Monday, August 23, 2010

Market comments for Aug. 24th (Update)

The day was positive but closed negative before all was said and done. Tuesday economic data will drive the market as Existing Home Sales gets released at 10:00am EST or 7:00am PST. Last month June's data came in at 5.37 Million homes sold. We had the tax credit then but no more. Expectations for July are to come in at only 460 Million Home Sales. We all expect a lower number so if the number surprises at all to the up side the market will rally. If it is lower than expected say around 450 Million Homes or less, we may see another sell-off. Also, the Richmond Fed will be announcing their data as well at 10:00am EST. The Philly Fed was negative last report, so many eyes will be trained on these numbers to see if the Richmond Fed is also negative.

In any event, Wednesday we will see Durable Goods Orders for July and New Home Sales. Durable Goods Orders are expected to come in at +2.5% for July. June's numbers came in at -1.2%. If Durable Goods orders come in again with a minus number, the market will sell-off in a big way. We all know it has been slow in the economy but now we are getting just how slow it has been.

Thursday is Initial Jobless Claims. Expectations are for 475K for the week. Remember last week many were shocked with the reported 500K. Lastly Friday we will see the fudged GDP number for Q2. Expectations are for 1.3%. Think about that for a moment. That's almost no growth at all. Last quarter the number came in at 2.4% and I expect that number to be revised down to 1.7% or less.

The S&P 500 closed Monday with an inverted Hammer pattern. Usually this would mean that the trend will be reversed, but it is possible to have a number of days with such patterns before a reversal comes about. And when it does, that reversal could be short lived.

Today I purchased additional shares of TZA at $36.50, and was pleased to see it close higher at $38.70/share, even if just for today. I believe these shares will rise during Sept. and October and surprise many who think the recovery is still ongoing, admittedly while slowing somewhat.

Futures are all down and all European markets are also down about 1.0%-1.3% this morning. Oil is down to about $72.50/barrel and isn't that far from the low of $70/barrel for all of 2010.

One last thing, the Put to Call ratio dropped at the close yesterday to 0.71 which we haven't seen since July 19th. I have posted above, the chart of the Put to Call ratio I had posted a few days ago and you can see the spike down we had back then.

UPDATE: 7:00am PST

Existing Home Sales were down 27.2% for July. Expectations were for 460 Million Home Sales and the actual came in at 383 Million Home Sales. That is a very big disappointment.

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