Tuesday, October 27, 2009

Morning Update/ Market Thread 10/27

Good Morning,

Equity futures are up slightly overnight:

The dollar sank back below the 76 level after a huge upwards move yesterday that jumped above that level. Bonds are slightly higher after breaking important support, oil & gold are both slightly higher after taking large hits yesterday.

Both the Redbook and Goldman ICSC show small gains in sales for the past week over a year prior. Again, both of these measurements are flawed to the point of being completely worthless, however, I mention them only so you will know what the rest of the market may be thinking.

The Case-Schiller home index came in with small rises in both the 10 and 20 city composite indexes. Here’s CNN’s report that was posted within two minutes of the data’s public release:
NEW YORK (CNNMoney.com) -- Home prices rose for the fourth month in a row during August and suffered a smaller-than-expected annual drop, according to a report issued Tuesday.

Prices in the S&P Case-Shiller Home Price index of 20 cities rose 1.2% in August. It was the fourth consecutive monthly increase and came after a 1.6% gain in July.

Prices were down 11.3% versus August 2008, but that drop was less severe than expected. Analysts surveyed by Briefing.com had forecast a 11.9% drop.

"Broadly speaking, the rate of annual decline in home price values continues to improve" said David Blitzer, chairman of at Standard & Poor's index committee.

The housing market has shown some signs of stabilization recently, as low home prices and mortgage rates, as well as government tax credits, have revived anemic home sales.

But the long-term outlook for home prices is grim.

Home values are predicted to drop in 342 out of 381 markets during the next year, according to a recent study by financial information and analysis firm Fiserv.

Fiserv expects the national median home price to drop 11.3% by June 30, 2010.

Consumer Confidence is released at 10 Eastern.

According to Nouriel Roubini the recession’s over. This sure seems to be the consensus, but I say no way, the only way this Depression is over is if you believe the trumped up government growth data. I don’t.
Oct. 27 (Bloomberg) -- The U.S. economy’s worst recession since the 1930s seems to be over, said Nouriel Roubini, the New York University professor who predicted the financial crisis.

The economic recovery in advanced nations will still be “anemic,” Roubini, chairman of New York-based research and advisory service Roubini Global Economics, said via satellite to a conference in Cape Town, South Africa. The economist said he’s “more optimistic” on the outlook for growth in emerging markets.

It’s nice to play it both ways so that you will be correct in any event… “anemic” growth will be his, “see, I told you so.” Sorry, Nouriel, trumped up growth figures do not equate to recession over, we are still in a Depression and it is about to hit home in a harder and more devastating way.

Yesterday’s decline did do some technical damage on the charts. The Transports closed below the 50dma and right on the rising wedge bottom trendline. It did, however, produce an inverted hammer, that is a potential reversal indication.

The VIX rose 9% off the bottom but was stopped by the 50dma:

The XLF closed below the 50dma:

The S&P 500 and the DOW are both a bit above the rising wedge’s bottom trend line and they have been making higher volume prints on the decline. All the short term stochastics are currently oversold, meaning a bounce in here is possible, especially since we did not break beneath the 1,061 pivot. If we do then 1,041 is the next support pivot and 1,090 is overhead. The daily stochastics are not even close to being oversold as of yet.

The EW count still indicates that a final leg up may be at hand. If that count does play out, we could even see a rise to new highs and an overthrow of the rising wedge. The B wave could also be over, that’s why we watch the rising trend lines and don’t get ahead of anything. Most analysts will look at the C wave as another buying opportunity and many are predicting a shallow pull back followed by another rise to new highs. I don’t think that’s what’s going to happen, and once those trendlines are broken, I become much more bearish, noting that rising wedges usually return to their base at a minimum, AND they do so, typically, in about half the time it took to create the wedge. We’ll see… the next few months are going to be interesting for sure.

Dire Straits – Your Latest Trick: