Market comments for Aug. 17th, 2011

Today I have put together a 3 month chart of the S&P 500, which shows we are battling a similar fight between the Bears and Bulls, as we are in the Dow charts. Pretty much all the Indexes have a similar pattern. What is driving our patterns is not a sector problem, specific industry issue or stock issue but rather a phase of US growth that has slowed down enough to give many investors pause as to whether they want to take on more risk right now by buying stocks of less risk by selling them. The chart below shows the S&P and its low support level at 1120 and the upper resistance level at about the 1200 level. We won't break out of this range, either lower or higher, until the news turns one direction or the other. Listening to domestic economic news is not enough. You must also listen to what is happening in Europe with its debt issues as well as China for any glimpses of a major slowdown there too.

This morning the PPI data for July was released and it showed a +0.2% reading compared to a -0.2% reading for June. Expectations were for a +0.1% reading for July.

Core PPI came in at +0.4% for July as compared to a +0.3% reading for June. This makes a rise of 7.7% year over year in Core PPI. That is inflationary. Gold has advanced in premarket and European markets are mixed this morning within a tight range.

Tomorrow Initial Jobless Claims data will be announced at 5:30am PST, along with data on CPI, Existing Home Sales, the Philadelphia Fed data and Leading Indicators. So much to digest here.

The meeting yesterday between Germany's Merkel and France's Sarkozy left many unsatisfied as expectations were high for some major announcement and there was none. They did not embrace the aggressive purchasing of Eurobonds as a solution, nor did they strongly propose the Financial Purchase tax I had spoken about yesterday. Just to show another similarity of chart patterns, the chart below is of Germany's DAX Index. Notice the similarity of the patterns most recently.

And lastly, VP Biden went to China to assure leaders we are good for our debt to them and not to worry about the downgrade of the US from AAA to AA+ rating. Good luck selling that when they are looking for some tangible reassurances. VP Biden is good with the blarney so we shall see.

Market comments for July 15th UPDATE

The CPI data came in at -0.2% in June, compared to +0.2% in May. Core CPI came in at +0.3% in June and was up +0.3% in May. This is showing that core prices are really rising as many feared. This economy is sounding more like we are in "stagflation". These CPI Core numbers are in line with what is happening with what has happened to the Core PPI numbers as well. In June Core PPI rose to +0.3% from a May reading of +0.2%.

The Empire State Index came in at -3.76 in July versus in June it was -7.96. Expectations for July were for the number to be 0.0, so this is not a good number and indicates a slowing business climate. That's hard to imagine given the business climate has felt like it has almost stopped the past 3 months. This data is in line with the Inventories data which is also rising and showing that Manufacturing is slowing down even further. This data is feeding into fears a double dip recession is going to occur.

Later this morning, Industrial Production data will be released for June, as well as Capacity Utilization and Michigan Sentiment data for July. Here's what to watch for Industrial Production came in in May at +0.1% and expectations for June are for a +0.3% reading. I expect the number to disappoint. Capacity Utilization came in last month at 76.7% and expectations are for a reading of 77%, indicating more usage of existing capacity. I think this number will disappoint as well and be below 77%. And lastly, Michigan Sentiment in June came in at 71.5, and expectations are for it to be 70.0% reading. I believe this number will be somewhere between 71.5% and 70.0% and will not be off by much, resonating with the general feelings in the country of negativity, partly based upon the politics of the moment on the issue of whether the Congress is going to raise the debt ceiling and also the higher Unemployment numbers this month. The trends are not good and we may be very close to going back officially into a recession.

Bah, humbug! The Futures look positive this morning in advance of this data. The Dow Futures indicated +44 before the CPI data came out and the Empire State Index. Now the Dow Futures indicate a +43 reading, so nothing has really changed with respect to the Futures.

Today is Options Expiration for July so expect high volume today.

UPDATE: 6:55am PST

Industrial Production came in at +0.2%, not +0.3% as expected. But the huge news is that the Michigan Sentiment came in at only 63.8 vs an expectation of 70.0 and a reading last month of 71.5!!! This is a huge disappointment but a realistic data point on how people are really feeling.

Capacity Utilization came in at 76.7%, same as last month and not the 77.0% expected.

Market comments for April 14th, 2011

Initial Jobless Claims rose unexpectedly last week to 412,000, going back above the 400,000 level many thought were in the rear view mirror. Also the PPI number for March came in at +0.7%, while Core PPI came in unexpectedly at +0.3%, causing more worries about inflation creeping into goods produced.

Futures are down in pre-market with the Dow down about 54 points. Still to come out tomorrow are CPI, Core CPI, Industrial Production, Capacity Utilization and Michigan Sentiment.

Yesterday the Dow closed up a few points as shown in the chart below, but if you look at the other leaders like CAT, DD and others in the Index, you will notice that volume was down yesterday and that the trend of these leaders looks like they will continue down. Unless new leaders emerge in the Dow Index, then the Dow is set to continue to drop as we are now below the 25 and 50 day Moving Averages on these stocks.

Market comments for Oct. 14th, 2010

Data released this morning shows that Initial Jobless Claims were higher at 462,000. Expectations were of 450,000. Last week the numbers reported were only 450,000, so this spike is in the wrong direction. However, as usual, they adjusted the prior week's data up from 445,000 to 449,000. Continuing Claims came in at 4.399 Million vs 4.511 Million the prior week. But the 4 week moving average is up to 459,000. When you really think about it, Americans are losing jobs to the tune of greater than 450,000 a week and have been doing so for a very long time! How sad for American workers and their families. This is not a good report for President Obama going into the elections in a few weeks.

On another note, the PPI came in at +0.4%. This was the same data as reported for August. The Core PPI, year over year increase, is up only 1.6%. The Trade deficit came in at -$46 Billion versus -$43 Billion last month. Expectations were for improvement to being down to -$40 Billion, so this too was in the wrong direction. With China's currency resisting world pressure to appreciate because they have an unfair advantage I believe they will continue to defy the world and will keep their currency as low as they can. Why not, they are in the drivers seat and they know it. Even if the whole world dropped their currencies they couldn't get it low enough to match where China's currency is because their population works for under a $1 a day. We just can't compete with them nor can anyone else.

Foreclosures reached a record 100,000 last month, and the background story, which emerged a week ago, was that an investigation of Banks and their foreclosure process is being conducted. Bank of America had stopped all foreclosure processes in 50 States pending an investigation by them.

Futures are close to unchanged or slightly lower after the release of the data.

It is now clear that with the sizable debt this country has, that the way we are dealing with it is to devalue our currency so that the value is half of what it was so we can pay the debt off in cheaper dollars to China, who holds our debt, as does Japan. That is why Japan is trying to lower its currency as well so they get paid eventually relatively equivalent dollars and why China will not inflate its currency. The major world powers are in a Currency war right now. This game is going to end very badly as wealth is being transfered out of the United States.

But we are all happy now because the stock market appears to be rising, right?! How naive the American public is. That is the price we all pay for a poor education of our kids who someday grow up and are fooled by the talking heads in Washington and vote against one's own personal interest.. Education is the one answer to get this country back on track and we haven't even begun to get serious about improving education yet. That is why we get the Government we deserve.

Market comments for Sept.16th (UPDATE)

Initial Jobless Claims came in at 450K and expectations were for 440K. That was a little more than expected. The prior week number was 451K but here again, it was revised up to 453K. The number is still basically the same, week after week, so the jobless picture is not getting better, but also at this period of time isn't getting worse either. That is good news for those employed, but bad news for the long term unemployed, as it is still very difficult to get a job.

Continuing Claims came in at 4.485 Million. Expectations were for 4.450 Million. The prior week's number was 4.478 Million but was revised upward today to 4.569 Million. Again a more negative number than previously reported. You would think with all these revisions over the past months that sometime they would revise them downward, but they don't. That is part of the reason why I believe the numbers are being deliberately manipulated.

PPI numbers released for August were +0.4%. The prior month of July it came in at +0.2%. Expectations were for +0.1%. Core PPI came in at +0.1% compared to prior month's data of 0.3%.

The Futures market is still negative with Dow Futures down about 42 and the S&P 500 down about 6 points.

FedEx sees 1Q profit double, and you would think that is good news. However, they said that the Global recovery isn't as strong as was previously reported by them. Also, in the announcement, they said they are going to layoff 1700 jobs. Read the entire story here.

Other news, which caught my eye this morning was that foreclosures are up 25% on the year. The increase in foreclosures came even as the number of properties entering the foreclosure process slowed. To read the complete article click here.

I know what you are thinking right now. Where is the market going? If it were based on the data, it should be down much lower than where we are now. But it doesn't seem to be following that course of late. It doesn't make sense to me that the market has been rising this past 2 weeks, but it has. So your guess is as good as anyone's right now. You decide!

The next data out will be at 7:00am PST and it will be the Philly Fed data. Last month the number came in at -7.7, which surprised many. Initially expectations were that the number would come in today at +2.0, but since the expectation was lowered to 0.0, so we will see what actually it come sin at. Come back and I will post it below, just after 7:00am PST, with the word UPDATE, added in the title of this post.

UPDATE 7:30am PST

The Philly Fed data came in lower than expected at -0.2, which drove the market lower. The day is setting up as a Hammer Candlestick pattern, which usually means that the trend has been broken and it shall now drive lower in coming days of trading. Trading volume is still very low, relatively speaking.