Wednesday, October 14, 2009

Morning Update/ Market Thread 10/14

Good Morning,

Stocks are considerably higher this morning following a good report from Intel and a marked to complete fantasy report from JPMorgan:

The dollar broke support at the 76 level and sits at 75.55, yet another .5% move. Those are huge moves for currencies. Now that the 76 level has been broken, I would expect it to be tested from below, and then the descent to continue into the 71/72 level. Oil is higher, gold went on to set a new high, but then descended back to even. Bonds are lower as rates move higher.

The report from Intel was better than forecast, but it was still a year over year decline of revenues of nearly 8%. Last year at this time Intel was at $16, now it is at $22 with lower earnings. Which is the more overvalued market? They are pricing in a future that isn’t going to happen.

JPM profit grew a sickening six fold, or $3.6 billion!! $1.9 billion came from their investment banking division, the one that makes bets on theirs and Goldman’s market manipulations. The rest, I’m sure, came from fees on the consumer and from marking their assets to fantasy in accordance with the rules they created/paid for. Great job, that’s quite the business model. Keep in mind that these fantasy games, tax payer backed, artificially low interest rate (taxpayer funded), “profits” jack up the “earnings” of the entire market making earnings look far better than reality. These phony paper earnings are nothing but a lie and that lie will eventually be exposed for what it is… The politicians won’t expose it - it will be up to the people at some point to put an end to the pillaging.

The ridiculous MBA purchase applications “index” fell 5% in the past week – and that means??? Don’t know, they don’t give the data so yoy and historical comparisons are impossible, just the way they want them.

Retail sales fell 1.5% in September, the consensus was for a 2.1% fall following the end of cash for clunkers, thus producing a “beat.” Note in Econoday’s chart, that yoy retail sales are down about 6%, much greater than either the Redbook or Goldman ICSC numbers – oh, and Econoday will not talk about the yoy numbers, only the short term pop:
The consumer pulled back sharply in September-but it was mostly due to the post-"clunkers" drop in auto sales. Otherwise, the numbers were surprisingly healthy for the most part. Overall retail sales in September dropped 1.5 percent after a 2.2 percent spike the month before. The September drop in sales was not as severe as the market forecast for a 2.1 percent fall. The decline was led by a 10.4 percent plunge in auto sales after a 7.8 percent boost in August. Excluding motor vehicles, retail sales advanced 0.5 percent, following a 1.0 percent jump in August. The consensus had expected a 0.3 percent rise for September.

Checking on the other volatile component, gasoline sales provided lift, gaining 1.1 percent in the latest month. Nonetheless, excluding motor vehicles and gasoline, retail sales rose 0.4 percent, following a 0.6 percent gain the previous month. Although core components were mixed, they were mostly positive and reflected sizeable gains. Apparently, the consumers that have jobs are a little more optimistic and are willing to spend.

We now have had two months of unexpectedly healthy core sales. Components outside of autos and gasoline were actually led by furniture & home furnishings, up 1.4 percent; general merchandise, up 0.9 percent; and health & personal care, up 0.8 percent. Gains were also seen in food & beverage stores, clothing & accessories, sporting goods & hobbies, and food services & drinking places. Declines were seen in building material & garden shops, miscellaneous stores retailers, and nonstore retailers.

Overall retail sales on a year-ago basis in September improved marginally to down 5.7 percent, from down 5.8 percent in August. Excluding motor vehicles, the year-on-year rate increased to minus 4.9 percent in September from down 6.3 percent the previous month.

Equities should like today's report since the number beat expectations but also should get a lift from Intel and JP Morgan beating estimates after yesterday's close. The dollar firmed on today's news as did Treasury yields.

Import and Export prices were just reported. Import prices rose .1%, while export prices fell .3%. Year over Year, export prices have plunged 5.6%, while import prices have cliff dived 12%. This is an improvement from a 15% cliff dive the month prior and is due, I believe, to an easier yoy comparison as prices had already fallen this time last year.
Import prices are posing evidence that the weak dollar is increasing inflation pressures. Key readings are import prices excluding petroleum, up 0.4 percent in September following a 0.3 percent rise in August, and import prices for industrial supplies excluding petroleum, up 1.5 percent following August's 1.1 percent rise. Pressures may now be beginning, in a mild way, to find their way to finished goods with prices for consumer goods excluding autos up 0.1 percent following two prior months of decline and prices for capital goods up 0.1 percent to end a long string of no changes.

But the headline readings are tame. Total import prices prices rose only 0.1 percent reflecting a 1.1 percent downswing in prices for petroleum products. But with oil prices now back above $75, the petroleum reading for October is likely to show an upswing. The report also includes export prices which fell 0.3 percent reflecting a downswing in agricultural prices of 2.8 percent. Finished goods prices for both consumer and capital goods exports rose 0.1 percent. Today's overall results pose little trouble for the September consumer and producer price headlines though they do indicate rising pressures for crude and intermediate goods in the producer price report.

Oh yeah, that’s quite the inflation… maybe in a monetarist’s hopeful never ending fiat fantasy dream, but it’s not happening on that chart.

Business inventories come out at 10 Eastern, more earnings and data the rest of the week will also be important.

Today’s movement looks to be satisfying the small movements in the McClelland Oscillator. We are now running up into the 1,090 pivot area, the next higher is at 1,107. Support, for now, is at 1,061. The earlier inverse H&S target is 1,125 and that is coincident with a 50% retrace of the entire bear market. Yes, despite the largest and fastest rally in history, we still have not regained even 50% of the losses. That will be a very strong area of resistance, as I’m sure the 10,000 area on the DOW will also provide some resistance as well.

Prices have now risen into the upper Bollinger band again with extremely overbought readings.

By the wave count, we are very near the end of this rally, wave B. I know this rally has turned a lot of people into believers, that’s exactly the way the psychology is supposed to work to take in as much money as the market can. We are at an extreme, the place where contrarians make their money. It is good to run with the crowd in the middle, but at the extremes is where the contrarians are finally proven correct – it’s coming. In the mean time let all the people see the magical and mystical bank profits and wallow in the mythical blue skies… just as the pigmen wallow in their hard bought and paid for “profits” and bonuses, the purchasing power of your money erodes away.

ELO - Mr.Blue Sky: