor Jerome Powell and Atlanta Fed President Dennis Lockhart sought to damp expectations that an increase in the benchmark interest rate will come sooner than previously forecast.

Watching the Fed this week has been almost as much fun as watching a married man who said something innocently wrong to his wife, and she went ballistic. Somewhere, there is a Treasury note with a box of chocolates and a dozen roses…

Business Week: Four Reasons Mexico Is Becoming a Global Manufacturing Power

Should you invest in Mexico? Here are 4 reasons to do it:

1. Manufacturing wages, adjusted for Mexico’s superior worker productivity, are likely to be 30 percent lower than in China by 2015…
2. Mexico has more free-trade agreements than any other country…
3. Mexican manufacturing has a significant advantage in energy costs…
4. Industry clusters, especially in autos and appliances, are growing…

I see the first two reasons as the main ones in Mexico’s favor on a go-forward basis. Energy costs can change tomorrow, although Mexico is still a major oil producer. And the industry clusters are more of a symptom of existing growth, with no guaranty of future growth.

Now for some reasons from me not to invest in Mexico:

1. High crime. The article mentions Mexico’s crime rate, but this is still a significant concern.
2. Culture. Actually, culture is a double-edged sword in Mexico. On the one hand, the workers defer to authority, which is good for controlling an operation there. On the other hand, that deference is nearly total, to the point where many workers will do nothing more than they are told to do, even if common sense would tell them otherwise. From my perspective as a computer geek, I can appreciate this mentality from Mexicans (computers are the same way), but most business people will get frustrated by it. One of the catch phrases in the business world today is “inclusive meritocracy”, and it is difficult to advance that ideal in Mexico.

However, I think it is still possible to have a successful operation in Mexico, as long as you treat it like a computer: You need good leadership there (like a computer operating system), and you need to keep in mind that it will only do exactly what you tell it to do, and that includes everything from manufacturing to accounting. Don’t assume anything.

All that said, I expect companies will eventually figure this out, even if they have to put aside some of their “developed world” preconceived notions. The biggest problem will remain the high crime, but companies will overlook this to be able to produce products cheaply.

If you are going to invest in Mexico, there is the iShares MSCI Mexico (EWW) etf for broad exposure. For more specific plays, there is Carlos Slim’s America Movil (AMX), which is also the largest holding of EWW. Other companies in Mexico (I am not recommending them, just mentioning them): Fomento Econ (FMX), Coca-Cola FEMSA S.A.B de C.V. (KOF), Grupo Financiero Santander S.A.B. de C.V. (BSMX), Grupo Televisa, S.A.B. (TV), CEMEX, S.A.B. de C.V. (CX), Grupo Aeroportuario del Sureste, SAB de CV (ASR), Grupo Aeroportuario del Pacifico S.A.B. de CV (PAC), Gruma S.A.B. de CV (GMK), Grupo Simec S.A.B. de C.V. (SIM), Industrias Bachoco S.A.B. de C.V. (IBA), and Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (OMAB).

Fox News: Lawmakers fail to reach student loan deal before July 4 break

College is about to get more expensive:

Interest rates on student loans are set to double on Monday after lawmakers failed to find a bipartisan solution to keep the federally subsidized borrowing costs down.

The Senate adjourned Thursday night for the July 4 recess without approving a student loan rate package.

With the current, 3.4 percent interest rate on Stafford loans — the most popular funding for college students – set to expire on July 1, a host of 11th-hour fixes all failed to generate support from both sides of the aisle. Without new legislation — either to extend the cap, set a new one or find another way to peg the loans – the cap rises to 6.8 percent. Congress could always forge a solution in the following days, even lowering rates retroactively.

GNW: 0.23 to $11.39 ( 2.06% , 21.56% overall)– bought at $9.37
IACI: 0.32 to $47.60 ( 0.68% , -3.86% overall)– bought at $49.51
IAU: -0.24 to $11.65 ( -2.02% , -12.86% overall)– bought at $13.37
NNVC: 0.06 to $0.70 ( 9.38% , 48.94% overall)– bought at $0.47
YHOO: 0.18 to $25.47 ( 0.71% , 5.47% overall)– bought at $24.15

OVERALL: +0.10%

“If one rejects laissez faire on account of man’s fallibility and moral weakness, one must for the same reason also reject every kind of government action.”–Ludwig von Mises

We are entering “window dressing season” on the markets, otherwise known as the end of the quarter. I don’t see anything definitively negative from the technicals, and the S&P 500 futures are pointing up at the moment, so we could ride out the next 2 days on a positive note. Considering next week is the July 4th week, we could see a big move on Monday, July 1st, followed by light volume the rest of the week. Short-term bullishness seems likely.

Watch out for next Friday, July 5th: We get the monthly U.S. Jobs report. That should also keep trading volume down next Monday-Wednesday (U.S. markets will be closed next Thursday).

The S&P 500 levels to watch today:

UPSIDE: 1606-1608 (3 data points), 1610 (June 12th’s low), 1612 (10 day moving average), 1619 (50 day moving average), 1622-1625 (7 data points and the 20 day moving average), 1628-1630 (3 data points), 1637 (June 12th’s high), 1639-1640 (6 data points), 1644 (June 7th’s high), 1646 (2 data points), 1648 (June 10th’s high), 1652 (June 19th’s high), 1654 (June 18th’s high), 1666 (top of the Bollinger Bands), and 1687 (May’s high and the all-time high).
LAST CLOSE: 1603.
DOWNSIDE: 1597-1599 (3 data points, including April’s high), 1592-1593 (2 data points), 1588 (June 24th’s high), 1584 (June 20th’s low), 1581 (May’s low), 1577 (2 data points and the bottom of the Bollinger Bands), 1572 (March’s high), 1560 (June 24th’s low), 1536 (April’s low), 1530 (February’s high), 1509 (January’s high), and 1508 (200 day moving average).

Yahoo Finance: As Stocks, Bonds and Gold Fall, Where’s the Cash Going?

The answer:

…the past month has been about greater urgency among sellers of bonds, stocks and commodities to reduce exposure, without much motivation to immediately reallocate it elsewhere. Proceeds of security sales can be immediately recycled into the same kind of investment, or another market, or used to pay down debt — or turned into a boat, a vacation or a diamond ring.

So the evident excess of urgency by sellers across most markets, without any asset obviously capturing an outsize percentage of their newly raised cash, implies a sort of broad, temporary paralysis. The default way-station for cash raised is bank and brokerage accounts. When the outlook is considered uncertain and conviction wanes, it sits there longer.

The U.S. dollar has been rebounding sharply, implying a greater willingness among investors to hold short-term dollar instruments such as Treasury bills, either to play the currency appreciation or just wait.

Investors won’t sit on the sidelines (or cash) forever. At some point, it has to go somewhere, or else risk losing value to inflation. Where it will go, and when, remains to be seen.

However, this actually bodes well for equity markets in the near-term, and not necessarily because that is where the cash will go. If trading drops in equity markets, it leaves them to the high frequency traders, thereby creating the slow, steady, low volume “melt-up” markets. I won’t say the recent correction is done, but it is a possibility. Even if it isn’t, my guess is it won’t go for much longer.

Business Insider: World Drug Report Reveals The Staggering Extent Of North America’s Meth Problem

From 2007 to 2011, the purity of available meth in the U.S. skyrocketed while the price tumbled from $290 per pure gram to less than $90 — a combination that hooks people on the fast, intense, and long-lasting high.

Part of the problem is simple economics: With unemployment over 7%, people have to find a way to make a living. And manufacturing illegal drugs is a great way to make money when “the powers that be” are ignoring the economy for trivial matters (would you care about the “sequester” or healthcare or whether power is produced from coal, when you don’t know where your next meal is coming from?). Whether you agree with the ethics of producing illegal drugs, it is out there regardless, and will continue to be out there no matter what we do.

As Warren Buffett once said,

“One of RJR’s largest shareholders, he knew tobacco and liked it. “I’ll tell you why I like the cigarette business,” he said. “It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty.”

The same can be said for the illegal drug business. As long as people are willing to buy something, there will always be other people willing to sell it.

Business Week: What if the World Doesn’t Want IPhones?

Presented without comment:

The same iPhones that fly off American shelves are losing ground in key markets abroad—an example, in case one was needed, that what works in the U.S. doesn’t automatically succeed overseas. This is no temporary stumble, according to new data, but an illustration that we’ve reached the end of the beginning for smartphones and a sign that Apple’s (AAPL) ways of appealing to customers could prove less effective in the future.

IDC released first-quarter numbers on smartphone shipments in Western Europe, and Apple’s share dropped to 20 percent. A year ago, by contrast, iPhone shipments had 25 percent of the market. Much of Apple’s lost business went to Samsung (005930), which accounted for 45 percent of shipments (up from 39 percent). But companies like Sony (SNE) and LG (066570), seen as also-rans in the United States, also experienced big gains.

People who want high-end smartphones have probably already bought them, says Francisco Jeronimo, IDC’s director of European mobile device research. New buyers have less disposable income and are buying smartphones only because they have become cheap. “We are now entering the second wave of smartphone adoption, which will be driven by those users with no need for a smartphone,” he says.

These customers have less money to spend and less reason to splurge when cheaper products are available. In addition, European phone carriers are much less generous when it comes to subsidizing customers’ phones. IPhones don’t seem much more expensive than other smartphones in the U.S., but the difference can be significant for those who are paying for them out of pocket.

The horizon for high-end smartphone makers seems even bleaker when you look beyond the world’s richest markets. Asian and Pacific markets, excluding the wealthy Japanese, accounted for half of total demand for smartphones in the first quarter. Chinese smartphone makers have been serving these customers just fine, gathering expertise that could potentially help them sell to budget-minded Europeans in the future.

Financial Review: S Korea introduces fastest wireless network

It is things like this that make me love South Korea:

South Korea’s largest mobile operator is launching what it says is the world’s fastest wireless network.

SK Telecom has launched a new generation mobile network that offers speeds twice that of its existing long-term evolution (LTE) network and 10 times that of 3G services.

The new LTE-Advanced, which will be immediately available in Seoul and 40 other cities, will allow users to download an entire movie in about 40 seconds.

The network was launched on Wednesday in conjunction with a new LTE-A capable version of Samsung’s flagship Galaxy S4 smartphone, and SK Telecom said half-a-dozen other compatible smartphones were expected to be offered in the second half of 2013.

“LTE-A will … give birth to new mobile value-added services that can bring innovative changes to our customer’s lives,” said Park In-Sik, president of network business operations at SK Telecom.

The company plans to use the new network to launch a group video-calling service for up to four users, which it claims will boast 12 times better video quality and audio quality twice as clear than any existing service.

One of the most wired countries on earth, South Korea already has about 20 million 4G users.

In May, researchers at Samsung Electronics said they had successfully tested super-fast 5G wireless technology that would eventually allow users to download an entire movie in one second.

The South Korean giant said the test had witnessed data transmission of more than one gigabyte per second over a distance of two kilometres.

However, the new technology will not be ready for the commercial market before 2020 at the earliest.

GNW: 0.28 to $11.16 ( 2.57% , 19.10% overall)– bought at $9.37
IACI: 0.32 to $47.28 ( 0.68% , -4.50% overall)– bought at $49.51
IAU: -0.53 to $11.88 ( -4.27% , -11.14% overall)– bought at $13.37
NNVC: 0.03 to $0.64 ( 4.92% , 36.17% overall)– bought at $0.47
YHOO: 0.33 to $25.29 ( 1.32% , 4.72% overall)– bought at $24.15

OVERALL: -0.79%

I sold my ETFS Physical Silver Shares (SIVR) today because it dropped below a descending support line, which is about as bad as it gets technically speaking. This has been a bad play overall, with the only saving grace being it was a small position:

SIVR: -0.92 today, -4.42 overall to $18.43 (-4.75% today, -19.34% overall)–bought at $22.85

Contrary to Media reports, I would call yesterday’s rally more technical than news-driven. But today is a new day…

S&P 500 futures are showing some strength this morning, with the September futures (currently at 1590) actually pointing above yesterday’s close. Is this a turnaround, or a market head fake? The technicals aren’t showing me anything definitive, so either possibility seems open. The P&F chart still has a bearish price target of 1480, although that could change if we see a longer term move upwards. The Williams %R and the McClellan Oscillator both moved out of oversold territory with yesterday’s bounce. With the S&P 500 finishing above the bottom of the Bollinger Bands (at 1578), either direction remains a possibility.

My magic 8-ball says “Reply hazy, ask again later”…

The S&P 500 levels to watch today:

UPSIDE: 1593 (June 25th’s high), 1597-1599 (3 data points, including April’s high), 1607-1608 (2 data points), 1610 (June 12th’s low), 1613 (10 day moving average), 1618 (50 day moving average), 1622-1625 (7 data points and the 20 day moving average), 1628-1630 (3 data points), 1637 (June 12th’s high), 1639-1640 (5 data points), 1644 (June 7th’s high), 1646 (2 data points), 1648 (June 10th’s high), 1652 (June 19th’s high), 1654 (June 18th’s high), 1669 (top of the Bollinger Bands), and 1687 (May’s high and the all-time high).
LAST CLOSE: 1588 (June 24th’s high).
DOWNSIDE: 1584 (June 20th’s low), 1581 (May’s low), 1578 (bottom of the Bollinger Bands), 1577 (2 data points), 1572 (March’s high), 1560 (June 24th’s low), 1536 (April’s low), 1530 (February’s high), 1509 (January’s high), and 1507 (200 day moving average).