Friday, April 24, 2009

Morning Update 4/24

Good Morning,

Well, evidently the market thinks it was priced for Armageddon because companies like Ford, who ONLY lost $1.4 BILLION (!!) in the last quarter beat expectations and said they are on the road to recovery – stock up 27%! Yes sir, that’s tremendous progress right there, heck, at that rate they might even stay in business a few weeks longer.

Then there’s American Express… profits ONLY FELL BY 56%! That’s good enough to send the stock up more than 12%. Yes sir, that’s a beat, one hell of a performance and goes to show that everyone should be buying stocks.

Seriously though, people may have been expecting instant disintegration, but the rate of fall was so fast that maintaining that rate was mathematically impossible, so of course the rate at which things are falling slows at some point. That doesn’t mean that things are imminently better. And that feels better, it gives hope, and that’s part of the psychology and bear market rallies.

At any rate, the futures are up some this morning, once again the market turning upwards late at night:

The 10 minute stochastic has a little room to run higher before it’s overbought, the 30 minute fast is already overbought, but the slow has room, and so we may see a move higher that could be followed by a move lower later. That would fit the trendlines of the tentative triangle I have drawn, as you can see a run over that upper trendline, say above 857 would be bullish and the /ES is almost there already. If you’re short, then holding past there may mean taking a chance and riding it up to the 862 area, or even higher:

Durable goods orders were down .8% which again was better than expected. But once again revision games come into play with February’s gain whittled down substantially. Also note that March’s negative performance comes on the heals of February’s positive one, again showing that one month’s data doesn’t make a trend. And, year-over-year, durable goods orders were down a stunning 25.2%! That’s huge and it truly is economic cliff diving. Here’s Econoday’s report:
Durable goods orders in March declined less than expected but February's sharp gains were whittled down substantially in revisions. Durable goods orders fell back 0.8 percent in March, following a 2.1 percent rebound in February. The prior month's increase originally had been estimated at 3.5 percent. However, the drop in March was not as severe as the market forecast for a 1.8 percent fall. Excluding the transportation component, new orders decreased 0.6 percent, after advancing 2.0 percent in February.

Weakness in new orders was widespread in the latest month but was led by communication equipment, down 8.1 percent, and primary metals, down 3.2 percent. The only major industry group to post a gain was electrical equipment & appliances which rebounded 1.8 percent.

By special category, nondefense capital goods rose for the second consecutive month, increasing 1.9 percent in March after a 4.9 percent boost the prior month. But these orders are still recovering from January's sharp 9.9 percent plunge.

Year-on-year, overall new orders for durable goods slipped to down 25.2 percent in March from down 24.8 percent in February. Excluding transportation, new durables orders declined to down 20.3 percent from down 18.3 percent the prior month.

The latest durables report showed a partial pullback in durables orders but over the past two months there has been a net gain. Overall, the numbers indicate that contraction in manufacturing may be slowing – which still is good news. The "may" part has to be heavily considered since durables orders are notoriously volatile. Also, we certainly will have to pay more attention over the next few months to ex-transportation since auto manufacturers are shutting down some assembly lines due to weak sales and high inventories.

That’s about it, market’s opening right now and breaking above that trendline, so be careful playing today, but have fun.