Thursday, November 12, 2009

Morning Update/ Market Thread 11/12

Good Morning,

Equity futures are down a little this morning, but the S&P is still above the 1,090 pivot after being rejected from yesterday’s low volume run up to the 1,107 pivot (1,105 high):

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

The now worthless MBA purchase index fell a whopping 11.7% last week, here’s Econoday:

Demand for purchase applications plunged in the Nov. 6 week pointing to the risk of a dip backward in home sales. The Mortgage Bankers Association's purchase index fell 11.6 percent in the week to a nine-year low (MBA did not release index levels, only percentage changes). In contrast, the refinance index surged 11.3 percent in the week. The proportion of refinancing applications to purchase applications is 71.5 percent, the highest since May. Mortgage rates are at rock bottom with 30-year fixed averaging 4.90 percent, down 7 basis points in the week. Refinancings will give a big lift to homeowners, cutting down monthly costs and allowing the hardest pressed to stay in their homes. But the indication on home sales is a disappointment. Next data on the housing sector will be housing market index on Tuesday.

All I can say is wait until rates move higher. They will.

Jobless claims fell to 502,000, yet another print above the half million mark – we haven’t had a print under 500k since December of last year (December prints tend to be lower):
Jobless claims continue to come down. Initial claims fell 12,000 in the Nov. 7 week to a level of 502,000 (prior week revised 2,000 higher to 514,000). The four-week average shows the progress that's underway, down 4,500 to 519,750 for the lowest level since last November. Continuing claims extended their long downward trend, falling a very large 139,000 to 5.631 million (Oct. 31 week). Though some of this improvement may reflect new hiring, much of it unfortunately reflects the expiration of benefits. The number receiving extended benefits fell 28,243 to a level of 523,061, while those receiving emergency compensation rose more than 20,000 to 3.52 million (both Oct. 24 week). The unemployment rate of insured workers continues to fall, down another tenth to 4.3 percent and in big contrast to total unemployment which has continued to rise, jumping to 10.2 percent in October. Unemployment remains high but initial jobless claims are definitely improving in what is a big plus for the labor outlook. Though better than expected, today's report is having no initial impact on financials markets.

No impact? The market has already priced in zero unemployment for cripes sake! We need to create 150,000 jobs a month just to keep up with population growth and we’ve been losing massive jobs for months and months. There are people that have been unemployed for so long that they simply run out of benefits and are no longer counted here. Thus the government does everything they can to make the data and themselves look as good as possible. This is the same reason MBA no longer reports real index values, they simply do not want you to see the truth.

Little Timmy Geithner was flapping his lips yet again about how important our strong dollar policy is! Talk about a joke of a “man.” He’s a little boy who can’t say no to his pals. In fact, I can’t really point to an adult in the entire administration, it reminds me of a teenage binge. But, the dollar is higher overnight getting back above the 75 support level, and the EUR/USD is falling back from its run above 1.50.

To say that the market is overbought is literally the understatement of the year. Divergences abound, and now 100% of stocks in the DOW are over their 5 day moving average. Yesterday’s low volume ramp up set a new high in the S&P and changed the Elliott Wave count there to still being in wave B up, this would be the final wave higher. According to Tony Caldero, all the major overseas indices are in confirmed downtrends, meaning that their wave B’s have been completed and that the wave count has now eliminated those indices from being in an uptrend. Thus the markets are in a complex state with divergences all over the place. I think this is screaming TOP at us… it is near, but blow off tops can run irrationally, especially with all the teenagers running our country and our markets.

Want to see a snapshot into the REAL economy? Here’s a chart from the Association for Manufacturing Technology (AMT) and The American Machine Tool Distributors’ Association (AMTDA) showing machine and machine tool consumption.

Look at the current levels compared to the bubble days. Looks like less than 25% of the peak value. And how about that bounce upwards at the end, looks just like the stock market, no? Anybody remember the line, “Subprime is contained?” And the same people who made statements like that are still running our country and lying to us.

Hey, the candles from yesterday could represent a top, Monday was a turn date and the turn has yet to happen, it should happen this week. 1,090 is support, if it falls, 1,061 is next.

David Bowie - Changes