Wednesday, June 24, 2009

Morning Update/ Market Thread 6/24

Good Morning,

Equity futures are higher this morning in front of the FOMC announcement with the /ES reaching the 900 level, just beneath the 50 and 200dma:

Monday’s big down day was a 93% down volume day, the second 90%+ day inside of a week. That is usually a marker of a powerful bear market, but it’s also an indication that the market needs a little rest. But the back and forth motion yesterday caused another small change in the McClelland Oscillator and thus we can expect a large change in price most likely today or tomorrow – direction is unknown from that very reliable indicator.

With the FOMC today, I was completely neutral at yesterday’s close and do not intend to play with the criminals today unless the FOMC presents a good entry opportunity which it may.

I believe that this morning’s bounce will make wave 2 of 3 down. If my working count is correct, then 3 of 3 should follow sometime in the next few days.

The short term stochastics still have room for more upside here. The 901 SPX area currently has both the 50 and 200dma in that area, so it may offer up a little resistance, but I will not be surprised if it is thrown over – in fact, that area as I type has just turned away the futures advancement.

The economic data produced more ammunition for the greenshoots crowd… The MBA Purchase Applications Index came in higher for last week with the index rising from 261 to 280. Here’s Econoday’s report:
The June 19 week was a good one for purchase applications which jumped 7 percent to 280.3, a still depressed level but a rare, solid improvement for the index. The refinancing index also rose, up 6 percent to 2,116.3. The applications activity is tied to a turn back down for mortgage rates. Thirty-year fixed mortgages averaged 5.44 percent, down 6 basis points in the week. Home sales data in general have been firming the last couple of months, raising talk that the housing sector has finally hit bottom. New home sales for May will be posted at 10:00 ET.

The week prior, if you remember, had fallen off the proverbial cliff due to rising interest rates. This rise is not at all surprising giving the breather in rates, the seasonality, and the greenshoot “spirits.”

Durable goods orders also rose month over month, giving the on air heads something to flap their lips about. Of course they are likely not to mention the year over year figures which are down a mind numbing 23.3%! Hey, we just learned that Japanese exports fell again and are now down more than 40% year over year! Oh yeah, greenshoots galore!
But Econoday and others have to put their best spin on it, how else will they garner their sponsor’s money?
New factory orders for durables in May came in unexpectedly strong – even after discounting transportation. Durable goods orders increased 1.8 percent in May, following a rebound also of 1.8 percent drop in April. The boost in April initially had been estimated to be 1.7 percent. The May gain came in well above the market forecast for a 0.5 percent decline. Excluding the transportation component, new durables orders posted a 1.1 percent boost after rising 0.4 percent the month before.

The rebound in new orders was widespread but was led by machinery, up 7.7 percent, and transportation, up 3.6 percent. Also making gains were primary metals, and computers & electronics. Declines were seen in fabricated metals, communication equipment, electrical equipment, and "other."

Another sign of optimism was that capital goods orders rebounded. Order for nondefense capital goods jumped 10.0 percent in May after a 2.9 percent dip the month before. Even excluding aircraft, nondefense capital goods orders rose 4.8 percent after a 2.9 percent drop in April

Year-on-year, overall new orders for durable goods improved slightly to down 23.3 percent in May from down 24.5 percent the previous month. Excluding transportation, new durables orders rose to down 22.4 percent from down 23.6 percent in April.

The May report on durables orders showed broad-based strength for new orders. While the gain in new orders will take a little time to impact production, the latest numbers add to the argument that the recession's bottom is near. This still does not change the likely fact that the recovery will be sluggish. Nonetheless, equities should like today's numbers. Treasury yields firmed on the news.

New home sales come out at 10 Eastern, the FOMC announcement at 2:15 Eastern (11:15 Pacific), and of course there are bond auctions galore today and tomorrow to finance our “Fed’s” folly.

Today I get serious about my move tomorrow. I’ll only be with you online off and on until about the FOMC announcement and then I begin disconnecting my computers and packing up my office. Moving, unpacking and arranging the new house, and taking care of the current house will take me out of the blog world through the weekend. Before I unplug I’ll post a market thread for tomorrow and once again appreciate your patience with me as I literally get my house in order!

Hey, make sure you follow along with Point, Seth, Maize, Frank, Glass (where you been?), Joe, Nola, Comrade Wanna-be and others… they’ve been on a roll lately and especially Point’s red hot reports and Seth’s laser beam NASA moonbat calls, those guys are on FIRE!

Bruce Springsteen – Fire: