Tuesday, September 29, 2009

Morning Update/ Market Thread 9/29

Good Morning,

Equity futures are up a little this morning, rising to the 1,061 pivot on the latest Case-Schiller data that showed some month over month improvements (1,090 is the next higher pivot):

The dollar is up, bonds are down, oil and gold are both down.

The ICSC showed slight improvement, but we completely ignore that Goldman report as it has no basis in the real world whatsoever. The Redbook, half connected to the real world, showed a year over year decline in sales of 2.2% which is an improvement over last week’s -2.6% showing. Econoday claims an improving trend, but these have been negative for quite some time.

Here’s what was released by Econoday on the Case-Schiller Index:
Case-Shiller reports a third month of gains for home sale prices. The composite-10 index rose 1.7 percent in July on top of a 1.4 percent gain in June and a 0.5 percent gain in May. The composite-20 index, up 1.6 percent in July, shows similar gains. With the exception of Las Vegas, all metro areas show gains or at least flat conditions. Year-on-year rates also improved for a third month, now at minus 12.8 percent for the 10 index and at minus 13.3 percent for the 20. Rates of decline in California have definitely come down, now showing year-on-year declines in the mid-teens vs. 20 percent and worse declines earlier in the year. These are exhaustive data but do lag, which is a concern given set backs in new and existing home prices during August.

Note that the year over year declines are still very large at 13.3%, but better than the expected 14.2% plunge the "experts" were counting on. These numbers are a disaster for overleveraged homeowners and banks - oh, and for our overleveraged government, the world's largest home owner, auto manufacturer owner, bank owner/partner, and market/data manipulator extrodinaire.

Consumer confidence comes out at 10:00 Eastern.

Yesterday’s move up was powerful price wise, but very weak volume wise. This is yet another sign that the top is nearing and that distribution is occurring. I see an overall declining volume pattern still while lately the down days are quite a bit heavier than the up days. This is true across the ETFs and all the indices, not just one or two.

McHugh wants to see a Hindenburg Omen to be ensured that wave C down has begun. A Hindenburg Omen occurs when the market is split, with a large percentage of new 52 week highs alongside a large percentage of new 52 week lows. Every major decline in the past 25 years has been preceded by a Hindy. In order to get one, however, prices must start down and produce the new lows that are required – that will take some time as we are currently running at 170 new highs and only 2 new 52 week lows. My point being that you should not expect to just fall off the proverbial cliff immediately when C begins. Sure, that still could happen, but the odds do not favor it playing out that way. Declines roll and develop and the meat of the decline usually occurs with wave 3 down. Again, we are nearing the end of the count for wave B up.

Styx – Crystal Ball: