Beijing’s policymakers have shown more proof that they’ve changed course: The yearlong fight to suppress inflation is shifting to economy-boosting efforts.

That means money-tightening policies are reversing course. Easier credit hopefully will fight the economic drag imposed by, among other things, Europe’s crisis.

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Bloomberg reports that the People’s Bank of China will let the country’s five biggest banks increase lending by roughly 5% in the current quarter. The report cites “two people at state lenders who have knowledge of the matter.”

Most interest rates in China are fixed by the government, including deposit rates, commercial rates and mortgage rates.

The PBOC’s primary monetary tools include the supply of credit — caps on how much a bank may lend, for instance.

The PBOC’s tool of choice in its recently ended tightening phase was the reserve requirement ratio, that percentage of deposits that a bank must set aside as cash. More cash put aside means less cash available for lending.

Hopes for easing have helped boost China’s Shanghai composite and Hong Kong’s Hang Seng indexes recently.

Those two gauges each rose 1.3% Thursday. Talk of more action from the International Monetary Fund to address Europe’s debt crisis also lent a hand, analysts say.

What does this mean for U.S.-listed ADRs from China? Remarkably little. A scan of the best-rated names from the mainland that trade on the NYSE or Nasdaq yields almost nothing worthwhile.

Gone are the days when a solid uptrend in the U.S. was dominated by names such asBaidu (BIDU), Sina (SINA), New Oriental Technology & Education (EDU), China Mobile (CHL) and Yanzhou Coal (YZC).

It’s no surprise that former leaders have fallen so hard — and indeed these have done just that.

But almost no new Chinese names have taken their place. And that’s odd coming from the country that many have said would be the world economy’s new driver of growth.

Try this exercise. Run a screen of American depositary receipts — from all countries — that show RS and EPS Ratings of at least 75 each.

What do you notice? First, the pickings are slim. Second, China is barely represented.

Soufun Holdings (SFUN) appears on the list. The small-cap company operates a Web portal that provides real estate listings and information. Soufun’s earnings will likely show a 57% gain for 2011 when the final numbers come in. That will be its sixth straight year of profit improvement.

But look past the 99 EPS Rating and 94 RS Rating, and you’ll see a thinly traded stock that is rebounding from a 68% dive.

Mindray Medical (MR), a Chinese maker of patient-monitoring systems, is breaking out from a long base. But much of that base was built below its 10-week line, a serious flaw. And while sales and margins are fat, earnings are not.

Mindray Medical’s biggest plus may be a huge outstanding short interest. That’s not enough to make a great winner.

source form: investors

Three medical industry groups are in the top 11 of IBD’s 197 groups, based on six-month price performance. A fourth is No. 30.

The overall sector is held back by the four additional medical industry groups that are in the bottom 30 of IBD’s 197, going into Thursday.

 

“There are quite a few macro forces at work,” said Steve Silver, equity analyst for S&P Capital IQ. “Some industry groups are beneficiaries. Others are victims.”

Several sector leaders are clustered in two of the top 30 groups.

Alexion Pharmaceuticals (ALXN) and Celgene(CELG) are in No. 2-ranked medical-biomed/biotech. Takeovers of small biotechs have helped drive the group, Silver says.

Endo Pharmaceuticals (ENDP) is in No. 30 medical-ethical drugs.

Biomed/biotech was No. 23 six weeks ago and Medical-ethical was No. 29.

Wells Fargo Advantage Growth , with $7.6 billion in assets, boosted its Alexion stake in its latest disclosure period. The $4 billion Goldman Sachs Growth Opportunities recently began its position.

The $2.6 billion Janus Global Select recently began to invest in Celgene. And $32 billion Fidelity Low Priced Stock Fund added to its Endo holdings.

Alexion is up 49% and Celgene 23% in the past six months. Endo is down 6% but up 42% from its Oct. 4 low.

All three are driven by products with competitive advantages. “Several treat rare, life-threatening diseases, so they are powerful niche medicines,” Silver said.

Alexion treatments serve small patient groups. No one else makes treatments for them.

Its Soliris treats the blood disorder known as PNH. It won approval in September for patients with the syndrome called aHUS.

“Cash flow goes to profits and pays for takeovers,” Silver said.

Celgene keeps finding new applications for its cancer treatment Revlimid. The company has several other drugs in various stages of development.

Endo is diversified with devices as well as drugs. Silver sees the firm’s acquisition streak slowing to give it time to pay down debt.

Going forward, Greg Bolan, an analyst for Sterne Agee, likes HMOs. As workplace health plans shift more costs onto plan members, more of them switch to HMOs.

IBD’s medical-managed care group ranks No. 10.

Bolan also likes health care information technology. Medical-systems/equipment is ranked No. 11.

“The government’s $30 billion in incentives to physicians and hospitals to take record-keeping electronic from paper is a massive jolt of incremental revenues,” he said.

Outsourcing has been another driver for the sector. Small caps like Parexel (PRXL) andCovance (CVD) help big-cap drug and device makers with several stages of new product development, Bolan says.

Parexel is barely above where it was 52 weeks ago. Its Composite Rating from IBD is a dreadful 23.

After eight quarters of slowing earnings per share growth, Covance’s EPS grew 0%, 14% and 42% the past three stanzas. Sales growth also accelerated.

Still, the stock is way down over the past 12 months. It is struggling to regain its 10-week line, which is below its 40-week average.

source form: investors

Many people determine what is true, and then forget about it, rather than let it nourish their lives, Maritain said.

So it is with investing.

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The hardest challenge of investing isn’t learning all the probability-based rules discussed in “How to Make Money in Stocks.”

With time and effort, you can learn the rules. The big challenge comes after you learn the rules.

The challenge? You must follow the rules!

It’s human nature to look for loopholes, exceptions, excuses — any reason to ignore a rule. But that’s the road to investor hell — a portfolio filled with “exceptions” that turn out to be exceptionally efficient at losing your money.

One rule some investors have trouble following is the rule against buying extended stocks.

A fundamentally strong stock that breaks out of a base in big volume shouldn’t be bought after it rises 5% past the ideal buy point.

Eventually an investor will encounter a situation where this rule seems like a real party pooper.

You miss the breakout and then watch the stock rise day after day.

“Surely, IBD doesn’t believe I should follow this rule all the time,” you say. (We do, except for certain gap-ups that skip the 5% range.)

There’s a simple reality that makes violating this rule risky. Most winners will rise 20%-25% and then begin consolidating. That’s why investors should take most profits at 20%-25%.

If an investor buys a stock that is extended 10%, 15% or 20% past the buy point, the investor often will be buying just in time for a downturn.

And remember, not all breakouts make it to 20%. So you might be buying extended shares from the investor who bought properly and is now cashing in. Does that sound like a winning strategy?

Southwestern Energy (SWN) broke out of a double-bottom base on Feb. 1, 2005 with a 53.19 buy point 1 . Seven sessions later, the oil and gas developer closed at 57.71, up 8% and extended 2.

After a 19% gain, the stock began to form a base on base 3. Investors who bought at the peak faced the 8% sell rule two days later 4. Those who bought only 10% extended saw a fleeting 8% gain and faced the sell rule four weeks later.

source form: investors

Time of release: 01/20/2012 12:00 GMT, 7:00 EST

Primary Pair Impact: USDCAD

Expected: 2.7%

Previous: 2.9%

DailyFX Forecast: 2.5% to 2.8%

Why Is This Event Important:

Consumer prices in Canada are expected to increase at an annualized 2.7% in December, and the slower rate of inflation could spark a bearish reaction in the loonie as the development dampens expectations for higher interest rates. As the Bank of Canada maintains a cautious outlook for the economy, easing price pressures may encourage the central bank to endorse a neutral tone for monetary policy, and Governor Mark Carney may keep the benchmark interest rate at 1.00% throughout 2012 in an effort to stem the downside risks for the economy. However, the stickiness in the core rate of inflation could prop up the Canadian dollar as the central bank concludes its easing cycle, and the BoC may talk up speculation for higher borrowing costs as policy makers expect the economic recovery to gradually gather pace over the coming months.

Recent Economic Developments

The Upside

The Downside

Elevated input costs paired with the rise in private sector consumption may encourage businesses to pass on higher costs onto consumers, and an above-forecast inflation reading could produce a test of former resistance, which lies around parity. However, as firms scale back their outlook for future sales, businesses may keep a lid on consumer prices, and a soft inflation report could drag on the Canadian dollar as interest rate expectations deteriorate. In turn, we may see the USD/CAD give back the decline from earlier this week, and the exchange rate may continue to pare the sharp selloff from December (1.0414) as the development dampens the scope of seeing a rate hike this year.

Potential Price Targets For The Release

How To Trade This Event Risk

Although we’re expecting to see a drop in the headline reading for inflation, an uptick in the core CPI could pave the way for a long Canadian dollar trade as it fuels speculation for higher borrowing costs. Therefore, if we get an in-line print paired with a higher core rate, we will need a red, five-minute candle following the report to establish a sell entry on two-lots of USD/CAD. Once these conditions are met, we will place the initial stop at the nearby swing high or a reasonable distance from the entry, and this risk will generate our first objective. The second target will be based on discretion, and we will move the stop on the second lot to cost once the first trade reaches its mark in order to preserve our profits.

In contrast, the slowing recovery in Canada paired with the weakening outlook for private consumption may ultimately lead to a soft inflation report, and a weaker-than-expected print is should drag on the exchange rate as interest rate expectations deteriorate. As a result, if both of the annualized figures fall short of forecast, we will carry out the same setup for a long dollar-loonie trade as the short position mentioned above, just in the opposite direction.

Impact that the Canada Consumer Price report has had on CAD during the last month

November 2011 Canada Consumer Price Index

The headline reading for Canadian inflation held steady at 2.9% for the second consecutive month in November, while core consumer prices crossed the wires at 2.1% amid forecasts for a 2.2% print. A deeper look at the reported revealed a 1.8% drop in energy prices, with prices for clothing and shoes contracting 3.1%, while the cost for food increased 0.9% during the month to mark the first rise since July. As the slowing recovery in Canada dampens the outlook for inflation, the Bank of Canada may preserve a wait-and-see approach in 2012, but the central bank may see scope to gradually normalize monetary policy over the medium-term as the region benefits from the more robust recovery in the United States – the region’s largest trading partner. Indeed, market participants showed a fairly muted reaction to the in-line print, with the USD/CAD holding above 1.0300, but the loonie gained ground during the North American trade as the exchange rate ended the day at 1.0294.

source form: dailyfx

While at this point it is still way too early to make any serious calls, we have been projecting relative underperformance in the commodity currencies over the coming months as the fallout from the global recession spreads. Our view from the start of the recession has always been a 3 phase recession view which originated in the United States, spread to Europe, and will soon move on to China, the commodity bloc economies and emerging markets. Although these phase three economies have slowed in the face of the US and Eurozone slowdowns, in our opinion, the intensity of the recession has not been fully realized in these regions. As such, we project relative underperformance in these economies even against the Eurozone going forward and look for crosses that have recently posted multi-year and record lows, like EUR/AUD and EUR/NZD to soon aggressively reverse course.

Data out of China has been less and less encouraging of late, while both Australia and New Zealand produced some extremely discouraging economic data this week, with terrible employment and much softer CPI respectively. With markets, it is also always about what has been priced in and what has not been priced in rather than what actually is at present. We believe that as bad as things are in the Eurozone, there is very little room for additional downside as most of the bad has been priced in, while in Australian and New Zealand, there is still a good deal of downside risk that has not been appropriately priced into markets.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: The market has finally managed to find some bids and although the broader underlying trend remains intensely bearish, the risks from here are for additional corrective gains back towards the 50 and 100-Day SMAs in the 1.3100-1.3400 area before the next lower top carves out. Some falling trend-line resistance has already been broken on the daily chart and the 10-Day SMA looks to be on the verge of crossing back above the 20-Day SMA to provide added confirmation for short-term bullish structural shift. Setbacks should now be well supported ahead of 1.2750, while only back under 1.2620 negates short-term bull bias.

USD/JPY:Despite the latest pullbacks, we continue to hold onto our constructive outlook while the market holds above 76.55 on a daily close basis. We believe that any setbacks from here should be limited in favor of a fresh upside extension back towards 79.55 over the coming weeks. Look for a break above 78.30 to confirm and accelerate, while only a daily close below 76.55 negates and gives reason for pause.

GBP/USD: The market has mostly been locked in some sideways chop over the past few weeks with any rallies very well capped ahead of 1.5800 and setbacks supported on dips below 1.5300. Until either side is convincingly broken, we would expect to see additional range trade. Therefore the preferred strategy is to look to buy range dips and sell by range highs. Only a weekly close above 1.5800 or below 1.5250 would give reason for outlook shift.

USD/CHF: Although our overall outlook remains intensely bullish, the market is in the process of some interday consolidation before the next major upside extension beyond 0.9600 and towards parity. As such, from here, we see risks for additional setbacks towards 100-Day SMA by 0.9100 from where a fresh higher low is sought out. Ultimately, only a sustained break back under 0.9000 would negate constructive outlook and give reason for pause. Dips towards the psychological barrier should therefore be used as formidable buy opportunities.

source form: dailyfx

U.S Housing Starts Fell by 4.1%

According to a recent report, privately owned Housing starts fell in by 4.1%; nevertheless, the annual rate for December 2011 was 24.9% above the December 2010.

As I have sited in the pasts, there is a supposed lagged (by one day) and negative relationbetween the development in housing starts and gold; i.e. as Housing starts annual rates falls, gold tends to increase the following day. If this relation will hold up then we should expect gold to rally today.

Forex / Gold & Silver– January

The Euro/USD rose again for the third straight day, yesterday by 0.82% to reach 1.2863; currently itseems that the debt auctions of France and Spain went well, as they have sold their bonds at a lower yields than anticipated. Therefore, if the Euro will further appreciate against the USD it may help rally gold and silver.

U.S. Treasuries / Gold & Silver– January

In recent months there seems to be positive linear correlations between the daily percent changes of U.S. 10 year notes yield and precious metals (during January, the linear correlations for 10 year note yields and gold and silver is 0.55 and 0.634, respectively). If the LT U.S. treasury yield will continue to rise, it may also indicate that gold and silver will tend to increase.

Gold and Silver Outlook

Gold and silver changed direction and slightly fell yesterday, but their general trend in January is still upward. The ongoing rally of the Euro against the USD will continue to affect commodities trading and may trade up gold and silver during the day. Finally, the upcoming U.S. existing home sales might affect the direction of gold and silver as I have presented in the past.

source form: dailyfx

As the managing director of Bethesda, Md.-based Absolute Investment Management, Robert Wiedemer oversees $200 million in assets under management. He explains what he sees in store for the market next year and which ETFs investors should buy now.

IBD: What is your outlook on the U.S. and global economy and stock market for 2012?

 

Wiedemer: The U.S. is in a “suspended recession.” The economy is still in the recession of 2008-09, but it has been suspended by massive government borrowing and massive government money printing. Hence, the outlook for 2012 will be heavily determined by how much more of this economic stimulus the government will create.

We expect that the government will continue to borrow at its current rate, but with little or no increase. Maintaining the massive spending increases of the past will keep the economy from falling dramatically, but it will not provide a major stimulus for growth. Only a big increase in borrowing will do that.

We do expect to see an increase in money printing. Another round of money printing, in some form of quantitative easing, or QE, will likely keep the stock market from falling too far and will indirectly keep the economy from declining substantially because a high stock market will encourage business investment and consumer spending.

Overall, this will result in slow or no growth, but likely not a big decline. Europe will likely go into a recession, and that will be a head wind to any economic growth in the U.S.

Furthermore, China’s growth may slow down dramatically and likely already has, but the Chinese government is not releasing a very accurate picture of its economic growth rate.

The combination of negative growth in Europe and slowing growth in China will help limit U.S. economic growth in 2012.

IBD: What leads you to believe another global financial meltdown is coming? How will it compare to the European debt crisis and the 2008 U.S. financial crisis?

Wiedemer: The fundamental economic problems, which will cause a global financial meltdown, have not improved at all. They have only gotten worse.

The four economic bubbles — housing, consumer spending, stock market and private credit — are being held up by massive increases in government debt and dollar bubbles.

source form: investors

Expectations of some sort of ECB lending operation helped spark Tuesday’s gains, including the follow-through move in the U.S. market. News of a bigger-than-expected refinancing added the promise of more gains, at least initially.

For more in-depth coverage on the Longer Term Refinancing Operation, click here for related story.

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With the U.S. market’s big gains Tuesday pointing the way, Taiwan’s weighted index shot up 4.6%. There, as if to help a market already on the upswing, the government announced a fund that will support prices on the Taiwan stock exchange, which had been diving.

That index shows a year-to-date loss of 22.4%. The iShares MSCI Taiwan Index (EWT) has lost 25.7% in 2012, and is in 14th place out of the 18 slots on IBD’s Daily World Map.

India’s Sensex 30-share index leapt 3.4%, South Korea’s Kospi jumped 3.1% and the Singapore Straits Times index added 2.3%.

Hong Kong’s Hang Seng index rose just 1.9%, while the Shanghai fell 1.1%.

China’s stocks have been lagging for more than a year.

The Shanghai composite has dropped a year-to-date 22%, while the iShares FTSE China 25 Index (FXI) lost 19%, holding the No. 9 slot on the Daily World Map.

There, hopes for standout growth are giving way to fears of a slowdown after more than a year of tightening from the People’s Bank of China.

Add to that some loss of confidence among investors after a spate of corporate-accounting fraud. Some companies simply invented fictitious customers, sales and money.

In Europe, major indexes ended lower: Frankfurt’s DAX-30 fell 0.9%, France’s CAC-40 shed 0.8% and the FTSE 100 lost 0.6%.

Those mild declines mask a wild ride.

The DAX-30 had climbed as much as 2% on optimism that the ECB’s move, a sort of back-door approach to quantitative easing, would help see the EU through its crisis. The CAC-40 saw a 2.2% intraday best. As doubts about the plan crept in, those bourses reversed lower.

But the EU’s woes weren’t the market’s sole sore spot Wednesday. Tech giant Oracle Systems’ (ORCL) Q2 report, issued late Tuesday, missed estimates so badly as to cast a pall over all things technological.

Oracle’s gap-down 12% loss set the tone for foreign tech ADRs. Ireland-based IT services provider Accenture (ACN) lost 4%, German business-software giant SAP (SAP) sank 6% and Taiwanese chip designer Silicon Motion Technology (SIMO) dropped 2%.

ASML Holding (ASML), a Netherlands-based chip-equipment maker with fast-fading profit and sales results, dipped 1%.

source form: investors

The stock has found support at its 10-week line, which has been rising. Look for the stock to clear resistance around 40.

BE, which makes seats, drink carts and other products, got a boost last week when aircraft maker Boeing (BA) announced thatSouthwest Airlines (LUV) would buy 150 next-generation 737s, adding to a previous order for 58 current-generation 737s. It was one of Boeing’s biggest orders ever.

 

Still, profit at Wellington, Fla.-based BE is seen growing just 19% in Q4 vs. a year ago, down from gains of 44%, 38% and 56% in the prior three quarters. Also, the Composite Rating and its Earnings Per Share Rating rank 10th and fifth, respectively, in the Aerospace-Defense industry group.

Nevertheless, big investors are showing interest. Fund ownership has increased for three consecutive quarters, and the stock’s up/down volume ratio of 1.2 tops the neutral reading of 1.0, indicating rising demand.

The Aerospace-Defense industry ranked a respectable 36th out of 197 in Wednesday’s IBD.

Also, BE’s base is a first-stage pattern, which has a better chance of success than those in later stages.

Southwest’s big order for Boeing aircraft reflects growing global demand for commercial jets, which stands to benefit suppliers like BE.

The International Air Transport Association sees worldwide passenger traffic rising an average 4.6% annually through 2015. International travel is seen climbing at a slightly faster 5.4% average annual pace during that time.

Planes used on international routes are bigger and have more amenities.

“Industry conditions remain very favorable,” BE CEO Amin Khoury told analysts last month.

source form: investors

IBD asked big money managers to share their potentially most profitable ETF investing strategies for the tough market they see ahead.

• Alan Zafran, partner at Luminous Capital in Menlo Park, Calif., with $4.7 billion in assets under management.

Money managers, from left, Alan Zafran, Jeffrey Sica, Rob Stein and Mark Eshman favor dividends and/or shorting emerging markets. View Enlarged Image

1. Vanguard Dividend Appreciation Index Fund(VIG) : This fund lets investors buy a basket of companies with a history of raising their dividends over time. Only companies with solid cash flow generation and predictable, sustainable business models can steadily raise their dividends year after year. These are the type of high quality stocks that investors should own during times of heightened macroeconomic uncertainty.

2. IShares IBoxx Investment Grade Corporate Bond Fund (LQD): U.S. corporations have markedly improved the strength of their balance sheets over the past three years for two reasons.

First, they have taken advantage of the low interest rate environment to refinance their debt obligations. Second, they have been reticent to add fixed costs (labor, capital spending), given the tepid economic recovery, so they are generating ample amounts of cash from operations to support their debt obligations.

3. SPDR Gold Trust (GLD): In order for politicians to find a credible and actionable solution to the European debt crisis, there will eventually need to be some form of money printing/quantitative easing to offset the defaults and fiscal austerity measures. Accordingly, since the euro is a fiat currency, it will fall in value relative to the price of gold.

• Jeffrey Sica, president of Sica Wealth Management in Morristown, N.J., with more than $1 billion in assets.

ProShares Short MSCI Emerging Markets (EUM): In 2012, we expect a year of uncertainty combined with extreme market volatility. We would invest in EUM to take advantage of our predicted declines in the emerging markets, due to the contagion of the European debt crisis. Emerging markets have done considerably well in the past few years as we saw the world economy emerge out of the subprime debt crisis of 2008.

However, in recent years we have seen slowdowns in several of the emerging markets combined with rising food prices. We anticipate that as the economic debt crisis in Europe accelerates, we will see less mature economics in the emerging markets.

The major risk to my theory would result from the unlikely possibility that Europe would emerge from its debt crisis, banks would stabilize and therefore avoid contagion. The second scenario would be that we would see the costs of raw materials decline, improving the overall economic health of countries with the emerging markets.

The third detriment to our thesis would be improvement in gross domestic product numbers, which most likely would involve these countries being able to export to Europe, the U.S. and emerging markets countries, further expanding the profitability of the businesses that are a part of the MSCI Emerging Markets index. The stop-loss level on EUM is 29.50.

• Rob Stein, global head of asset management at Astor Asset Management in Chicago, with $1.2 billion in assets.

SPDR S&P Dividend (SDY): With GDP (growth) to be in the lower end of the historical range as a result of reduced government spending, uncertain tax policy and declining high probability of recession in the euro zone where fiscal issues are worse yet, it would be hard to see sustainable stock market rallies.

Although earnings have been impressive as margins remain at historically high levels and profits following suit, it appears this is needed to just stay in place.

In the three years following the financial crises, corporate America has done a great job in repairing its balance sheets, creating ample cash reserves and improving efficiencies and margins.

Unfortunately, the private sector and government sector have not followed corporate America’s lead, and debt levels for both are not only unsustainable, but a real head wind for the economy and markets. With the housing sector still in decline, the almighty consumer, which accounts for more than 70% of GDP, will find it increasingly more challenging to support the fragile economy.

Corporations are the strongest leg of the economy, and dividend yields (as of Dec. 20) are appreciably above 10-year Treasury yields and some might say with less risk, given the state of the government’s financial condition.

Even if the market doesn’t hold up well in 2012, you get paid handsomely to wait. And balance sheets can support the dividend income with little worry of a cut.

• Mark Eshman, chairman of ClearRock Capital in Sun Valley, Idaho, with $300 million in assets.

IShares Dow Jones International Select Dividend Index (IDV): Europe is in the midst of an existential crisis, but it cannot and will not fail.

The reason is simple. Both the healthier countries (Germany and the Netherlands) and the weaker countries (Spain and Italy) will lose if a major bank fails. While any resolution in the euro zone will likely result in a recession, valuations are currently reflecting this.

Consequently, we like the idea of buying the highest quality, highest dividend-paying international companies.

IDV is comprised mostly of non-euro zone companies from the U.K. and Australia in recession-resistant industries like utilities, communication services, energy and noneuro zone financials. IDV sports a current yield of 4.68%, so we get paid nicely while we wait for Rome to stop burning.

source form: investors