Friday, March 13, 2009

Morning Update/ Market Thread 3/13

Good Morning,

Futures are up slightly this Friday the 13th morning.

We had China threaten us not to devalue our dollar last night (or they won’t keep buying our debt) and then they turn around and claim that they can stimulate their own economy at any time sending copper and other commodities higher. Don’t you just love being a debtor nation?

But the GOOD news is that our trade deficit is coming down rapidly, falling all the way from the $60 billion a month level, month after month, down to ‘only’ $36 billion. That shows the collapse in trade and manufacturing. I say that’s a good thing, because trade needs to come back into balance.

As trade has collapsed, prices are down. Import prices are down 12.8% in the past year!
(Econoday) Prices for imported goods continue to contract, though perhaps at an easing rate. Import prices fell 0.2 percent in February, less severe than the 1.2 percent decline in January and the run of even much more severe declines in prior months. But the slower decrease is tied to prices for imported petroleum which bounced 3.9 percent in February. Excluding petroleum, and this is the core reading for the report, prices fell 0.6 percent in the month, just a bit easier than the 0.8 percent decline in January and much easier than the extremely severe declines in prior months. Prices for imported capital goods are very weak, down 0.4 percent in the month and reflecting the monumental downturn that the industrial sector is suffering.

On the export side, prices fell 0.1 percent in the month reflecting a 1.7 percent drop for agricultural products. Prices for non-agricultural export products are actually steady, up 0.1 percent in both February and January and a big improvement from prior sharp contractions.

There are definitely mixed signals in this report. Year-on-year rates of price decline for both imports and exports continue to accelerate, though only slightly. Import prices are down 12.8 percent year-on-year with export prices down 4.5 percent. Today's report isn't likely to raise new concerns over deflation, though it does indicate that the period of disinflation is still ongoing. And today's report isn't likely to raise concern over next week's producer and consumer price reports.

Gold and oil are up again overnight, today I am looking for another consolidation day, probably not huge gains or losses. That will keep people guessing going into the weekend. I’m hearing A LOT of bullishness now. That’s a pretty dangerous statement, especially since I still don’t see any wave 5 of 5.

The next pivot higher is at 768 and then 789. Pivots below are 734, 717, & 696. My best guess for today would be range bound, but I won’t be surprised by moves in either direction. There’s very little volume resistance now until we get up to the 800 level, but once we reach there, going higher will be very difficult indeed. The 50dma currently resides at 813ish.

I see a potential small bear flag that’s worth about 7 points already in the futures, so we’ll see what today brings, I doubt we’ll see more panic buying at these levels and I don’t see the catalyst for panic selling here either other than the fact we’re up against some potential channels tops as I outlined in last night’s report.

Have a great day,

Nate

Hey, Friday the 13th and a full moon coming... as Seth would say, must be the season of the witch!

Donovan - Season Of The Witch