Friday, August 28, 2009

Morning Update/ Market Thread 8/28

Good Morning,

Equity futures are up this morning as, according to McHugh, we launch higher on wave 3 up of 3 up of c up of B up:

Again, let’s get over resistance at night, not during trading hours…

The dollar is about level and it’s hard for me to tell what the bond market is doing this morning as treasury futures rolled to a new month but appear to be down… I’ll have to see what they look like during trading hours. Oil is up slightly and gold is substantially higher, getting close to the top of its triangle (potentially bullish on a break above).

Personal income and outlays were reported this morning. Income was flat month over month (expecting .1% positive growth), it was down 2.4% year over year, while consumer spending was up .2% mom and up 1.1% yoy. This would mean that the savings rate is falling again as consumers earn less but spend more, a dynamic that is either not true because of the data and/or because we’re now getting yoy comparables to a time last year that was already lower.
The consumer is not getting much fuel for spending as personal income was flat in July. Cash for clunkers boosted an otherwise bland month for consumer spending. Personal income in July was unchanged after plunging a sharp 1.1 percent in June from the end of a fiscal stimulus program. June originally was a 1.3 percent drop. The July number fell short of the market forecast for a 0.1 percent rise. Even the wages and salaries component was sluggish but at least gained 0.1 percent, following a 0.3 percent drop in June. Consumer spending is primarily fueled by wages and salaries.

Consumer spending continued to rise, advancing 0.2 percent after a 0.6 percent boost in June. Strength was in durables, which jumped 1.8 percent on auto sales. Nondurables dipped 0.3 percent while services increased 0.3 percent

Meanwhile, inflation eased substantially as energy costs softened. The headline PCE price index slowed to a flat reading after surging 0.5 percent in June. The core PCE price index also softened, rising only 0.1 percent after a 0.2 percent boost in June. The July rise in the core index matched market expectations.

Year on year, personal income growth improved to minus 2.4 percent from minus 3.2 percent in June. Year-ago headline PCE inflation declined to negative 0.8 percent from minus 0.4 percent the prior month. Year-ago core PCE inflation slowed to 1.4 percent from 1.5 percent in June.

The July personal income report shows the consumer sector with little contribution to pulling the economy out of recession other than the boost from the cash for clunkers program. The report should be about neutral for the markets today as small upward revisions in June numbers should offset the incremental shortfall of July to expectations.

Well, Econoday must have employed a new reporter? At least he’s not trying to pump this report and is breaking out the cash for clunkers compenent. It’ll be interesting to see the subsequent data and if it falls off because of that.

Consumer sentiment comes out at 9:55 Eastern this morning. Consumer confidence was higher earlier this week, but two weeks ago consumer sentiment surprised on the down side. If I were trading in here, I’m not, I’d be ready for anything. Keep in mind that we still are awaiting a large move in the markets due to the small changes in the McClelland.

If McHugh’s count is correct, that move would be up as subwaves 3up of 3 up strike. He is actually targeting the mid 1,100 area on the SPX, and his count seems to be tracking pretty well so far.

I am always suspect of large moves upwards overnight. There are several open gaps in the charts below us and we’re going to make another one this morning on the open…

The Rolling Stones – Paint it Black: