GAME CHANGER: Citigroup Hires IBM's Watson Computer

Source: IBM
This is big news for the financial industry and could disrupt jobs on Wall Street. IBM's Watson computer, which "is built on IBM DeepQA technology for hypothesis generation, massive evidence gathering, analysis and scoring" and "applies advanced natural language processing, information retrieval, knowledge representation and reasoning, and machine-learning technologies to open-domain question answering" (IBM's definition), was just hired by Citigroup. This is what business school grads will be competing against. From Bloomberg:

"Watson can comb 10-Ks, prospectuses, loan performances and earnings quality while also uncovering sentiment and news not in the usual metrics before offering securities portfolio recommendations. It can also monitor trading, news sources and Facebook (FB) to help a treasurer manage foreign exchange risk."

Last November, after watching the PBS documentary on Watson's Jeopardy challenge, where it defeated two champions (video below), I wrote about IBM's Watson and Boston Dynamics' PETMAN humanoid robot, which, combined, could be a Terminator. Is there a way to put Watson's brain in PETMAN's head? There would be no need for human labor at that point. Here is the official IBM/Citi press release from March 5, but, more importantly, read what Manjoj Saxena, General Manager of IBM Watson Solutions, sees Watson doing in the financial services industry going forward (bold emphasis mine).

GM, Chrysler To Sell Natural Gas Trucks, See Price Gap Between Natural Gas, Gasoline and Oil

This could help the price gap between gasoline, oil and natural gas close if this trend really takes off. As well as lower the fuel tax on consumers.

"General Motors Co. on Monday plans to disclose it will offer bi-fuel Chevrolet Silverado and GMC Sierra 2500 pickups in the fourth quarter. The trucks will be built by GM and sent to a supplier that will retrofit them to use compressed natural-gas tanks." (read more at WSJ)

Natural Gas, Gasoline and Oil (source: stockcharts.com)

Greece's 1-year Bond Yield is at 1,006%, Debt Swap Decision Ahead

This is for the DistressedVolatility archives. View the chart/quote of the 1-year GGB yield at Bloomberg.com.

Source: Bloomberg.com

News:

Private Investors Holding About 20% of Greek Debt to Participate in Swap (Bloomberg)
Investors call on ECB to play fair in sovereign credit (Reuters)
ECB still obstacle to Greek deal (ekathimerini)
Goldman Secret Greece Loan Shows Two Sinners as Client Unravels (Bloomberg)
Venizelos Says Greece Prepared to Force Bondholders Into $140 Billion Swap (Bloomberg)
Greece Is Prepared to Force Debt Swap: Venizelos (Bloomberg Video)
Private Holders of Greek Debt Should Reject Swap Offer, DSW Says (Bloomberg)

ECRI's Achuthan Says 2012 Recession Call Still Stands (CNBC, 2/24/2012)

Source: CNBC/ECRI
ECRI's Lakshman Achuthan was on CNBC's Squawk Box on February 24 reiterating his call that the U.S. will be in a recession by mid-year 2012, despite the consensus view and haters saying otherwise. He made his original recession call in the media in early October 2011.

Achuthan mentioned that ECRI's U.S. Coincident Index (output, jobs, income and sales) was at a 21 month low, and said: "you haven't had a decline like that in the past 50 years without a recession following in short order." Below is a summary of the key points he made during the interview followed by the video.

Historical Look At How The Last Bull Market Ended (H&S Pattern), Moved Against Negative Credit News For Years

source: bigcharts.com
I found an old chart on my computer and think it's useful because it shows how the last 5 year bull market in equities ended. I compared the weekly S&P 500, Dow and Nasdaq charts that showed the head and shoulders top and breakdown in 2007, as well as the first trend/floor support test. I'm not sure if this was a linear or log chart. I created this on 1/31/2008 at BigCharts.com about a month and a half before Bear Stearns was bailed out by the Fed and sold to JP Morgan. Update: Using the linear chart, which I think this was, I looked back at each chart specifically and at this time the S&P broke through the trend line from 2002, the Dow held it, and the Nasdaq pierced through the trend line but rallied above it (slightly). I can't tell if the Dow's RSI made a new four year low, but look how the trend in volume was increasing during sell offs, which was flashing a warning sign.

Lightning Bolt Hitting Sears Tower In Chicago

iPhoneography break: Check out this photo I took of a lightning bolt hitting Chicago's Sears tower (now Willis Tower) a few years ago. I took it with a Razr phone. Click to enlarge it.



Here's an iPhoneograph of Lakeshore Drive and the John Hancock building from the North Avenue Beach bridge (Chicago, IL).

Economic Growth Trends Have Been Rolling Over (YoY Charts)

Below are charts showing the year-over-year percent changes in industrial production, personal income, personal consumption expenditures (PCE), gross domestic product (GDP), retail sales, and the velocity of M2 (money supply) since 1968. The charts also include recessions. As you can see they've all been rolling over, but some earlier than others. More on this in a moment. You can find this chart at the St. Louis Fed's FRED database.


IYT/WTIC, IYT/SPX See Negative Correlations (Transports vs. Oil and S&P 500)

Today is a big day because I'm introducing the 'correlation' indicator on a few charts. StockCharts.com allows you to chart out the correlation between two securities over any time period. First, I compared the two month relationship between IYT (Transportation ETF), SPY (S&P 500 ETF), DIA (Dow Industrial ETF), IWM (Small Cap ETF), QQQ (Nasdaq 100 ETF) and $WTIC (Crude Oil). At the beginning of February, IYT started to move inversely with WTIC (oil up, transports down), which made sense. During this time the other major market index ETFs either fell (IWM), drifted sideways (SPY, DIA), or rose steadily (QQQ). But then in the middle of the month, IYT completely decoupled from SPY, DIA, IWM and QQQ.

Watch RSI on Monthly GLD/SPY Chart, Testing 20 Month Moving Average

Check this out. GLD/SPY is testing the 20 month moving average on the monthly chart and GLD/SPY's RSI (relative strength index) is at 52.20. Look at the MACD versus the exhaustive peaks as well. What's interesting is the RSI on GLD/SPY hasn't been below the key 50 level since GLD, the Gold ETF, started trading in 2004. If RSI breaks below that level and starts moving between 0 and 50, that would be new structural development for GLD's strength relative to SPY, the S&P ETF. In other words, If GLD/SPY's RSI breaks below 50, and/or the ratio technically breaks down and starts trending lower, it would mean GLD's relative strength and/or price action is underperforming SPY. They can still go up and down in tandem. GLD has outperformed SPY for years now, so in real terms the S&P hasn't done much. But there have been corrections along the way in the ratio. Anyone watching it?

GLD, GLD/SPY Technical Update, Gold Was Dumped After Bernanke's Testimony

GLD, the SPDR Gold ETF, lost 5.31% yesterday after Fed Chairman Ben Bernanke didn't mention QE3 in his testimony to Congress (Zacks Research, Investor's Business Daily). And GLD didn't seem to care that the European Central Bank loaned 530 billion euros to 800 banks in the next LTRO (long-term refinancing operation) to protect the funding markets from a sovereign debt bomb in Europe (EuroMoney, Reuters, Zero Hedge). Check out which banks participated in the LTRO. Was the GLD move based on stability over liquidity (monetary inflation)? Decent economic data was reported as well (Reuters, Business Insider). Today the S&P closed red, but Treasury yields rose. Correlations are starting to get interesting again. Overnight, or last night, gold spot (XAU/USD) bounced off yesterday's lows.

GLD, GLD/SPY Technical Update

Now for some charts. The first chart (at the top) is an intraday 1-minute chart of GLD showing the crash. There were huge chunks of red volume spikes.

The second chart is of the daily. As you can see, the $175 ceiling is a key resistance level to break. I think a breakout would prove that GLD has enough strength to rally to the September 2011 high of $185. It failed to break above $175 twice. Above $185 is the next freedom level.  GLD is currently testing the 50 and 200 day moving averages (red/blue lines), so those need to hold for the bull case to stay intact in the short-term. The last time GLD's 50 and 200 day moving averages crossed was in mid-2008, a few months after and during a deep correction.