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.

Market outlook for Aug. 5th: Still bound by upper resistance levels!

Initial Jobless Claims rose unexpectedly to 479,000 this week compared to an expectation of 450,000. Continuing Claims came in at 4.537 Million, while expectations were of 4.500 Million. Before the numbers were released the Dow Futures were up 10 points and after the number the Futures were down -28 points with Fair Value up 3 points. The Initial Jobless Claims are at the highest level since April. This should have an impact on the markets and has already on European markets going lower than they were. But you never know in this market whether people will just shrug off the news as they have in the past. Why the market is still as high as it is is still confounding because the data is pointing very strongly that we are in a Deflation period which is accelerating.

The chart of the S&P 500 above shows that on Tuesday we formed a Hammer Pattern. This pattern marks a reverse in the previous trend. While yesterday's closing was not down, today's should be to fulfill the Hammer pattern reversal. Watch the S&P 500 today as it should lead the market over the Dow, which often gives confusing signals, because there aren't many stocks in the Dow Index and fewer stocks can be manipulated more easily.

The chart above from Haver Analytics was last updated on July 29th, so it doesn't include this week's data but as you can see 479,000 is clearly a trend in the wrong direction and alarming to many, especially the long term unemployed, often referred to as the 99ers. Those are individuals out of work longer than 99 weeks and get no benefits currently and are living on a string, as an article on the front page of the NY Times said on Tuesday, describing a 49 year old woman who moved out of NY with only a few hundred dollars and drove to Brattleboro, VT and plans to live in her car and try and find some work.

Revisions to the previous week's data were made from 457,000 to 460,000 Initial Claims. Tomorrow the Unemployment rate for July will be released and it was already expected to rise to 9.6% from 9.5%, but with these Initial Claims rising steadily, it could go back up to 9.7% or higher.

Stay tuned and return during today's market action for any Updates which will be posted below.

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!

Economic Indicators for July 15

Here I am waiting for a flight from Rochester, NY to go home via Chicago and I check the economic news out at 5:30am PST, and guess what, I see more bad news. For a starter, the PPI came in at -0.5 percent, which is another indicator we are in Deflation, not Inflation! Anybody listening out there? And that's with all the stimulation the gov't was allowed to spend. Paul Krugman warned that we needed twice as much stimulus back when the government was deciding what was needed, but Republicans in the Senate and a few Democrats like Ben Nelson and Independent Joe Lieberman wouldn't support any more. In fact they didn't even suppot the amount which was approved by Democrats and Independent Bernie Sanders of Vermont. Thank God they passed what they did!

Here's the other piece of news. The NY Fed announced that the Empire Manufacturing Index came in at 5.0, which is barely manufacturing. Last month the number was 19.6 and the expectation for this month was for a reading of 19.0, so how's that for a taste of reality.

One last piece of data to type on this iPhone, Continuing Claims came in much higher than expected at 4.654 Million Continuing Claims versus an expected number of 4.440 Million Claims. Still think the economy is getting better? What planet are you living on, because it doesn't look that way from where I sit!

I will be watching the market as much as I can traveling home today. God bless the iPhone! Good luck investing or trading.

Headlines and comments for July 13th

Ok, want to get a sense of what's going on and where the market is headed? Let's just look at the headlines from today's Bloomberg.com web site. I'll write the headline in quotes and then make a comment after each. Here they are:

-"European Stocks, U.S. Index Futures Rally on Alcoa Earnings; Euro weakens" Hmmm, why is the Euro weakening, I thought things were improving in Europe, as the Greek debt crisis had abated. Well it turns out they are now worrying about Portugal's debt, as Moody downgraded it.

-Greece Bill Sale Below EU Bailout Rate Eases Concern over Borrowing Costs" Hmmm, but what about Portugal's debt crisis looming?

-"Europe's Banks Poised to Win Reprieve in Basel on How Capital is Defined" Hmmm, I don't get a chance to redefine what my capital is. What kind of game is this? And why do they have to redefine what capital is? Haven't they had a definition all these years already? What's the old definition and what's going to be the new one? Isn't money, money? Oh, and here is the real news from the article, "A push to water down stringent standards proposed last year by the Basel Committee on Banking Supervision, and to allow more time to implement them, is led by France and Germany, according to bankers, regulators and lobbyists involved in the talks. Representatives from the U.S. and the U.K., who have sought to rein in risk-taking, are willing to compromise on how capital is defined to reach an agreement at a committee meeting that begins tomorrow, the people said." Feel better now? I don't! The games Governments are playing now threatens our very economic survival.

-"German Investor Confidence Drops as Debt Crisis Threatens to Hobble Growth" Hmmm, I thought we solved the Debt problem with 1 Trillion Euros. Are you telling us you are still worried? Now you've got me worried! It turns out that German investor confidence declined for a third month in July as Europe’s debt crisis threatens to cripple economic growth and banks undergo stress tests to prove their durability. Imagine that, they lend 1 Trillion to solve the debt crisis but then worry whether they have 1 Trillion to lend. By the way, this is the 3rd month of declining German Investor confidence has dropped. It went down to a 15 month low of 21.2 and they had expected a drop to only 25.3 from the 28.7 level in June. Hmmm, this is the only real truth out there it seems today. The German's seem to know it's a shell game. Their confidence level, or lack of it, says it all for me!

-"U.K. Inflation Slows Less Than Forecast; Rate is Above Government Target" Hasn't anybody been paying attention there? What good is a target if you never have acted on anything away from target before? Oh now you are concerned. Well the World is really experiencing Deflation if they pay attention.

That's enough to get you going on the headlines this morning from Bloomberg.com. Hope you enjoyed the recap and comments. You get the point, it's all a game of manipulation with a smattering of honesty mixed in for good measure. Read headlines for what they are really saying. There is another way to interpret each, using a more skeptical eye.

After reading all the headlines, I looked at the charts again and I do not believe we will go over 10,300 and stay above that level. And we are close as yesterday we closed at 10,1216.

PPI, Housing Starts for May: Not really good, but will it affect the market?

Yesterday was an unusual day in the market. The Dow soared up above the R2 (Resistance) level of 10,377, closing above 10,400 and all on bad news during the day. I had said it wouldn't happen. I was wrong. The Futures were pointing down as the PPI data and Housing Starts data was to be released. The PPI (Producer Price Index) came in at -0.3% compared to being down -0.1% in April, while Housing Starts were down -10%. May Building permits were down -5.9% after being up +3.9% in April.

The PPI numbers continue to support the fact we are in a Deflationary period, contrary to many who believe we are in Inflation. Does it really make a difference? It should as it affects Fed policy, but the stock markets seem to be driven by the beat of a different drummer and we aren't sure who's beating that drum, are we. This stock market even has Cramer scratching his head, as he said on his CNBC Mad Money show yesterday. To quote Cramer, "It makes no sense at all!"

Where's the market headed? Some facts to consider.

I was trying to use news items to see the probability of the market going up versus down going forward. So I have listed all the things I could remember that would affect the market negatively and which would positively. Here’s a glance at them:

Positives:

-Stock market rallied this past year and recovered 70% of the losses from the lows.
-The SubPrime mortgage problem has run most of its course.
-The divisiveness of the healthcare reform Bill has abated and the Bill passed.
-Personal Savings has increased this past 1 1/2year
-The Dollar has rebounded from its low after the Euro has dropped significantly.
-The US Auto companies have been restructured to be more competitive and profitable
-The Banking system has been saved from total collapse and Deposits are insured by the government, for up to $500,000 per couple.
-Freddie Mac and Fannie Mae were saved from the brink of collapse
-The Stimulus plan has created some jobs.
-GDP was 3% in the first quarter
-Corporate earnings for the most part beat expectations (but expectations were set low last year. Top line growth has been muted but cost savings have led the way for earnings improvement.

Negatives:

-The debt level of the US is astronomical at a significant % of GDP
-The EU has had near collapse of Country debt for Greece and is threatened by similar issues from Spain, Portugal, Ireland, Italy.
-The Gulf Oil crisis is destroying habitat and livelihoods in the Gulf for years to come
-North Korea has threatened war against the South and us over the Missile torpedo on the South Korean ship
-The National debt will be increasingly difficult to pay as interest rates rise.
-People are afraid and causing GOLD and Silver to rise dramatically as they don’t trust currencies.
-Stock market is poised for a Super Grand cycle correction according to Elliott Wave Theory.
-New Home Construction is still down and Home Prices are continuing to go down.
-The CPI is near zero with all the Stimulus money throw at it and we are in Disinflation now and headed towards Deflation.
-Bank lending has tightened significantly and 3 Month Libor (rate the Banks charge each other for lending) rates have increased.
-Official Unemployment rate remains high at 9.9% while the unofficial rate, which includes those looking for Full time work from part-time workers is at 20%.
-Wars in Iraq and Afghanistan
-Issues with Israel for Obama Administration over building Settlements
-Latest incident of Israel raiding the flotilla of boats bringing supplies to Gaza
-Issues with Iran and Nuclear materials for possible bomb building.
-Terrorism: A host of attempts to terrorize us from Detroit bound passenger lighting his pants on fire to the Times Square attempted car bomb and many others trying to harm the US.
-The Tea Party movement
- Political divisiveness between Democrats and Republicans
-Arizona Immigrant laws newly enacted.
-Financial regulation not yet passed to prevent Too Big to Fail banks.
-Stock market looks poised for another selloff
-Now Fixed Rate Mortgage owners are going into foreclosure and rate appears to be increasing.
-Commercial Property is now feeling the problem with businesses closing and there are now an increasing number of For Lease properties For Sale. The U.S. national office vacancy rate of 17.3% was the highest in 16 years.
-Credit Default Swaps still are an issue and have not been resolved since the crash of 2008.
-Most Fixed Income retirees are getting in more and more of a financial bind and may have significant problems financially surviving in their retirement.

That’s my list. What does it say to you? Do you think that these can be overcome and drive the market higher this year or next? To me the Negatives far outweigh the Positives and my inclination is that bodes poorly for any chance the markets will stay at current levels for any prolonged time. The best hope I can see is that we won't go as low as I have predicted, which is below 4,000 to as low 2,500 on the Dow. Now that is truly scary!

Do you have any items you want to add either on the Positives or negative lists? Please feel free to make a comment with any additions you have.

A philosophical view of the stock market and commentary.

Yesterday's market action was a function of fluctuations in currency movement and the same could happen today, according to Art Cashin of UBS Warburg on CNBC this morning. I don't know if that was the cause but there was a surge of the dollar at the open yesterday and, within an hour of the close, the Dollar dropped. Theses fluctuations are expected to continue as Europeans settle in on what they think about the Euro now in light of the 1 Trillion bailout of EU zone countries.

Having said that, we continue to be in a negative frame of mind in US markets. Today the PPI number for April came in at -0.1%, which is deflationary in itself. That continues to plague our economy as we have had negative CPI or zero CPI with all the money and stimulus the Fed has been actively creating. Even with this major effort, there appears to be deflation worries continuing and so far the Fed has not managed to abate this concern. Inflation watchers, rightfully so, keep looking for inflation to rear its ugly head. It has in effect with the rise in Gold and other precious metals, but not enough to turn the tide in the direction of inflation. There is contention on this topic in most Cable programs based upon commentary by their guests.

You would think this would be the most ideal time to pay down Federal Debt with nearly zero interest rates, but it appears for political reasons we prefer to pay the debt down when interest rates rise and the pain is greater. I just don't understand the shortsightedness of Americans. I do understand the politics of the situation, as we are a democracy where politicians are working to get re-elected immediately after winning an election and pain means sure defeat at the polls. Which is why the pain caused by our lack of backbone in dealing with these issues at a logical time is not great enough to make us move into action. That is why we had a Great Depression and why we are destined to repeat history again, unfortunately. This is why I favor the view the markets will drop significantly and shake us to the core as the excesses of the 80's to the first part of the 21st Century will shape a new generation of true fiscal conservatives. We need a cleansing and we are going to have one. That is why the markets do follow Elliott wave Theory and are based on Fibonacci numbers. It is based upon the very nature of man (and woman).

Market outlook for June 24th, 2009

This morning in pre-market Durable Goods Orders were reported to climb again 1.8% for May, as compared to a 1.8% gain in April. It is a very small positive sign, but the market is looking for any good news these days and a gain is better than a loss. The market may rise today but not a very strong rally in my view. The bigger news being awaited by the market is the announcement by the Fed after several days of meetings. Will Fed Chairman Bernanke say he still sees the worry of deflation or will they say they see and are concerned about inflation. In my view the Bulls and Bears will each have a strong case with whatever they say as a case can be made for being Bearish or Bullish. It doesn't really matter what they say. It is more important as to what the actual data says on the economy. So far, it's pretty bleak! If you are an American, Asian or European who is watching the data and see the Unemployment rate in the U.S. is at 9.4%, in California it's at 11.5% or in Spain it's 17%, you can say we are still in a bad recession. If you are one of those who are unemployed yourself, then you feel we are in a Depression!

But in pre-market the Futures are up and in Europe trading is up as well. Those views are by those who have money to invest and are obviously employed. They don't feel the pain of job loss! Only when the market goes down do most start to feel the pain of the reality of the economic conditions in their countries. Stay tuned!

Don't forget to vote in the Mini Poll on the right margin if you haven't voted this month. There is only 1 week left before I summarize June's data.