Market comments for Aug. 12th, 2011 (UPDATE)

Yesterday we did rally on the lower Initial jobless Claims data, but let's be honest here, the data was not that great for such a strong rally. Yesterday's charts give conflicting signals to me for a short term read on direction. I have put together 4 charts for today. One on the Dow, one on the S&P 500, one on the Nasdaq and finally the last one on the Russell 2000. I have drawn some lines on each chart. Some show that the trend looks down from here, others show up from here and one shows stagnant and staying at this level. So we will need more days of data for clarity. Here are the various charts:




From these charts above you can see that the long steep downward move hit a bottom, rose back up a bit dropped again and then rose up again. This second move up did not convincingly go much higher than than the first bounce. In fact, depending on which index you look at, the Dow actually came in below the first bounce. I will need today and tomorrow's market action to get a better sense of near term direction. The Volume though has been extraordinary for a summer month.

Also, of interest from yesterday's Volume was the chart below of the Dow in 1/2 hour increments and the Cumulative volume up to that time. In the last 1/2 hour yesterday, the Dow traded 146 Million shares!


Retail Sales data released this morning for July was +0.5%. Expectations were for +1.0% and the data from June was only +0.1%.

Michigan Consumer sentiment data will be released in 1 1/2 hours and I will post it as an update. Futures initially responded slightly up from the release of the Retail Sales data.

UPDATE: 7:01am PST

Consumer Confidence came in at 54.9, which was the lowest reading since May 1980!! When the data was released it reversed, from being up 140 points on the Dow to being up only 50 points. This is a contributing factor to why the Fed most likely thought they needed to keep interest rates very low through to 2013. To put today's number into perspective, last month Consumer Confidence came in at 63.7 for July.

Initial Jobless Claims improved.

Expectations were that we would actually have 440K Initial Jobless Claims when the data was released this morning for the previous week, but instead, the data released showed only 398K were in fact what was recorded. That is the first time we have been below 400K in almost 2 months. However, it should be noted tha the week before this data's release was revised upwards from 418K to 422K. Still, today's release showed an improvement and at least is in the right direction.

Meantime, the debt ceiling standoff is approaching a critical moment for the Congress and the markets. Stay Tuned.

Tomorrow an important piece of data will be released, which may have a major impact on markets, a first look at 2nd quarter GDP, as well as the Chicago PMI and Michigan Sentiment.

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 March 11th

Much news in the world today. There is the big 8.9 magnitude earthquake in Japan with a Tsunami following. There is the trouble in Libya, the unrest still in Egypt, and new protests in Saudi Arabia. But if that isn't enough, the Michigan Sentiment for March came in at only 68.2, while expectations were for a 78.0 reading. That is a huge drop and most likely based upon the recent rise in Oil prices because of the trouble in Libya and Egypt. The prior reading was a 77.5 reading. The reading today was the lowest since Oct. 2010. See the chart below.

The market is meandering today after the big sell-off yesterday. It has been both down and up today but the total range is about 94 points today for the Dow. It does not change my view that we are headed lower next week.

The reality of the economy and the irrationality of the Fed and Wall St.

Yes my friends, new data released today defies the logic of the markets. First piece of news was that Michigan Sentiment came in lower than expected for December at 72.7. The prior months reading was 74.5 and the expectation for Dec. was 75.5. So much for that "good news"!

Then the Retail Sales number was reported at 0.6% for Dec. Expectations were for 1.0% for Dec. Nov. came in at 0.8%. So this clearly is in the wrong direction and includes the Christmas shopping data. Remember how they said it was a great season? Hmmmm.

The CPI came in at +0.5% for Dec. Expectations were for +0.3%, so that's in the wrong direction but Core CPI came in at only +0.1%, which excludes Oil for some reason. You don't need gasoline or heating Oil, right? That isn't a "cost" to you, right?

So how's the market reaction to this news? Well the markets were down before the news came out and now they are up! Go figure, it's QE2 at work distorting reality of the economy. Thanks Fed Chairman Bernanke!

Michigan Sentiment Index historic chart and does it mean a slip into a Double-Dip recession?

I thought I would go back and look at the data released on Friday concerning the Michigan Sentiment number and how it looks on a chart. Here in chart from is the Univ. of Michigan Consumer Sentiment index plotted back to 1998, by Haver Analytics.

The last few points is what has many concerned for a Double Dip recession. The level we are at now is the same as it was just when they say the recession ended, as is noted in the grey bar from 2008 to mid 2009. It was mid 2009 (June 30th) when the stock market was at 8,447 and Gold was at $934/ounce, and the Dow Gold ratio was 9.0. Today the Dow is at 11,062 while Gold is at $1367.50/ounce and the Dow Gold ratio is at 8.1 and heading lower. So the Dow had risen 2615 points or 31% since June 30th 2009 while Gold has risen 46.4%. Still think you made any real money which you can buy more Food/Products/assets with? I am expecting that the Michigan Sentiment number will drop after the election for next month and signal a returned concern to a double dip recession. It certainly will set the stage for a slow Christmas shopping season, no matter what you hear to the contrary. Bah, humbug!

Market comments for Aug. 13th: That's Friday the 13th bad luck! UPDATE

Here we stand on Friday the 13th all wondering whether the direction of the stock market will have a reversal today based upon the recent few days Candlestick patterns, because that is what the patterns say. We should have a minor reversal today. Economic data will not be the determinant today. It won't be the social mood of traders. It will be whether the Fed wants the market to go down another day ending the week.

Even though we expect CPI data today to come in near zero or a negative reading adding to the deflationary case that has been made by many including me, it will not be the decisive data to determine market trend. That direction will need one more week to be determined. Next Friday is Options Expiration for August and 2 weeks before the start of school. Speaking of the return to school, Retail Sales numbers will shed more light on the Consumer as its data is to be released momentarily. Dow Futures before the data release was at -27 for the Dow. So here is the data:

CPI for July came in at +0.3% The market had expected +0.2%. The prior month's reading was -0.1%
Core CPI for July came in at +0.1%The market had expected +0.1%. The prior month's reading was +0.1%

Retail Sales came in at +0.4%. The market had expected +0.5%. The prior month's reading was -0.5%.
Retail Sales ex Autos came in at +0.2%. The market expected +0.4%. The prior month's reading was -0.1%.

The Dow Futures have now moved more negative with the Dow Futures now at -50, so the initial quick reaction was more negative. TIME WILL TELL WHETHER THIS PLAYS OUT FOR THE ENTIRE DAY TODAY.

Michigan Sentiment comes in in about 1 hour and 25 minutes at 9:55am EST or 6:55am PST and I will update this post top add the data so be sure to check back if you are as interested as I am to post it. The market expects 70.0. The prior month's data was 67.80.

Be sure also to visit over the weekend as I will post some charts and show where we are headed and where resistance is on both the Dow and S&P 500. You see on a micro level it is much harder to determine short term market direction. But at a Macro level it is much clearer. Thanks for visiting the site. I also am going to post soon several non stock market commentaries. One will be on the Proposition 8 Court decision which took place this week reversing the ban on Gay Marriage on Constitutional Grounds. The other article I am working on is about opinions by the Chamber of Commerce on Prop 19 in California, which would legalize Marijuana use in California for adults. I have some definite thoughts on both topics.

As I finish writing this post, the Dow Futures have recovered to only -6. So it might not be that bad a Friday the 13th for the Longs but instead could be for the Shorts. Have a nice weekend.

UPDATE: 6:55am PST

Michigan Consumer Sentiment came in at 69.6%, which was not quite 70.0 but close and better than July.

Leading Economic Indicators for week of July 12th.

Leading Economic Indicators for the week are as follows:

Tuesday, July 13th:
Trade Balance for May. Market expects $39.5 Billion.
Treasury Budget for June. Market expects $70 Billion.

Wednesday, July 14th:
Retail Sales for June. Market expects -0.2%. Last month -1.2%
Export Prices for June.
Import Prices for June ex-oil
Business Inventories for May 0.3%.
Minutes of FOMC meeting released at 2:00pm EST.

Thursday, July 15th
Initial Claims
Continuing Claims
PPI for June. Market expects -0.1%
Industrial Production for June. Market expects -0.2%
Capacity Utilization for June. Market expects 74.1%
Philadelphia Fed for July. Market expects 10

Friday, July 15th
Core CPI, CPI for June. Market expects 0.0% & -0.2%
Michigan Sentiment for July. Market expects 74.0, and prior reading was 76.5%

In overnight trading the Nikkei is up 7 points at this hour. This is not reinforcing of the drive last week so only time will tell what will happen. If you are on vacation, enjoy it and visit here less frequently. Summer comes only once per year unfortunately. :)