Friday, September 11, 2009

Morning Update/ Market Thread 9/11/09

Good Morning,

Can you believe it’s been 8 years since the World Trade Centers collapsed? I remember I got up early that morning and was watching it a little on the television but had to drive to Seattle for a flight simulator training mission and listened on the radio as the towers collapsed. I remember standing in the simulator building talking to the pilots and mentioned that I guaranteed them that they would see bullet proof cockpit doors as a result. Besides a bunch of “look good” airport security BS, that was about the only change of substance besides bankrupting ourselves with our inappropriate reactions. Sad for those involved and they have my sympathy, even more sad what we have done to ourselves.

At any rate, this will be my last daily update until I return as I’ll be heading out this Sunday. You will be in good hands with Davos providing the updates, please give him a warm welcome by providing your usual good observations and links. I’m sure he’ll post up a lot of the links you provide, so keep him informed!

The equity futures this morning are up:

The dollar has fallen beneath that descending wedge. Everyone should hope it’s just a throw under, because if it’s not, the dollar descending further will be much less fun in the end than having the stock market descend.

Gold is back up over $1,000 as a result. Below is a chart of the dollar futures on the left, the red line is the bottom of that wedge. There was a small H&S on the dollar and it is now confirmed with a break down below support. Gold futures are on the right:

Import and export PRICES were released this morning. The month over month change into August was higher than into July. Import prices rose 2.0% and export prices rose .7% in August. Year over year, import prices fell 15%, and export prices fell 6.1%. That is still a historic collapse in prices. Pretty soon the year over year comparisons start to get easier, but I would not discount the power of that collapse and I would not be fooled into believing it’s over – nothing moves in a straight line. However, crude has for now not resumed its price decline and its rise over the past few months is pressuring price data. That could begin to show up in year over year inflation data soon, the price action of crude is very important in that regard. Here’s Econoday’s take:
Import prices rose 2.0 percent in August reflecting a 10.5 percent jump in prices for imported petroleum products mostly crude. Excluding petroleum products, imported prices rose a sharp 0.4 percent in what will pressure next week's core data on producer and consumer prices. Prices of imported manufactured goods rose a steep 0.6 percent from both industrialized and non-industrialized countries. Prices of all imports from China rose 0.2 percent which is a sizable rise for this category.

Export prices rose 0.7 percent and were boosted by a month-to-month swing higher in agricultural prices which rose 0.2 percent vs. a 4.9 percent decline in July. Export prices for non-agricultural goods jumped an unusually high 0.8 percent.

Though there are steep readings in today's report, import and export prices for finished capital and consumer goods showed very little change indicating that the month's pressure was centered in raw materials, indications backed up by the surprisingly high readings in the ISM prices paid indexes for August. Price pressures are brewing for commodities including oil and base metals, the result of Chinese stockpiling and also forward buying and investment buying on expectations of stronger demand in the future. There was little initial reaction to today's report though gold did pop several dollars higher to $1,004.

Consumer Sentiment is released at 9:55 AM.

Yesterday the trade figures were released and this morning I have the Fed’s updated charts. Below is a chart showing the balance of trade. Note that we have experienced a major change of trend. There will be movement within, but the trend has definitely changed from a widening trade deficit to a narrowing one – that’s a good thing in the long run for our economy, but the bobblehead politicians and economists don’t look at it that way – and all I can say is that their brains are fried – must be something in the water at Haaavard. Here’s the chart:

Below is the mostly raw data chart of Imported goods:

And this is Imports expressed in yoy percent change:

Here is Exported goods:

And this is Exports expressed in yoy percent change:

Stunning charts, they paint a much truer picture of the economy than the spun and manipulated figures such as GDP, and they put into perspective the size of the “bounce” we have been experiencing. Is a 50% rise in the stock markets commensurate with what you see here? NO? Well then, perhaps there’s a reason that insiders are selling again at a record pace?

That disconnect is not going to end well, Nate says, as the /ES pushes higher still right into the 1,041 pivot. The next higher pivot is at 1,061, support is at 1,018 until prices get over the 1,041 pivot and turn it into support.

McHugh’s count has been more accurate than other EW callers that I follow. He is tracking this rising wedge that I have outlined in blue:

He believes that we have some more of 3 up of c up of B up to go (with some minor correction), then we’ll have more consolidation and a final push higher to complete wave c up of B up and that will complete the B wave. Timing at the pace of movement would maybe put the end of B towards the end of this month or sometime next month – that would coincide with what this rising wedge is saying. That’s the best I can say from what I see right now, so keep that wedge in mind over the next few weeks.

When the levee finally does break, it’s going to produce a flood that you don’t want to be caught in, that’s for sure…

Led Zeppelin & Neil Young — WhenThe Levee Breaks: