Market comments for May 24th

Today I have added a little something different to the mix. I have found an interesting piece of news about the economy and where we are right now that I thought I should repost here. It is from Haver Analytics and includes a chart. Here it is and the title:

Chicago Fed Index Provides Further Evidence of Momentum Lost
BY TOM MOELLER MAY 23, 2011

The list of indicators suggesting that the economy's forward momentum has waned continues to lengthen. The Chicago Fed reported that its National Activity Index (CFNAI) retraced its earlier improvement and fell to -0.45 in April from a little-revised 0.32 in March. The three-month moving average of the index, which smoothes out some of the series' volatility, slipped to -0.12, the first negative reading since December. During the last ten years there has been an 81% correlation between the index and the Q/Q change in real GDP.

To read the entire article on Haver Analytics click here.

While yesterday's market was down and broke below the previous support line, as seen in yesterday's post on the Dow, the final Volume for the day was not that strong and indeed was less than the previous day's volume. Given this fact, today's market may bounce up somewhat, as Futures indicate. Watch today's volume for clues as to future direction.

Consumers still paying off debt. A good thing for them but a bad thing for the economy

I came across a good chart and data provided by Haver Analytics on Consumer Debt. You will remember that I said in a recent post that the Consumer is 70% of the equation in Sales in this county and until they start really spending, the economy is going to stagnate. Add to that the fact that unemployment will also stay high as long as companies can increase productivity with their existing employees. In the chart above you can see that things don't appear to be trending in the right direction for the economy to pick up.

In the Haver Analytics posting today, here is what they said:

"Consumer borrowing continued its retrenchment during February. Consumer credit outstanding fell $11.5B, reversing a revised $10.6B January increase which was much larger than reported last month. The Federal Reserve reported late-Wednesday that the resultant 4.0% y/y decline in credit outstanding remained near the record. During the last ten years, there has been a 60% correlation between the y/y change in credit outstanding and the change in personal consumption expenditures.

· Usage of revolving credit was cut sharply. The $9.5B drop followed a modest January increase and left usage down a near-record 9.1% y/y. Versus February 2009, finance companies lowered lending by 14.3%, commercial bank lending fell 12.7%, pools of securitized assets fell 7.4%. Loans from credit unions offset some of these declines with a 6.5% increase while savings institution raised lending 1.6%."