Asia Pledges to stimulate economies

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FACTBOX-Asia pledges to stimulate economies 26 Nov 2008 15:10

(For related story see [ID:nHKG394570]) Nov 26 (Reuters) - Asian and Australasian governments have pledged hundreds of billions of dollars in fiscal stimulus plans, ranging from tax cuts to shopping vouchers, to lessen the impact of the global financial crisis on their economies. Here are some details on some of the main packages. Click on the codes in brackets for full stories. AUSTRALIA: * Nov 10: A$3.4 billion ($2.3 billion) package for the auto industry to offset crisis and a 2010 tariff cut. [ID:nSYD415429] * Oct 14: A$10.4 billion ($6.8 billion) package of cash handouts and family benefits; an additional A$1.5 billion ($978 million) to boost housing and home building markets, grant for first-time home buyers doubled to A$14,000. [ID:nSYD391388] * Sept 26: Government to invest $A4 billion ($3.33 billion) in domestic residential-backed mortgage market (RMBS). [ID:nSYD365120]. It doubles the amount to A$8 billion a few weeks later. CHINA: * Nov 14: Value added tax (VAT) rule change allows companies to deduct the cost of core investment expenses, saving them about 120 billion yuan a year. [ID:nSHA293184]. The government has also increased export tax rebates for a wide range of products. * Nov 9: A 4 trillion yuan ($586 billion) stimulus package to boost domestic demand through 2010, 100 billion yuan of which will be spent by the central government by the end of 2008. Central government to finance 1.18 trillion; the rest from local governments and state-owned banks and enterprises. [ID:nPEK71029] HONG KONG: * Nov 10: A 70 percent guarantee of loans to SMEs and a HK$10 billion ($1.3 billion) pledge of extra liquidity for loans to SMEs. [ID:nHKG73224] JAPAN: * Oct 30: A 5 trillion yen ($51 billion) package of new government spending, including 2 trillion yen in payouts to families, tax breaks on mortgages. [ID:nT214217] [ID:nT239177] MALAYSIA: * Nov 4: 7 billion ringgit ($2 billion) injection into 2009 budget from fuel subsidy savings, cut employees' pension fund contribution to 8 percent from 11 percent, allow foreigners to hold up to 70 percent in services firms in 2015. [ID:nKLR205233] * Aug 22-Nov 17: Five fuel price cuts since June. SOUTH KOREA: * Nov 3: A 14 trillion won ($11 billion) government stimulus package; additional 3 trillion won in tax cuts. [ID:nSEO370901] * Sept 18: A 4.57 trillion won ($3 billion) supplementary budget for 2008, to ease impact of high oil prices. [ID:nSEO82676] * June 8: 10.5 trillion won ($10.2 billion) package to ease financial burden of surging oil prices. [ID:nSEO281176] -- For a more detailed list see FACTBOX-South Korea measures to stave off crisis [ID:nSEO7274] THAILAND: * Oct 30: Government to boost public spending by 100 billion baht ($2.9 billion) to 1.94 trillion baht. [ID:nBKT000830] * July 16: A 46 billion baht ($1.3 billion) package of tax cuts and handouts for the poor, including cuts in transport and utility costs. [ID:nBKK261585] TAIWAN: * Nov 18: A T$83 billion ($688.6 million) shopping voucher handout -- about T$3,600 ($108) per citizen, to boost domestic consumption. Scheme needs parliamentary approval for a 2009 start. [ID:nTP274071] * Sept 11: Stimulus package to generate T$1 trillion ($30 billion) in domestic investment and consumption. Steps include T$122.6 billion in subsidies and tax cuts and T$58.3 billion in infrastructure spending. [ID:nTP277349] -- For a FACTBOX on global fiscal stimulus plans to tackle the crisis see [ID:nLN444507] (Compiled by Gillian Murdoch; Editing by Neil Fullick) ((gill.murdoch@reuters.com, +65 6870 3922, Reuters Messaging gill.murdoch.reuters.com@reuters.net)) Keywords: FINANCIAL/ASIA STIMULUS

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Where the money goto

U.S. Credit Crisis

Where the money will go ($250 billion)

Citigroup J.P. Morgan Bank of America Merrill Lynch Goldman Sachs Morgan Stanley State Street Bank Bank of New York

$25 billion $25 billion $12.5 billion $12.5 billion $10 billion $10 billion $3 billion $3 billion

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China Shipping Container Lines (2866)

HONG KONG, Aug 1 (Reuters) - Shares in China Shipping Container Lines (CSCL) <2866.HK> tumbled 6.7 percent on Friday, falling to a 15 month low, after Lehman Brothers slashed its target price on the stock by nearly 28 percent on a gloomy industry outlook.

The stock dropped to HK$2.38, a level last seen in late-April 2007. Lehman Brothers cut its target price on the stock to HK$2.1 from HK$2.9 while maintaining its underweight rating on the stock.

China's second largest container operator extended Thursday's 4.5 percent drop after its peer Oriental Overseas (International) Ltd <0316.HK> reported weaker-than-expected earnings on Thursday and warned of more challenges in the second half owing to a demand slowdown and sky-high energy costs.[ID:nHKG134505]

"We expect freight rates to decline due to a continued slowdown in demand, and we think it is unlikely to improve in 2009," said Lehman analysts Andrew Lee and Ceclia Chan in a research note on Thursday.

The brokerage also said weakening Asia-Europe demand in recent times is likely to drive the CSCL stock lower.

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Neptunes Orient Lines ( NOL .Sin)

SINGAPORE, Aug 7 (Reuters) - Neptunes Orient Lines, the world's seventh-largest container shipping firm, plunged as much as 8.4 percent to hit a 19-month low after it warned business will be more difficult in the second half of the year.

NOL fell to S$2.52 with almost four million shares changing hands.

The shipping firm posted a 19 percent fall in net profit on Thursday due to tough conditions and higher costs, and said it faced a worsening shipping market and expensive fuel. [ID:nSP112524]

"Although its results are not that bad compared to other shipping lines, investors are reacting to the bleak outlook. Freight rates can't really sustain at this level, and will definitely not go higher," a dealer at a local broking house said.

"Moving ahead, NOL will face rising fuel and oil prices and over the long term, we need to look at how the management can hedge oil prices and manage costs," he added.

0125 GMT - Straits Times Index <.FTSTI> was down 0.6 percent.

COSCO FALLS ON PRESIDENT'S SHOCK EXIT

Ship building and repair firm Cosco Corp (Singapore) <COSC.SI> fell as much as 7.8 percent to hit a 17-month low on news of its president Ji Hai Sheng's shock exit.

Shares of Cosco fell to S$2.49 with more than four million shares changing hands.

"A new and sudden change in a key management role does not bode well in this weak investor climate," said DMG & Partners analyst Serene Lim. "The share price is likely to be pressured, at least in the near term."

Cosco announced on Wednesday that Ji, who was also the vice-chairman and executive director of Cosco, will be stepping down with effect from Thursday.

A report in the Straits Times said Ji was informed of the board's decision only on Wednesday.

He will be replaced by Jiang Lijun, the chief executive officer of Cosco Shipping since 2002.

0105 GMT - Straits Times Index <.FTSTI> was down 0.54 percent.

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Shanghai electric (2727.hk)

HONG KONG, Aug 1 (Reuters) - Shares in Shanghai Electric Group Co Ltd <2727.HK>, China's top power generation equipment maker, fell as much as 5.5 percent on Friday after Reuters reported that its margins will fall by as much as 3 percentage points as it grapples with rising steel prices.

But executives say they do not expect a fall in gross margins to show up on financial results until 2009, because most of the products to be delivered this year had been ordered two years ago.

Still, the company chalked up around 60 billion yuan ($9 billion) of new orders in the first half, hitting 95 percent of its full-year target, senior executives told Reuters on Thursday.

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HKEx 0388

HONG KONG, July 31 (Reuters) - Credit Suisse has downgraded shares in Asia's top bourse operator, Hong Kong Exchanges and Clearing (HKEx) <0388.HK>, to underperform from neutral, on dwindling trading activity and falling investment income.

Credit Suisse also slashed its target price on HKEx to HK$90 from HK$150. The stock closed Wednesday at HK$116.50.

"HKEx revenues are coming under pressure on multiple fronts. Trading activity in both equity and derivative markets has faded while investment income on margin and clearing house funds is expected to suffer as a result of lower deposit rates," analysts Christopher Esson and Frances Feng wrote in a note to investors.

Turnover on the main exchange has been fading fast, falling to a 16-month low of HK$41.5 billion on Monday, with investors staying on the sidelines in the face of increased uncertainties in the global financial markets.

With a year-to-date fall of 47.33 percent, HKEx is one of the worst performing stocks on the benchmark Hang Seng Index <.HSI>

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HKEx 0388

HONG KONG, July 31 (Reuters) - Credit Suisse has downgraded shares in Asia's top bourse operator, Hong Kong Exchanges and Clearing (HKEx) <0388.HK>, to underperform from neutral, on dwindling trading activity and falling investment income.

Credit Suisse also slashed its target price on HKEx to HK$90 from HK$150. The stock closed Wednesday at HK$116.50.

"HKEx revenues are coming under pressure on multiple fronts. Trading activity in both equity and derivative markets has faded while investment income on margin and clearing house funds is expected to suffer as a result of lower deposit rates," analysts Christopher Esson and Frances Feng wrote in a note to investors.

Turnover on the main exchange has been fading fast, falling to a 16-month low of HK$41.5 billion on Monday, with investors staying on the sidelines in the face of increased uncertainties in the global financial markets.

With a year-to-date fall of 47.33 percent, HKEx is one of the worst performing stocks on the benchmark Hang Seng Index <.HSI>

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HKEx 0388

HONG KONG, July 31 (Reuters) - Credit Suisse has downgraded shares in Asia's top bourse operator, Hong Kong Exchanges and Clearing (HKEx) <0388.HK>, to underperform from neutral, on dwindling trading activity and falling investment income.

Credit Suisse also slashed its target price on HKEx to HK$90 from HK$150. The stock closed Wednesday at HK$116.50.

"HKEx revenues are coming under pressure on multiple fronts. Trading activity in both equity and derivative markets has faded while investment income on margin and clearing house funds is expected to suffer as a result of lower deposit rates," analysts Christopher Esson and Frances Feng wrote in a note to investors.

Turnover on the main exchange has been fading fast, falling to a 16-month low of HK$41.5 billion on Monday, with investors staying on the sidelines in the face of increased uncertainties in the global financial markets.

With a year-to-date fall of 47.33 percent, HKEx is one of the worst performing stocks on the benchmark Hang Seng Index <.HSI>

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FACTBOX - Quotes from Merrill's Thain on capital needs

July 28 (Reuters) - Merrill Lynch & Co Inc <MER.N> said on Monday it would raise $8.5 billion by selling new stock. (see [ID:nN28254377]) But CEO John Thain has consistently denied that the investment bank would need to raise more capital. Here is a selection of comments by Thain or about his views since the end of last year:

"One of my first priorities at Merrill Lynch was to strengthen the firm's balance sheet, and today we have made great progress towards that by bolstering our capital position through these investments and our announced sale of Merrill Lynch Capital." (Dec. 24, 2007 -- Thain in a statement when Merrill announced a $6.2 billion capital raising)

"...These transactions make certain that Merrill is well-capitalized." (Jan. 15, 2008 -- Thain in a statement after selling $6.6 billion of preferred shares to a group that included Japanese and Kuwaiti investors)

"We're very confident that we have the capital base now that we need to go forward in 2008." (Jan. 18, 2008 -- Thain as quoted by the New York Times).

"...Today I can say that we will not need additional funds. These problems are behind us. We will not return to the market." (March 8, 2008 -- Thain in an interview with France's Le Figaro newspaper)

"We have more capital than we need, so we can say to the market that we don't need more injections. We can confirm that we have tackled the problem." (March 16, 2008 -- Thain in an interview with Spain's El Pais newspaper)

"In 2007, we lost 8.6 billion dollars after tax, but we raised 12.8 billion dollars in new capital. We raised significantly more capital than we lost. And we did that on purpose so that we could say to the marketplace that we raised more than enough capital. We replaced all the capital we lost. We have plenty of capital going forward, and we don't need to come back into the equity market. The goal is to maintain our current ratings. No more capital raising; I'm sure we have enough capital." (April 4, 2008 -- Thain in an interview with Japan's Nihon Keizai Shimbun)

"We deliberately raised more capital than we lost last year ... we believe that will allow us to not have to go back to the equity market in the foreseeable future." (April 8, 2008 -- Thain to reporters in Tokyo, as reported by Reuters)

"John Thain has been very clear that we have sufficient capital and don't have a need to raise additional common equity for the foreseeable future. When we raised this capital in January, we had a lot of demand so we went beyond what we needed." (May 12, 2008 -- Merrill President Greg Fleming in an interview with the Times of London)

"Today on a pro forma basis we have about $44 billion of equity capital, which actually isn't very much below the all-time high that Merrill ever had. And our philosophy about this is that we are well-capitalized. We're comfortable with our capital position. We, like everyone else, are deleveraging our balance sheet." (June 11, 2008 -- Thain on a conference call hosted by Deutsche Bank)

"Right now we believe that we are in a very comfortable spot in terms of our capital." (July 17, 2008 -- Thain on a conference call after posting Merrill's second-quarter results)

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Shaky markets to hit southeast Asian bank profits

  SINGAPORE, July 28 (Reuters) - Most banks in Singapore and 
Malaysia could report weaker quarterly profits, hurt by the 
global financial crisis, which has slashed income from the sale 
of stocks, bonds and wealth management products. 
    But loan growth in Southeast Asia has remained buoyant, 
underpinned by infrastructure projects such as Singapore's 
multi-billion dollar casinos, and power projects, which may 
partly offset the severity of the market slump in Asia. 
    Banks could see smaller losses from their complex debt 
portfolios after taking big writeoffs last year related to the 
global credit crunch, but analysts were more worried about 
weakening growth in the second half of the year and beyond as 
Asian economies slow and higher prices hurt consumer demand. 
    "There are sensible reasons to believe the credit cycle may 
turn sharply in the next year: a function of weaker global 
growth, higher interest rates, sustained inflation, property 
market correction, increased unemployment," said Matthew Wilson, 
an analyst at Morgan Stanley. 
    Jaj Singh, an analyst at UBS, said net interest income has 
sustained double-digit growth, but weaker markets will crimp 
non-interest income. For a table on Asian stock performance in 
the second quarter, click on [ID:nSP235321]. 
    Singapore bank loan growth has defied expectations of a 
slowdown, expanding in May by 26 percent from a year earlier, the 
highest since the onset of the 1997 Asian financial crisis. 
    Thai banks kicked off the earnings season earlier this month, 
with Bangkok Bank <BBL.BK>, the country's biggest bank, reporting 
a 5.8 percent fall in second-quarter net profit as rising 
expenses outweighed strong loan growth and higher margins. 
    Fitch Ratings said Thailand's weakening economic outlook and 
falling consumer and business confidence will likely impact 
growth and asset quality in the second half of the year. 
     
    DBS CEO 
    In Singapore, home to Southeast Asia's biggest banks, the 
second-quarter figures of DBS Group <DBSM.SI> will be the first 
set of results released under new Chief Executive Richard 
Stanley, who joined the bank in May from Citigroup China. 
    DBS, Southeast Asia's biggest lender, is likely to report  
that quarterly profit rose by 1.6 percent from a year earlier to 
S$569 million ($418 million), according to the average forecast 
from a Reuters poll of five analysts.  
    Core profit will be lower than last year's S$664 million, 
which excluded an impairment charge for the falling value of DBS 
stake in Thailand's TMB Bank <TMB.BK>. 
    United Overseas Bank <UOBH.SI>, Singapore's No. 2 lender, is 
likely to report an 9.4 percent drop in second-quarter profit to 
S$530 million, according to four analysts polled by Reuters, hit 
by lower fees and weak trading income. 
    UOB will report its earnings on Aug 5, while DBS and OCBC 
will report on Aug 7. 
    Analysts said Singapore lenders could boost provisioning 
against potential bad loans in the months ahead after enjoying a 
period of strong economic growth and relatively low defaults. 
    DBS bank's total provisioning against its gross loans was 
1.24 percent as of March 31, with UOB's at 1.96 percent and 
OCBC's at 1.88 percent. 
    "While the global slowdown should lead to lower loan growth 
and higher NPLs, the emergence of a steeper yield should cushion 
the bottom line," said UBS' analyst Singh. 
    "More importantly, we expect NPLs to be largely confined to 
regional SMEs (small- to medium-size firms) and corporates." 
 
    MALAYSIAN BAKS 
    Analysts in Malaysia said they expect weaker markets to 
undermine earnings in the April-June quarter and the second half 
of the year. Malaysian analysts do not provide quarterly 
forecasts. 
    Maybank <MBBM.KL>, Malaysia's biggest bank, is expected to 
report full-year profit of 3.27 billion ringgit ($1 billion) in 
the financial year ended June 30, up from 3.178 billion a year 
earlier, according  to 14 analysts polled by Reuters Estimates. 
    "There are still earnings risks because of the acquisitions, 
especially the interest cost, which may bring down their earnings 
next year by 10-11 percent," said Sue Lin Lim, analyst at DBS 
Vickers Securities, who expects a slight drop in Maybank earnings 
in the last financial year. 
    Maybank bought a 15 percent stake in Pakistan's MCB Bank 
<MCB.KA> for $680 million in May and paid $2.7 billion for a 
controlling stake in Bank Internasional Indonesia <BNII.JK>. 
    DBS' Lim said Malaysia's second-biggest bank 
Bumiputra-Commerce <BUCM.KL> could be vulnerable to market 
turmoil because of its strong reliance on capital markets. 
    "Overall, for the full-year numbers, we can still look at 
further weakness because of the capital markets," she said. 
     
    SINGAPORE  - FORECAST Q2 NET PROFIT AVG (S$ mln) 
          Q2 2008    CHANGE (PCT) VS    Q2 2007   ANALYSTS 
 * DBS     569         1.6               560         5 
   UOB     530        -9.4               585         4 
   OCBC    500        -6.0               532         4 
 (Based on a Reuters poll) 
 (*DBS's Q2 2007 result included an impairment charge of S$159 
million on its stake in Thailand's TMB Bank) 
       MALAYSIA  FULL YEAR FORECAST($ bln ringgit) 
              2008         CHANGE (PCT) VS    2007    ANALYSTS 
 * MAYBANK   3.27 bln        2.8          3.18  bln      14 
 * BUMIPUTRA 2.6  bln        6.8          2.79  bln      16 
 (* Maybank's reporting period is July-June) 
 (Data based on Reuters Estimates) 

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Banks Rally, but Demons Still in Vault

Interbank Lending, House Prices Suggest
The Worst Isn't Over; a Bear Bounce?

By E.S. BROWNING
July 28, 2008

Every few months since the credit crisis began a year ago, bank stocks have rallied on hopes that the worst is over. They did it again, loudly, a few days ago. But there are signs that it may be too soon to sound the all-clear.

Randall Enos

The rebound this time was impressive. From their July 15 low through Wednesday, U.S. bank stocks surged 45% according to the Dow Jones Wilshire bank index. Even after giving back some gains late in the week, the prices of some financial stocks have doubled from their July lows. Still, the hardest-hit, such as Washington Mutual, National City and Fannie Mae, remain down 80% or more from their 2007 highs.

These sudden surges typically happen when stocks have fallen so drastically that short-term investors see the opportunity to cash in on a bounce. A government move to clamp down on short-selling, making it harder for investors to bet on stock declines, was a big catalyst for the recovery this time.

If longer-term investors decide the worst is over and start buying, this sudden recovery can mark the end of a bear market. If the longer-term investors stay away, the stock bounce turns out to be a bear-market rally, and stocks retrace their steps.

Each of the rebounds up to now ran out of steam and led to new lows. Some worry that the latest rally was running out of steam at last week's end. Considering how powerful the rally was, if some of the big rebounders, such as Fannie Mae and Freddie Mac, were to fall back to their recent lows, they would lose half their current value or close to it -- a big hit for anyone who bought last week.

Gordon Fowler, chief investment officer at Glenmede Trust in Philadelphia, isn't ready to take that risk.

"The fundamentals are still deteriorating" for banks, he says. "Charge-offs are still increasing." With financial stocks essential to the economy, he sees the group's weakness as part of a continuing slowdown in economic growth, which he fears will pull the stock market still lower.

A central problem for banks is that housing prices are still falling as foreclosures mount, so that no one knows how many more write-offs banks will have to take. Banks have said "the problems that began with some of the subprime mortgages are spreading over to the prime side of the business," says Robert Pavlik, portfolio manager at Oaktree Asset Management in New York, who was selling bank stocks, not buying them, this month. That is worrisome because the prime mortgage market dwarfs the subprime market.

Another worrisome sign: Banks continue to show a lack of confidence in one another.

For the past several quarters, banks have gotten nervous about lending to one another at quarter's end, creating a liquidity squeeze. They are worried about exposure to troubled comrades as they close out their quarterly books. "There has been a little funding stress around quarter-end," and also a few weeks before quarter's end, when many brokerage firms close out their financial reporting periods, says Michael Chang, U.S. interest-rate strategist at Credit Suisse. The stress showed up again in June, his data indicate, although the squeeze wasn't quite as bad as in March.

The stress can be seen in two areas -- an increase in interest rates for overnight loans between banks, and an increase in the price of borrowing three-month money compared to the price of overnight money.

Because of actions by the Federal Reserve and other central banks to prevent banks from getting squeezed for cash, fears of bank insolvency appear to be lessening, but they have been replaced with fears that banks will need to raise an unknown amount additional capital by issuing new shares, further diluting the value of their existing shares.

Perhaps the main reason long-term investors have yet to dive into bank stocks and turn one of the rallies into a sustainable run is worry that even after banks get through the current mess, they will have trouble earning healthy profits for some time.

Write to E.S. Browning at jim.browning@wsj.com

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Keppel Corp

SINGAPORE, July 27 (Reuters) - Singapore's Keppel Corp <KPLM.SI>, the world's largest offshore oil rig builder, said on Sunday it has won a S$181 million ($133 million) contract to build a ship for a Romanian drilling company.

Keppel said in a statement that its unit Keppel Singmarine Pte Ltd would build the multi-purpose heavy lifting and pipelaying vessel for drilling contractor Grup Servicii Petroliere SA to be used in the Black Sea and Mediterranean.

Scheduled for completion by the third quarter of 2011, the contract is not expected to boost Keppel's earnings in the current financial year, the firm added. (Reporting by Neil Chatterjee, editing by Will Waterman)

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Keppel Corp

  --Keppel Corp <KPLM.SI> 
    - Keppel Corp, the world's largest offshore oil rig builder, 
said on Sunday it has won a S$181 million contract ($133 million) 
to build a ship for a Romanian drilling company. 

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THE GURU'S CORNER

Banking on an upturn

Commentary: Goodbye commodities, hello financials

By Mike Paulenoff, MPTrader

Last update: 1:01 p.m. EDT July 24, 2008

NEW YORK (MPTrader) -- It seemed as though there was no place to hide when Apple and the technology sector, along with Bank of America and the financials, got clobbered with the rest of the market at Tuesday's open. Though by mid-day, the market did recover in a big way and left behind another significant low within a "rolling bottoming process."

Tuesday's action in the Standard & Poor's 500 Index (SPX

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SPX) established a low of 1248 and high of 1277. That dwarfed Monday's daily range, closing well above Monday's close and high, so from a strict technical prospective the blue chip index had a key upside reversal.

In addition, unlike the rally off of last week's July 15 low, Tuesday's rally did not have the feel of a temporary oversold rally. The morning sell-off wasn't as dramatic, with the S&P 500 only down 11.5 points from its previous close as opposed to nearly 28 points on July 15. So it was a higher, secondary low -- more corrective looking than that of the previous week, and less susceptible to a mere reactive bounce.

Driving the S&P 500, which has now recovered 6.8% from its July 15 low (through Wednesday's close at 1282), are the financials, which have room to go higher. Over the last several months the percentage that the financials make up of the S&P 500 has diminished just by virtue of the price deterioration, while the energy sector percentage of the index has increased. But institutions in the last week, in particular, appear to have begun to shift their money out of the once high-flying energy sector into equities.

One way to play this trend is through the Financial Select SPDR (XLF

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XLF) or its sister ETF, the Ultra Financials ProShares (UYG

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UYG) , which moves two times that of the XLF. Since its low of 14.08 on July 15, the UYG is up 68% through Wednesday's close at 23.67.

Traders should look this week for a break of 26.40. That's where the major resistance trendline from Sept. 30 of last year cuts across the price axis, a break of which would be the first major signal of damage to the downtrend that's transpired since the fourth quarter of last year. Beyond that, if the UYG can sustain above 33.75, it would indicate the end of the bear market in financials.

Likewise, the Ultra Short Oil & Gas ProShares (DUG

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DUG) provides an opportunity to play the downside move in energy shares. The DUG has put in a rounded bottom at around 25.30, closing Wednesday at 36.16, up 42% from its low, as oil prices have declined 15% from their $148 high. Its chart points to 39.50-41.00 next.

Another way to play the trend is through the iShares Dow Jones Transportation Average (IYT

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IYT) , which for obvious reasons is getting a major lift from declining energy prices. The IYT chart shows it made its bear market, corrective low on January 6 at 72.86, and went to new highs after that at 99.09 on May 18. The July 15 low at just under 82 was the pullback low after that new high, and from there it's gone to just above 92 as of Wednesday's close, a 12% gain in just a week. Tuesday was the first time it closed above its 50-day moving average since the first week of June, suggesting the IYT is in a new upleg and heading directly back to 99 to test that high.

Other commodity indexes are confirming what the IYT is suggesting, like the PowerShares DB Agriculture ETF (DBA

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DBA) , which closed below its 200-day moving average for the first time in a year on Tuesday. The PowerShares Commodity Index Tracking Fund (DBC

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DBC) closed for the second day in a row below its 50-day moving average and looks like it has considerable room to go down as well.

In addition, the streetTRACKS Gold Shares (GLD

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GLD) looked like it was on its way to retest high levels at around 98 early Tuesday but instead ran out of gas at around 96.20 in the pre-market hours and then reversed in a big way and closed at 93, falling to 90.57 as of Wednesday's close. Chances are the GLD now will move back to below 90, and possibly towards a full-fledged test of its rising 200-DMA, now at 86.80, which must contain any further sustained weakness to avert a total breakdown in gold prices towards $800 ($80 in the GLD).

The financials, transports and stock index ETFs are turning up, while we have sell signals in the, energy, agricultural and precious metals sectors. For people who have followed markets for a long time, this inverse relationship between equities and commodities makes intuitive sense and suggests there are trading opportunities developing that will last longer than a few hours!

Mike Paulenoff is author of MPTrader.com, a diary of his intraday technical chart analysis and trading alerts on ETFs for gold, oil, equity indexes and other major markets. (mptrader.com)

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