Wednesday, March 18, 2009

Morning Update/ Market Thread 3/18

Good Morning,

Futures are down this morning with 777 remaining the /ES high so far. S&P futures are down about 9 points.

In economic news this morning, the MBA Purchase Application index rose from a value of 253 to 257. Mortgage rates were lower last week and refinancings were up.

The CPI data came in higher than expected with overall inflation up .4% in February. The rise is largely due to increasing energy costs in the month. New vehicles up?

(Econoday)In February, consumer price inflation accelerated on a spike in energy costs, coming in higher than expectations. The headline CPI rose 0.4 percent in February, following a 0.3 percent boost the month before, giving inflation hawks reason to start worrying again. The February number topped market expectations for a 0.3 percent gain. Meanwhile, core CPI inflation came in at 0.2 percent, unchanged from January and matching the consensus.

The increase in the headline CPI was led by a 3.3 percent jump in energy costs, after a 1.7 percent rise in January. Gasoline spiked 8.3 percent in the latest month. Turning to the other big component in the headline CPI, food actually slipped 0.1 percent.

The core rise was led by notable increases in apparel, up 1.3 percent; new vehicles, up 0.8 percent; tobacco, up 0.7 percent; drugs, up 0.6 percent; and recreation, up 0.4 percent.

Year-on-year, headline inflation firmed to up 0.1 percent (seasonally adjusted) in February from down 0.2 percent in January. Meanwhile, the core is up 1.8 percent, compared to 1.7 percent in January.

The FOMC meeting results come out at 2:15 Eastern, or 11:15 Pacific. Of course everyone is expecting no change in rates, but they will be listening to the propaganda, I mean “statement,” from the Fed. Of course the market will react after the statement and the rule is that the first move is the wrong move. Frankly, I don’t even know why people give any credence to what they say, but that’s the game.

Good old Ken Lewis was bragging that he thought BAC could pay back the TARP money by next year. If it raises their stock value by 30 cents, look for the other disaster bank CEO’s to say the same within the next day.

IBM stock is down after word that they were going to buy Sun Microsystems. Sun stock is up. It would be the largest acquisition in the history of IBM if it goes to fruition.

Interesting that the dollar is down this morning while oil and gold are also down. Bonds are up slightly.

I do still see potential megaphone tops on the 15 minute /NQ and /TF charts. They have been leading the market and closed last night right on the upper boundary. Here’s a chart showing those:

Traditionally megaphones are ending patterns, but they are unreliable and when they break in a continuation, it can be more violent, so caution is advised.

Bonds are sitting right in the area where further rally in stocks would pressure rates. I know I’ve been saying that, and I believe it’s not possible to have your cake and eat it too in this regard. Something will give, it’s just math. The only way out is to relieve the pressure by letting stocks come down or by purchasing their own debt (which they may be doing by stealth, and by purchasing FNM and FRE paper).

The divergences in the market will eventually catch up to prices, be patient.

Have a good day,