Market comments for Sept.21st.

The big economic news today is Housing starts, Building Permits and The Fed FOMC meeting. The first data released this morning was Housing Starts for August. Expectations were for 540K and the number came in at 598K. For the prior month of July, the number was 546K so we are 10.5% higher than we were expecting. Futures reacted positively to the news.

Building Permits came in at 569K. Expectations were for 550K. The prior month was 559K. So this number along with Housing starts were better than expected and up from the previous month.

Later today the Fed will be meeting and announce whether interest rates will stay the same. The statement they make will be watched carefully.

This market, with a little good news could go to 11,200 on the Dow again. This is another 500 points. But it should not go higher. as it appears a Head-and-Shoulders pattern developed between May and mid-August of last year. So the shorts are going to have still yet a bit longer pain from this rally which will have moved 12% since it was 10,000 in August and 15% since it was 9700 in July. That is what has caused some pain for people like myself who are short right now. This too will pass and those short purchases now will provide the biggest gains when the market does turn. For me it is no time to be weak kneed. As this market rises to 11,200, I will add to my shorts and keep my fingers crossed. But I wouldn't make a move like "All In!" on this expected market rally.

Weekly Economic indicators for the week of Sept. 20th

Here below is a table of the economic data which will be released this coming week. The most important pieces of data released this week will be from the Federal Reserve FOMC meeting on Tuesday, Initial Jobless Claims on Thursday and Durable Goods orders on Friday. I will post the actual data as it is released this week and will comment on the stock charts as the week unfolds. Here's the Table of the economic data. Also, don't forget to read my last 2 posts if you haven't yet. One shows historical data on the University of Michigan Sentiment Index over a long period of time.

To view the data more clearly in a larger format, click on it.

Market comments for Aug. 10th (Update)

Economic data released this morning showed Q2 Productivity was the lowest since Q4 of 2008. It came in at -0.9%. Expectations were for +0.1%. Unit Labor Costs rose slightly +0.2%. Expectations were for them to rise 1.3%. Later this morning, data for Wholesale prices will be released. Expectations are Wholesale prices will be at 0.0% gain. I expect it to go negative, showing deflation but 0% is still amazing when you think about it.

Then the big item today is the FOMC will be releasing its rate decision and comments at 2:00pm EST or 11:00am PST., which is being anticipated with some anxiety. People want to know how the Fed will react to deflation and whether there will be more easing of Interest rates. Will the Printing Presses roar printing new money faster than it can be used. The worry had been Inflation but there appears that is not what the Fed is now concerned about. It's Deflation, just like in the 1930's.

Futures are down 105 points on the Dow.

UPDATE: 9:15AM PST

Above is the chart from Haver Analytics of Unit Labor Costs. Trend is pretty bad indeed. Looks like another piece of data showing deflationary times ahead to me

Market outlook for July 16th (With continuous Updates)

Well the news came out this morning on CPI. First the actual data and then how the media is portraying it. The CPI for the month of June came in at -0.1%. For the month of May it was -0.2%. The Core CPI for June came in at +0.2% while for May it was 0.1%. That's the unvarnished data. Now here are the headlines I noticed across the internet this morning:

From Yahoo.com
Headline: Consumer prices dip for third straight month
Excerpt: "The Consumer Price Index, the government's most closely watch inflation barometer, dipped 0.1 percent in June, the Labor Department reported Friday. Less expensive energy bills were a big factor behind the drop. Prices for some food items, airlines fares, computers, telephone service and personal care products also fell last month."

From Bloomberg.com
Headline: Prices Excluding Food, Fuel in U.S. Exceed Forecast
Excerpt: "The cost of living in the U.S., excluding food and energy prices, climbed in June more than forecast, easing concern that a slowdown in growth will spur deflation. The so-called core rate of the consumer-price index increased 0.2 percent, the most since October and exceeding the 0.1 percent gain projected by the median forecast of economists surveyed by Bloomberg News, figures from the Labor Department showed today in Washington. Prices overall fell 0.1 percent, a third straight decrease and matching the median forecast."

So what's important to focus on her.I think the fact that the CPI is down for the 3rd straight month and in fact down for most of the past 6 months, but no one mentions that. You see yesterday in the NY Times, there was a column about the Fed being split at its latest FOMC meeting in that a number of them raised concern about Deflation for the first time. Quoting from the article, "Inflation has been running well below its unofficial target of 2%, so much that a few officials fear that the US is at risk of the kind of deflationary spiral that has hobbled the Japanese economy for the better part of 2 decades." So even here at the FOMC meeting is the deflation issue is creeping into the forefront of the news.

Now add to that how us real people feel and you get a better view of how things really are. Just out are readings of Consumer Confidence which is important because the Consumer makes up 70% of our economy they say. So here is the info on that: The survey's preliminary July reading on the overall index on consumer sentiment plummeted to 66.5 from 76.0 in June. So we know how things really are going and sooner or later the markets will have to follow suit and replicate the real economy no matter how much the Fed is pumping money into firms like Goldman Sachs and others to get them to manipulate the stock market by buying near the close of the market every day. Just look at 1 minute charts of the Dow or Nasdaq or any Index for the last hour of trading compared to the previous time during the day. You will be convinced if you are objective.

So the market has had a minor reaction to the news with the Dow down as much as about 180 points this morning. Let's see how the day ends. My guess as it always has been of late is that it SHOULD be down based on the evidence, but manipulation of the markets has not yet abated. Time will tell if sanity rules.

UPDATE: 8:00am PST
The Dow has managed to stay below the 50 day Moving Average again today and that is a good reversal from past couple of days. It puts the rise in the market on hold and sets up a declining trend. The 50 day MA is at about 10,250, while the 200 day MA is at 10,380. The other thing I like particularly about the day unfolding is that we are forming a Hammer pattern which stops the uptrend and reverses it. That would keep in tact the trend of lower highs (the first rally a month or so ago was to 10,594 and this one will have peaked at 10,400) and lower lows. This will mean that we will most likely go below the previous recent low of 9,614.

UPDATE; 8:30am PST
Volume is up significantly at 160 Million shares so far compared to yesterday's 210 Million shares traded on the Dow for the whole day!

Market outlook for July 14th (UPDATE)

So yesterday the market fooled me and went over the 10,300 level I thought would hold. We actually hit a high of 10,407 for the day. We went above the 50 Day Moving average, which now is at about 10,250, but seemed to stay below the 200 day Moving average which is now at 10,385. The Dow closed yesterday at 10,363. Earnings for Intel seemed to please folks after the closing bell yesterday, but today is another day and right now the Futures are pointing down before the expected economic data is released in an hour.

Today, Retail Sales will be reported along with Business Inventories, Import and Export Prices, the Minutes of the FOMC meeting from the Fed and Oil inventories. Any one of these will be food for Bulls and Bears alike. Retail sales are expected to be down -0.2%. Anything lower will mean fuel for the Bears and anything better will be a case for the Bulls. However, remember this, these are lagging indicators and for June. Here we are in July. The real question is, WHAT WILL THE 3RD AND 4TH QUARTER LOOK LIKE? IT will affect our Debt/GDP ratio and the cost of borrowing going forward as well as whether the government will get necessary taxes from increased growth to help pay for the debt. The answer to this also has political ramifications for Democrats and Republicans alike. So these numbers on the economy get more and more important as we approach the 4th quarter.

It was painful yesterday to watch the TZA Call Options drop 20% and the underlying stock price to drop 10% or $3.57/share. It ate away at my profits made on earlier transactions, but I held and did not sell any. I expect some recovery today and in the days ahead and still am very bearish going into the rest of the year.

For today, keep an eye on the 200 Day MA of 10,385 and also the 50 day MA of 10,250. I would like to see us stay below the 200 day and to go below the 50 day by the closing bell so that this temporary rally ends, but that's only because I am on the Short side of the market right now because I do not believe that the economy is healthy nor do I believe we are out of serious danger. Rallies to me give a false sense of confidence to people and that is not the reality of this world crisis.

UPDATE: 8:40am EST.
Retail Sales came in at -0.5% which was significantly worse than the -0.2% expected. So that's one big one for the Bears. But Retail Sales ex auto sales were down only -0.1% versus an expectation of only -0.2%. This makes the case for the Bulls. So pick you side and your poison as to what you believe. :) I believe the -0.5% because it is the pure overall number. Now tell me the economy is really doing better. Ha!

Also, Elizabeth Warren in charge of monitoring TARP funds said this morning on Bloomberg TV that 76% of large Banks on Wall Street have paid back their TARP loans. However, only 10% of the smaller Banks have been able to pay back TARP loans. She added that 15% of the smaller banks which borrowed TARP money have missed at least one dividend payment to the government for the use of these funds and that it is going to get worse for these smaller banks. Another piece of data for the Bears.

UPDATE 9:00am EST.
More bad news for the Bulls. Import prices dropped to a -0.6% compared to the previous month at +0.5%. There is No Inflation folks. There is Deflation as I have been saying now for a while. Export prices were down also to -0.2%. That's Deflationary as well! Let's see the market's reaction together today.

UPDATE: 5:00pm EST
The FOMC released their minutes today. If I had to boil it down this is what they said:

Six Years

Most FOMC policy makers expected that the U.S. may not return to its long-term rates of economic growth, unemployment and inflation for as long as six years, the minutes said.

“Participants generally anticipated that, in light of the severity of the economic downturn, it would take some time for the economy to converge fully to its longer-run path as characterized by sustainable rates of output growth, unemployment, and inflation,” the minutes said. “Most expected the convergence process to take no more than five to six years.”

Pre-Market outlook March 18th: Cautious (UPDATE)

It's a good feeling to be able to guess correctly the markets direction over a number of days. I wanted people to see their 401K's and retirement accounts grow a little as it has been painful for many. The Dow closed today within a few points of 7,400 and the S&P 500 closed at 778. The VIX Index closed at 40, which a long way from the 50 level we had experienced for such a long time. The Put to Call ratio closed yesterday at 0.78 or just slightly down from 0.80 level on Monday. Gold ended the day yesterday at $916/ounce and in pre-market is at 902.

The news of the day yesterday was the level of bipartisanship surrounding the outrage of the bonuses to the AIG employees from the Division who were responsible for the collapse of AIG and required subsequent bailout by taxpayers. These contracts for these bonuses were in place during the Bush Administration and were known about apparently by former Treasury Secretary Hank Paulson, according to news reports. But the outrage from both sides of the aisle enjoined Democrats and Republicans for the first time since President Obama took office. Many are speculating that Tim Geithner, Treasury Secretary, may have his own job at risk for not stopping these bonuses from being paid. We shall see.

Again, the news seems to be favorable enough, or not negative, to continue with this uptrend. However, we are now approaching the final few days before Friday's Options Expiration and anything can happen in Options week. Yesterday I purchased additional shares of Citigroup to add to my original position which I bought at $1.73/share. Today's purchase was made at $2.41/share.

The Futures point down this morning as the CPI Index came in at up 0.4%, which was higher than expected and may foretell of a rise in inflation. Also, today is day 2 of the FOMC meeting of the Federal Reserve and investors are nervous as to what they may say later today. My guess is that the market will open down and stay down most of the day. Having said that I am hoping for a reversal in the final hour or so to have an up day.

UPDATE: 8:15am

Dow has been down all morning from -135 to -89 points where it is now. The Dow seems to keep trying to climb back up and over the 7.300 level. However, Citigroup has surged today making my purchase at $2.41/share yesterday look brilliant as it has hit a high of $3.30 and currently is sitting at $3.19/share. I predict this stock is going to go to $5/share or higher, if the market continues its climb back to over 8,000. This also is worth mentioning. I had to sell my Apple shares at $96.35/share and it was a difficult decision as the stock was still going up. Today the stock is at $100/share so I left $3.70/share on the table when I sold it or a 3.5% potential gain. But I used the money to buy Citigroup and today alone it is up over 25% and 30% from my purchase at $2.41/share. The moral of this story is this. Be willing to move a portion of your money to a faster or more rapid growing stock you have researched or discussed with your financial advisor. It opens more opportunities for you but also adds more risk. I saw Citi with less risk than most other stocks, including Apple, because the government is backing Citi and owns about 40% of the company. The government is making money on Citi right now, why shouldn't you!