Wednesday, October 7, 2009

Morning Update/ Market Thread 10/7

Good Morning,

Equity futures are flat to down slightly this morning after being up most of the evening:

The dollar is up, oil and gold are flat, and bonds are higher.

It’s a very light week for economic releases, this morning mortgage applications where released and it just irks me to no end that they now only report weekly percentage changes – worthless, but it is what they’ve made it, so here’s Econoday’s spin:
Homeowners are rushing to lock in rock-bottom loan rates. Mortgage applications jumped sharply in the Oct. 2 week, up 13.2 percent for purchases and up 18.2 percent for refinancing. The average rate for 30-year mortgages fell for a third straight week, down 5 basis points to 4.89 percent. The bulk of demand is centered in refinancing which is making up two thirds of all applications. Refinancing will help make household debt manageable and help limit foreclosures. Heavy refinancing is also a factor behind the steep contraction underway in consumer credit, a report that excludes debt secured by real estate. Consumer credit data will be posted at 3:00 p.m. ET.

Thirteen to twenty percent swings from one week to the next? Riiiiight. That’s almost believable and meaningful – not! This type of reporting is designed to obscure, plain and simple.

As they said, consumer credit comes out at 3 Eastern, the same time that Alcoa kicks of the 3rd quarter earnings season. Current price to earnings are at all time historic highs, meaning that vastly improved earnings are priced into the market. At some point people will remember what historic means and how historic norms became that way. For now, however, the historic disconnect continues.

Yesterday’s rise seems to confirm that the final wave up of B up has begun. It can take awhile to play out, McHugh’s next turn date isn’t until November 4th, and that coincides with a Bradley turn date on November the 9th. Still a month away, it is possible that it takes that long to complete, but again, the 5th wave can be very unpredictable as they can truncate or extend.

At yesterday’s close, the 60 minute stochastic was overbought as was the 10 minute. The 30 minute is nearly overbought so there should be at least a pause or a pullback somewhere in here soon. The daily stochastics are close to issuing a new buy signal. 1,061 is still the overhead pivot with support at 1,041 and then 1,018.

We’re still inside of the rising wedges, playing pinball between pivot points for now. Earnings will likely provide a direction from here. Of course we know that the financials are going to trump up their own earnings by marking their toxic waste to unrealistic extremes, thus granting themselves greater and greater bonuses for the job well manipulated and politicians well paid off. Meanwhile the real economy suffers while these otherwise bankrupt institutions play games with everybody’s futures. And there’s the Fed and Treasury with yet another $100 billion plus in auctions to feed it all, complicit in every way.

Pink Floyd – Is there Anybody Out There?