Saturday, September 4, 2010
Friday, September 3, 2010
Morning Update/ Market Thread 9/3
Good Morning,
Equity prices are jumping on the Employment Report where the headline number was an increase from 9.5% to 9.6%, with a minus 54,000 jobs print. The rate was inline with expectations, but the number of Private Payroll jobs “created” was better than expected at 67,000. The SPX is spiking over 1100 on the release, bonds are sinking, the dollar is sinking, oil is higher and gold is lower.
Below is the entire Employment report from the BLS, they claim that the employment situation is little changed from July to August with the labor participation rate largely unchanged:
Employment August
Let’s see the Econospin, and then we’ll dig deeper:
Not going back into recession? LOL, that’s a good one with a negative overall job print and a 16.7% U6!!
Here’s the deal, this report is not as bad as many were expecting, but it IS NOT great either. It certainly does not justify the action I’m seeing now in the market, that tells me that it could very well be an exhaustion move – an opportunity. Let’s dig deeper…
Below is the Alternate table showing U6, the number that is most like how it used to be reported. The seasonally adjusted U6 rose from 16.5% to 16.7%. Note how the percentages increase when the employment population ration stays unchanged:
When I went to find the Birth/ Death model adjustments, the data surprised me at how large it was – this is blatant game playing from my perspective, as there was a 115,000 add for small business jobs that were supposedly created, versus July’s 6,000! That is a rise of 109,000 from one month to the next! Bet you didn’t know so many small businesses created jobs just as school is about to start back up. When looking at the data from last year (top table), you can see that the same games were played in the same months last year. But then look at September of last year, it was a zero. If they play fair (lol), it should be roughly zero next month, and that means we are setting up for the next report to disappoint:
As a reminder, here is John Williams data, still pushing nearly 22%:
The supposed “growth” in private sector jobs is nothing but pure fudging of the numbers, the Birth/ Death model alone erases all of those supposed jobs. The government is laying off more than just Census workers, 121,000 last month in all – that is what happens when you hit the wall in deficits and the psychology shifts from stimulus to austerity.
The fact is that jobs are not being created and it takes very large numbers of them just to break even with population growth. This report is not good, buy the news at your own risk. Look for next month’s report to disappoint.
Lately there has been the RIDICULOUS notion in the markets that BAD data is good because it will prompt government intervention. If that’s the case, then a report that is taken as good should lessen the chance for more stimulus. Yet the HFTs are all running on one side with this, it’s a very dangerous prospect, again an opportunity is rapidly approaching.
There is more economic data coming this morning (non-manufacturing ISM), the day is young.
Below is a 30 minute chart of the SPX with the channel I was tracking. Yesterday finished with a small rising wedge, we have overthrown that now, but it could still be valid and this throwover may be finishing off this wave. We have filled the 1094 gap, and the only gaps left are above at 1120ish and now big gaps below us (look at the NDX). The market is WAY overextended on the up side, we should see a significant pullback soon. If the price remains over 1100, then there certainly could be more upside, but I think that once this report is fully digested some sort of correction will occur.
On the /ES (S%P futures), you can see that the spike took us to the top of the channel:
Hey, with reality reporting like that, it’s a good thing I ain’t no Senator’s son… as far as I'm concerned, this report and the media's reaction to it only further erode confidence in our government - they have bankrupted our nation in an attempt to spark the economy, and they have failed except in their attempts to massage and manipulate data.
Equity prices are jumping on the Employment Report where the headline number was an increase from 9.5% to 9.6%, with a minus 54,000 jobs print. The rate was inline with expectations, but the number of Private Payroll jobs “created” was better than expected at 67,000. The SPX is spiking over 1100 on the release, bonds are sinking, the dollar is sinking, oil is higher and gold is lower.
Below is the entire Employment report from the BLS, they claim that the employment situation is little changed from July to August with the labor participation rate largely unchanged:
Employment August
Let’s see the Econospin, and then we’ll dig deeper:
Highlights
Overall payroll employment fell for the third straight month but there was a moderate gain in the private sector. Also on the positive side, wages were up. Overall payroll jobs in August slipped 54,000 after falling a revised 54,000 in July (yes, they are the same) and contracting 175,000 in June. The August overall number was less negative than the consensus forecast for a 90,000 decrease. The June and July revisions were net up 123,000.
A big part of the latest month's weakness was seen in the government sector, which still includes layoffs of temporary Census workers. Government jobs dropped 121,000 after falling 161,000 in July. In contrast, private nonfarm employment continued to rise, gaining 67,000 in August, following a revised boost of 107,000 the month before. Analysts had called for a 40,000 advance for private payrolls in August. July had previously been estimated to be a 71,000 increase.
Average hourly earnings improved to 0.3 percent from up 0.2 percent in July. The August number topped the market estimate for a 0.1 percent gain. The average workweek for all workers was unchanged at 34.2 hours in July. The market forecast was for 34.2 hours.
Turning to the household survey, the unemployment rate came in at 9.6 percent, compared to 9.5 percent in July. The consensus projected a 9.6 percent figure for August.
Overall, today's report shows that the economy is not going back to recession. Still, growth is less than robust. For now, it appears to be a growth recession (less than long-term trend), but not an outright recession. The bottom line is that the private sector is holding up better than expected.
On the news, equity futures jumped sharply and interest rates firmed.
Not going back into recession? LOL, that’s a good one with a negative overall job print and a 16.7% U6!!
Here’s the deal, this report is not as bad as many were expecting, but it IS NOT great either. It certainly does not justify the action I’m seeing now in the market, that tells me that it could very well be an exhaustion move – an opportunity. Let’s dig deeper…
Below is the Alternate table showing U6, the number that is most like how it used to be reported. The seasonally adjusted U6 rose from 16.5% to 16.7%. Note how the percentages increase when the employment population ration stays unchanged:
When I went to find the Birth/ Death model adjustments, the data surprised me at how large it was – this is blatant game playing from my perspective, as there was a 115,000 add for small business jobs that were supposedly created, versus July’s 6,000! That is a rise of 109,000 from one month to the next! Bet you didn’t know so many small businesses created jobs just as school is about to start back up. When looking at the data from last year (top table), you can see that the same games were played in the same months last year. But then look at September of last year, it was a zero. If they play fair (lol), it should be roughly zero next month, and that means we are setting up for the next report to disappoint:
As a reminder, here is John Williams data, still pushing nearly 22%:
The supposed “growth” in private sector jobs is nothing but pure fudging of the numbers, the Birth/ Death model alone erases all of those supposed jobs. The government is laying off more than just Census workers, 121,000 last month in all – that is what happens when you hit the wall in deficits and the psychology shifts from stimulus to austerity.
The fact is that jobs are not being created and it takes very large numbers of them just to break even with population growth. This report is not good, buy the news at your own risk. Look for next month’s report to disappoint.
Lately there has been the RIDICULOUS notion in the markets that BAD data is good because it will prompt government intervention. If that’s the case, then a report that is taken as good should lessen the chance for more stimulus. Yet the HFTs are all running on one side with this, it’s a very dangerous prospect, again an opportunity is rapidly approaching.
There is more economic data coming this morning (non-manufacturing ISM), the day is young.
Below is a 30 minute chart of the SPX with the channel I was tracking. Yesterday finished with a small rising wedge, we have overthrown that now, but it could still be valid and this throwover may be finishing off this wave. We have filled the 1094 gap, and the only gaps left are above at 1120ish and now big gaps below us (look at the NDX). The market is WAY overextended on the up side, we should see a significant pullback soon. If the price remains over 1100, then there certainly could be more upside, but I think that once this report is fully digested some sort of correction will occur.
On the /ES (S%P futures), you can see that the spike took us to the top of the channel:
Hey, with reality reporting like that, it’s a good thing I ain’t no Senator’s son… as far as I'm concerned, this report and the media's reaction to it only further erode confidence in our government - they have bankrupted our nation in an attempt to spark the economy, and they have failed except in their attempts to massage and manipulate data.
Thursday, September 2, 2010
Morning Update/ Market Thread 9/2
Good Morning,
Equity futures are flat to slightly higher this morning. Bonds are lower, the dollar is flat, oil is down, while gold is up and looking to take out the prior highs.
Weekly Jobless Claims were roughly the same as last week, coming in at 472,000 versus last week’s 473,000. Of course last week’s figure was revised upwards to 478K, so the headline monkeys type that it fell 6,000 during the week! No, it fell 1,000, one cannot compare apples to oranges, yet the media does that all the time if it makes any report sound better than it is – which is exactly the theme as everyone is ultimately trying to take your money and your life’s productivity. Yes, professionals of all kinds are CONSPIRING to take your money, that’s become the American way, and if you have ever sat down at a company’s marketing meeting you are witnessing that conspiracy out in the open. Unfortunately, it has become the norm for absolutely everything. Here’s Econoday’s spin:
Although numbers are down from a year ago, the current trend is stubborn. It has been a long, long time with numbers this high and without the economy producing jobs. We need to produce many jobs just to stay even with population growth, so every week that we fail to create jobs, more people go without – a disaster that is dramatically underreported by the government and by the media.
By the way, the DOL releases these numbers to the public (yours truly) 15 minutes after companies like Bloomberg are granted access. I want to know who else is granted early access and why - it is absolutely ridiculous to create "insiders" who have the data prior to the public, especially when that data comes from a government agency who is paid for by the public! Disgusting.
The Monster Employment Index fell roughly 1.5% in August, their Index falling from 138 in July to 136.
Yesterday, Sales of domestic cars and light trucks were also reported down. Take a look at the grey bars on the accompanying chart, unit sales are down roughly 33% from August of ’07, three years ago. That is a huge percentage:
Speaking of conspiracies, what do you suppose is Mr. Harris’s motivation for speaking the following line of drivel? “The U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good.”
You have got to be kidding me. This is so inane, so totally lame, that you absolutely have no choice but to see the conspiracy that I mention, it is blatant. And yet Bloomberg, a supposedly respected business news service, chooses to print this crap:
There are simply no sources left, besides select bloggers on the internet, to get any semblance of reality. And here’s the reality – there is no recession, it’s called a depression. There is no growth, the GDP numbers are false, our “productivity” is false, and our employment numbers are nothing but an outright lie. I am ashamed of what I see. Embarrassed for my country and for the portions of the world that play along.
It’s tough to even call our stock market a “market.” It’s nothing but a playground for those wealthy enough to use High Frequency Trading machines to rob the citizens who are fooled into thinking that they are “investing” for their futures. This theft is allowed, backed, and sponsored by our own government. Talk about a dysfunctional relationship.
The proof of dysfunction was on clear display yesterday. Data that is piss poor, even in its trumped up form, gives the thieves a reason to ramp their HFT machines that all get on the same page within nanoseconds, even before orders are executed. Of course they are using YOUR MONEY to steal your money from you. The money is given to them by the FED, who works for them, yet leads you to believe they are a part of the government. They are not. The FED, through POMOs, is feeding the very companies who run the HFTs BILLIONS. That money is not used to do anything productive in the economy, it is used to ramp up the markets, enlarging the disconnect between reality and price.
Yesterday was a 96% up day – PANIC buying. Panic buying for what? For the sake of making a short term trade and for drawing in stupid money. If you don’t own an HFT, you are stupid money, and that includes me – I am blind in the market relatively speaking. My only advantage is in knowing reality and that eventually the games will work against them. Make no mistake, its coming. Not maybe, it’s a done deal – get ready.
This is my strongest warning ever that the markets are shouting crash potential. One in three days is a 90%+ day, Hindenburg Omens, Head & Shoulders patterns, wave 3 of 3 next in the rotation, it’s going to come undone, and yes, it can do it in a flash. The similarities between now and ’08 are stunning. There are also similarities between now and 1987. Volatility is a precursor, it is another clue, just as the Hindenburg Omen is a clue. Hello… Friday is a 90%+ up day, Monday is a 90%+ down day, Wednesday is a 90% up day. These types of large moves in both directions are exactly what presage a market meltdown. Another similarity is the action of the Yen – the trend is clearly with a stronger Yen (down on the following chart), just as it was in 1987:
Yesterday’s move stopped just under the 50dma. It is possible that wave 2 of 3 is nearly complete, but my best guess at this point is that it’s probably just wave a of 2 that is nearing completion. Either way, we are not far from what I believe is going to be a serious correction of the imbalances that exist. To echo Richard Russell, it won’t be over until the cleansing is complete.
Equity futures are flat to slightly higher this morning. Bonds are lower, the dollar is flat, oil is down, while gold is up and looking to take out the prior highs.
Weekly Jobless Claims were roughly the same as last week, coming in at 472,000 versus last week’s 473,000. Of course last week’s figure was revised upwards to 478K, so the headline monkeys type that it fell 6,000 during the week! No, it fell 1,000, one cannot compare apples to oranges, yet the media does that all the time if it makes any report sound better than it is – which is exactly the theme as everyone is ultimately trying to take your money and your life’s productivity. Yes, professionals of all kinds are CONSPIRING to take your money, that’s become the American way, and if you have ever sat down at a company’s marketing meeting you are witnessing that conspiracy out in the open. Unfortunately, it has become the norm for absolutely everything. Here’s Econoday’s spin:
Highlights
Initial jobless claims may be edging down, at least they have the past couple of weeks. Initial claims for the August 28 week came in at 472,000 compared with a revised 478,000 in the prior week and the 2010 peak of 504,000 the week before that. The four-week average fell 2,500 to 485,500 yet is still about 25,000 higher than a month ago, which is not a positive indication for tomorrow's employment report.
Continuing claims fell 23,000 to 4.456 million in data for the August 21 week. Here the four-week average, at 4.485 and down more than 100,000 from a month ago, probably offers a positive indication for tomorrow's report. Note that a decline in continuing claims reflects both hiring but unfortunately also reflects the expiration of benefits. The unemployment rate for insured employees is unchanged at 3.5 percent.
There are no special factors in today's report, a report that probably won't affect expectations for tomorrow's data. The job sector is flat at best, a description that likewise fits consumer spirits and consumer spending.
Although numbers are down from a year ago, the current trend is stubborn. It has been a long, long time with numbers this high and without the economy producing jobs. We need to produce many jobs just to stay even with population growth, so every week that we fail to create jobs, more people go without – a disaster that is dramatically underreported by the government and by the media.
By the way, the DOL releases these numbers to the public (yours truly) 15 minutes after companies like Bloomberg are granted access. I want to know who else is granted early access and why - it is absolutely ridiculous to create "insiders" who have the data prior to the public, especially when that data comes from a government agency who is paid for by the public! Disgusting.
The Monster Employment Index fell roughly 1.5% in August, their Index falling from 138 in July to 136.
HighlightsProductivity and Costs for Quarter 2 were released this morning with nonfarm productivity falling 1.8%. This is down from Q1’s drop of .9%, but slightly better than the forecast drop of 1.9%. The trend is clearly negative in this regard. This data is also very skewed from my perspective as it is based on “productivity” calculated in the same manner as GDP (including financial engineering, if you call that productive). That said, to have productivity falling means that businesses have hit the wall in terms of simply throwing people out the door and maintaining prior levels of “production.” Labor costs were expected to rise 1.2%, but rose 1.1% which is up significantly from Q1’s .2% annualized rise. Here’s Econoday:
The Monster Employment index fell two points in August to 136. The report said the decline reflects caution among employers. Manufacturing and warehousing, the latter group often focused on as a leading indication for job demand, both showed weakness in August.
HighlightsThe market is taking these as "disaster avoided for now." If I hear the term “new normal” one more time, I’m very likely to become violently ill, I must have read or heard that term more than a dozen times in the past week alone. No, it’s not a “new normal,” it’s called DEBT SATURATION, the point at which more credit cannot be forced onto “consumers,” as incomes cannot support more.
Due to the slowdown in output and businesses already having cut labor costs to the bone, productivity fell notably in the second quarter. Nonfarm business productivity declined an annualized 1.8 percent in the second quarter after a 3.9 percent advance in the prior quarter. The market had forecast a 1.9 percent dip in productivity. Unit labor costs rebounded an annualized 1.1 percent in the second quarter, following a drop of 4.6 percent in the first quarter. The median forecast was for a 1.2 percent boost in labor costs.
The drop in productivity reflected in part a slower 1.6 gain in nonfarm business output after a 5.0 percent jump in the first quarter. Also, hours worked jumped to a 3.5 percent pace from 1.1 percent in the first quarter.
Year-on-year, productivity was up 3.7 percent in the second quarter-down from 6.3 percent in the previous quarter. Year-ago unit labor slipped to an annualized minus 2.8 percent from minus 2.9 percent in the first quarter.
While the latest productivity report is not as favorable for profits as the recent string of gains, the good news is that companies may have pressure to start hiring. Any notable and apparently sustainable boost in company demand should result in additions to payrolls. Economic uncertainty, of course, will dampen hiring enthusiasm.
Today's numbers are close to expectations. At the same time, initial jobless claims barely missed analysts' median forecast. Markets are little changed on the release.
Yesterday, Sales of domestic cars and light trucks were also reported down. Take a look at the grey bars on the accompanying chart, unit sales are down roughly 33% from August of ’07, three years ago. That is a huge percentage:
Highlights
Unit sales of new domestic-made cars and light trucks slipped about four percent in August compared with July, offering a mildly negative indication for the August retail sales report. Domestic cars and light trucks sold at an 8.4 million annual rate vs. July's 8.7 rate. Yet less aggressive incentives in August are likely to narrow the gap in dollar terms. Note that fleet sales to non-consumers, which vehicle manufacturers do not break out, adds noise to the comparison. Sales of domestics make up about three quarters of new car and light truck sales. New car and light truck sales make up two thirds of the motor vehicle category which in turn makes up about one sixth of total retail sales.
Speaking of conspiracies, what do you suppose is Mr. Harris’s motivation for speaking the following line of drivel? “The U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good.”
You have got to be kidding me. This is so inane, so totally lame, that you absolutely have no choice but to see the conspiracy that I mention, it is blatant. And yet Bloomberg, a supposedly respected business news service, chooses to print this crap:
U.S. Avoids Recession as Data Can’t Get Much Worse
Sept. 2 (Bloomberg) -- The U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good.
The sectors of the economy that traditionally drive it into recession are already so depressed it’s difficult to see them getting a lot worse, said Ethan Harris, head of developed markets economics research at BofA Merrill Lynch Global Research in New York. Inventories are near record lows in proportion to sales, residential construction is less than half the level of the housing boom and vehicle sales are more than 30 percent below five years ago.
“It doesn’t rule out a recession,” Harris said. “It just makes it less likely than otherwise.”
The possibility of the economy lapsing into another contraction during the next year is 25 percent, he said in a Sept. 1 report. Harris cut his forecast for growth this year by 0.1 percentage point to 2.6 percent and lowered his 2011 estimate by a half point to 1.8 percent, according to the report.
There are simply no sources left, besides select bloggers on the internet, to get any semblance of reality. And here’s the reality – there is no recession, it’s called a depression. There is no growth, the GDP numbers are false, our “productivity” is false, and our employment numbers are nothing but an outright lie. I am ashamed of what I see. Embarrassed for my country and for the portions of the world that play along.
It’s tough to even call our stock market a “market.” It’s nothing but a playground for those wealthy enough to use High Frequency Trading machines to rob the citizens who are fooled into thinking that they are “investing” for their futures. This theft is allowed, backed, and sponsored by our own government. Talk about a dysfunctional relationship.
The proof of dysfunction was on clear display yesterday. Data that is piss poor, even in its trumped up form, gives the thieves a reason to ramp their HFT machines that all get on the same page within nanoseconds, even before orders are executed. Of course they are using YOUR MONEY to steal your money from you. The money is given to them by the FED, who works for them, yet leads you to believe they are a part of the government. They are not. The FED, through POMOs, is feeding the very companies who run the HFTs BILLIONS. That money is not used to do anything productive in the economy, it is used to ramp up the markets, enlarging the disconnect between reality and price.
Yesterday was a 96% up day – PANIC buying. Panic buying for what? For the sake of making a short term trade and for drawing in stupid money. If you don’t own an HFT, you are stupid money, and that includes me – I am blind in the market relatively speaking. My only advantage is in knowing reality and that eventually the games will work against them. Make no mistake, its coming. Not maybe, it’s a done deal – get ready.
This is my strongest warning ever that the markets are shouting crash potential. One in three days is a 90%+ day, Hindenburg Omens, Head & Shoulders patterns, wave 3 of 3 next in the rotation, it’s going to come undone, and yes, it can do it in a flash. The similarities between now and ’08 are stunning. There are also similarities between now and 1987. Volatility is a precursor, it is another clue, just as the Hindenburg Omen is a clue. Hello… Friday is a 90%+ up day, Monday is a 90%+ down day, Wednesday is a 90% up day. These types of large moves in both directions are exactly what presage a market meltdown. Another similarity is the action of the Yen – the trend is clearly with a stronger Yen (down on the following chart), just as it was in 1987:
Yesterday’s move stopped just under the 50dma. It is possible that wave 2 of 3 is nearly complete, but my best guess at this point is that it’s probably just wave a of 2 that is nearing completion. Either way, we are not far from what I believe is going to be a serious correction of the imbalances that exist. To echo Richard Russell, it won’t be over until the cleansing is complete.
Wednesday, September 1, 2010
Morning Update/ Market Thread 9/1
Good Morning,
First I would like to point out to Think or Swim (TOS), who has done a terrific job in the past, that should they not get their act together in the near future that there are other charting services available. Price freezes are not acceptable, nor is having to rebuild all your charts each and every morning.
After spending more than half an hour just getting my charts back, we can now see that equities have risen to the top of the current downchannel, the dollar is down strongly, bonds are down strongly, and both oil and gold are up.
For those who missed the economic reports and discussion in yesterday’s thread, the data was all BAD, but came in slightly better than expected and that got spun into something that it wasn’t. Consumer Confidence is still in the gutter, the Chicago PMI was down a very large amount, and the Case-Schiller Home data showed slow price growth, but that is based on sales that occurred PRIOR to the government stimulus ending and does not include sales that have fallen off a cliff since. The cheerleading only leads to larger disconnects from reality. That’s right, take two Prozacs and consult with your private marketing expert in the morning, you’ll feel better about it.
The worthless MBA Purchase Applications Index supposedly rose 1.8% in the past week – gee, what happened to those wild 30% weekly swings? This index is not based in anything, it is simply a marketing tool to spoon disinformation to the public, I repeat their nonsense only so that you know what others are being shoveled:
The Challenger Job-Cut Report showed that the amount of announced mass layoffs fell from July’s 41,676 to 34,768 in August. This report is echoing that the bulk of the layoffs are now coming from government. That is fitting with what is expected for wave C as the desire to provide stimulus grows weaker.
The ADP Report for Private Payrolls fell from July’s +42,000, to August at -10,000. You would think that a 52,000 drop in private payrolls would be a negative for the market, but no, stocks are higher. I give this report little credence as it is notoriously different than the government’s numbers which will be out this Friday. I look at the ADP report as a set up… it sets the expectations so that the real trade gets reversed out from those who act on this one. The consensus for Friday's number is that it improves from -131,000 to "only" -80,000... we'll see.
ISM Manufacturing and Construction Spending are released at 10 Eastern this morning.
Yesterday did produce a 6th Hindenburg Omen. Once again the number of new lows expanded against higher stock prices. Interestingly, the number of new lows on each touch of the SPX 1040 support area has been lower. This could be interpreted as a positive divergence, and I know that some people see it that way, I do not. I see it as basing for the next move lower. Each run up from the 1040 area has been weaker than the prior and that action has produced a descending triangle with a flat base. Those normally pressure the flat base until it breaks. However, this morning it looks like we are going to open above that triangle, so we’ll have to watch today’s action which may indicate that a higher level wave is occurring especially if we exit the current down channel as seen in the 30 minute SPX chart below:
We are also now clearly making a small rising wedge in the futures. You can see those clearly in the DOW and S&P futures below in what I could recreate in my charts this morning:
I’ll leave you with some words from an old sage who I respect immensely, Richard Russell. My only critique is his thinking on gold as money, otherwise his big picture view is spot on:
First I would like to point out to Think or Swim (TOS), who has done a terrific job in the past, that should they not get their act together in the near future that there are other charting services available. Price freezes are not acceptable, nor is having to rebuild all your charts each and every morning.
After spending more than half an hour just getting my charts back, we can now see that equities have risen to the top of the current downchannel, the dollar is down strongly, bonds are down strongly, and both oil and gold are up.
For those who missed the economic reports and discussion in yesterday’s thread, the data was all BAD, but came in slightly better than expected and that got spun into something that it wasn’t. Consumer Confidence is still in the gutter, the Chicago PMI was down a very large amount, and the Case-Schiller Home data showed slow price growth, but that is based on sales that occurred PRIOR to the government stimulus ending and does not include sales that have fallen off a cliff since. The cheerleading only leads to larger disconnects from reality. That’s right, take two Prozacs and consult with your private marketing expert in the morning, you’ll feel better about it.
The worthless MBA Purchase Applications Index supposedly rose 1.8% in the past week – gee, what happened to those wild 30% weekly swings? This index is not based in anything, it is simply a marketing tool to spoon disinformation to the public, I repeat their nonsense only so that you know what others are being shoveled:
Highlights
The Mortgage Bankers Association's purchase index rose 1.8 percent in the August 27 week, only a slight increase from a very low level which the report says points to no improvement for new home sales in August nor existing home sales for September. On the refinancing side, the index is up 2.8 percent to a 15-month high as borrowers take advantage of even lower mortgage rates. The rate on the average 30-year loan dropped 12 basis points in the week to 4.55 percent.
The Challenger Job-Cut Report showed that the amount of announced mass layoffs fell from July’s 41,676 to 34,768 in August. This report is echoing that the bulk of the layoffs are now coming from government. That is fitting with what is expected for wave C as the desire to provide stimulus grows weaker.
The ADP Report for Private Payrolls fell from July’s +42,000, to August at -10,000. You would think that a 52,000 drop in private payrolls would be a negative for the market, but no, stocks are higher. I give this report little credence as it is notoriously different than the government’s numbers which will be out this Friday. I look at the ADP report as a set up… it sets the expectations so that the real trade gets reversed out from those who act on this one. The consensus for Friday's number is that it improves from -131,000 to "only" -80,000... we'll see.
ISM Manufacturing and Construction Spending are released at 10 Eastern this morning.
Yesterday did produce a 6th Hindenburg Omen. Once again the number of new lows expanded against higher stock prices. Interestingly, the number of new lows on each touch of the SPX 1040 support area has been lower. This could be interpreted as a positive divergence, and I know that some people see it that way, I do not. I see it as basing for the next move lower. Each run up from the 1040 area has been weaker than the prior and that action has produced a descending triangle with a flat base. Those normally pressure the flat base until it breaks. However, this morning it looks like we are going to open above that triangle, so we’ll have to watch today’s action which may indicate that a higher level wave is occurring especially if we exit the current down channel as seen in the 30 minute SPX chart below:
We are also now clearly making a small rising wedge in the futures. You can see those clearly in the DOW and S&P futures below in what I could recreate in my charts this morning:
I’ll leave you with some words from an old sage who I respect immensely, Richard Russell. My only critique is his thinking on gold as money, otherwise his big picture view is spot on:
Richard Russell:
Bear markets exist for the purpose of exposing and eliminating the greed, the corruption and the fraud that thrived in the preceding primary bull market.
To my mind, the biggest fraud of the last fifty years has been the rise and acceptance of fiat "money." For that reason, I expect fiat money to meet its end before this bear market breathes its last. Judging by the size of the top, this could be the biggest bear market since the '30s. I believe this bear market means to take us back to basics and truth. That alone implies the end of central bank-created money and the rise of gold and probably silver. It may also end that immoral inflation machine, the Federal Reserve. Wall Street and its bankers now run the nation. That too will end.
The history of money in the US is a legend of lies, manipulation, immorality and greed. I think this bear market will end those lies, one way or another.
Tuesday, August 31, 2010
Morning Update/ Market Thread 8/31
Good Morning,
Equity futures are down again overnight after yesterday’s mini waterfall. The dollar is lower against both the Euro and the Yen, bonds are higher, and oil is down while gold rockets higher. It is quite apparent that gold is likely to take out its previous high and is very significant that it continues higher in the face of deleveraging elsewhere.
There are several economic reports that come out this morning after the open, we have Case-Schiller numbers on home prices, the Chicago PMI, and Consumer Confidence. We will announce those reports in today’s daily thread as they are released.
The folks over at dshort.com put together a terrific chart showing the ECRI against the SPX and also put in GDP in the background (green bars). The ECRI has been the only indicator that I know of that does tend to actually lead the economy and the markets. The Fed’s LEI is just flat out outdated. Note on the chart that the ECRI is now at minus 5.57, almost as deep into contraction as it was in ’08. The divergence between the ECRI and the SPX is now huge - the SPX H&S pattern is clear as a bell:
If last Friday’s action wasn’t bizarre enough, coupling a Hindenburg Omen and rising new 52 week lows with a 92% volume up day… Yesterday we saw a 92% down day reversal with contracting new lows and no Hindenburg Omen! Very bizarre, and once again a reminder of how this market lacks uniformity, something that is a requirement for overall higher prices.
Yesterday’s 90%+ down day is now the 14th since the April top to go along with 12 90%+ up days.
The market fell right back into the 1040 to 1050 support range yesterday, but has fallen to the bottom of that range overnight. Yesterday’s decline came on relatively low volume which I think is a result of a traditional vacation week just prior to Labor Day. I would look for volumes to pick back up next week. Below is a daily chart of the SPX, yesterday’s close was below Friday’s open, that is bearish:
On the 60 minute chart, you can see that prices are channeling nicely downwards from the August 9th high. The bottom of that channel is now in the 1015 to 1020 range where it’s likely this current move will find support once 1040 breaks. SPX 1010 is still the H&S target of the smaller pattern:
The channel above works for all the indices except the Russell 2000. That adds to the count confusion for me, especially as McHugh changed his primary count last night to reflect the bounce that finished Friday as being a subwave 4 of 1 of 3 versus a subwave 2 of 3. He cites proportionality of the last bounce, time wise, with the first bounce of this move… you can see that clearly inside of the channel above. And the fact that it does channel nicely supports that count. Again, the RUT breaking out of the channel still supports the wave 2 count that I was using as waves are always confined to channels, when they break the channel you are likely in a new wave, or the channel you thought you were in is simply larger than you had it, and that may be the case for the RUT.
Under the new working count, yesterday’s action would be the first wave down of subwave 5 of 1 of 3. That means that we should find a small wave 2 bounce, and then some type of completion to a wave 5 bottom soon. That intermediate bottom may come upon reaching the 1010 or 1020ish area? McHugh has a Fibonacci turn date on the 2nd, and then another on the 11th of September, it could be that we bottom in a couple of days and bounce in wave 2 of 3 until about the second turn date, plus or minus – that’s his thinking. Nailing the WHEN is the hardest part of technical analysis, so take it with many grains of salt. Direction is the easiest part, then depth or range, and then timing. I’ve been telling you direction (down), and depth (1010 and then 860), but timing is difficult indeed, as is keeping the count.
Meanwhile, the VIX just keeps rolling along, nothing too severe - yet:
What I like about McHugh is that he adjusts quickly and does not stay married to old counts while offering alternatives. Many amateurs do not like that, they want something rock solid without realizing that is impossible in a dynamic market.
Equity futures are down again overnight after yesterday’s mini waterfall. The dollar is lower against both the Euro and the Yen, bonds are higher, and oil is down while gold rockets higher. It is quite apparent that gold is likely to take out its previous high and is very significant that it continues higher in the face of deleveraging elsewhere.
There are several economic reports that come out this morning after the open, we have Case-Schiller numbers on home prices, the Chicago PMI, and Consumer Confidence. We will announce those reports in today’s daily thread as they are released.
The folks over at dshort.com put together a terrific chart showing the ECRI against the SPX and also put in GDP in the background (green bars). The ECRI has been the only indicator that I know of that does tend to actually lead the economy and the markets. The Fed’s LEI is just flat out outdated. Note on the chart that the ECRI is now at minus 5.57, almost as deep into contraction as it was in ’08. The divergence between the ECRI and the SPX is now huge - the SPX H&S pattern is clear as a bell:
If last Friday’s action wasn’t bizarre enough, coupling a Hindenburg Omen and rising new 52 week lows with a 92% volume up day… Yesterday we saw a 92% down day reversal with contracting new lows and no Hindenburg Omen! Very bizarre, and once again a reminder of how this market lacks uniformity, something that is a requirement for overall higher prices.
Yesterday’s 90%+ down day is now the 14th since the April top to go along with 12 90%+ up days.
The market fell right back into the 1040 to 1050 support range yesterday, but has fallen to the bottom of that range overnight. Yesterday’s decline came on relatively low volume which I think is a result of a traditional vacation week just prior to Labor Day. I would look for volumes to pick back up next week. Below is a daily chart of the SPX, yesterday’s close was below Friday’s open, that is bearish:
On the 60 minute chart, you can see that prices are channeling nicely downwards from the August 9th high. The bottom of that channel is now in the 1015 to 1020 range where it’s likely this current move will find support once 1040 breaks. SPX 1010 is still the H&S target of the smaller pattern:
The channel above works for all the indices except the Russell 2000. That adds to the count confusion for me, especially as McHugh changed his primary count last night to reflect the bounce that finished Friday as being a subwave 4 of 1 of 3 versus a subwave 2 of 3. He cites proportionality of the last bounce, time wise, with the first bounce of this move… you can see that clearly inside of the channel above. And the fact that it does channel nicely supports that count. Again, the RUT breaking out of the channel still supports the wave 2 count that I was using as waves are always confined to channels, when they break the channel you are likely in a new wave, or the channel you thought you were in is simply larger than you had it, and that may be the case for the RUT.
Under the new working count, yesterday’s action would be the first wave down of subwave 5 of 1 of 3. That means that we should find a small wave 2 bounce, and then some type of completion to a wave 5 bottom soon. That intermediate bottom may come upon reaching the 1010 or 1020ish area? McHugh has a Fibonacci turn date on the 2nd, and then another on the 11th of September, it could be that we bottom in a couple of days and bounce in wave 2 of 3 until about the second turn date, plus or minus – that’s his thinking. Nailing the WHEN is the hardest part of technical analysis, so take it with many grains of salt. Direction is the easiest part, then depth or range, and then timing. I’ve been telling you direction (down), and depth (1010 and then 860), but timing is difficult indeed, as is keeping the count.
Meanwhile, the VIX just keeps rolling along, nothing too severe - yet:
What I like about McHugh is that he adjusts quickly and does not stay married to old counts while offering alternatives. Many amateurs do not like that, they want something rock solid without realizing that is impossible in a dynamic market.
Monday, August 30, 2010
Morning Update/ Market Thread 8/30
Good Morning,
Equity futures are roughly flat to slightly lower so far this Monday – hey, you know some HFT ramp attempt is coming, it will only take one knucklehead to get the ball rolling into ramp mode, the others computers will sniff out that transaction before it’s even executed and it’ll be game on! There’s an open gap in the charts up to 1067 that everyone is watching… normally I would expect that gap to fill before resuming the downtrend:
Meanwhile, bonds are higher, the dollar is roughly flat, while oil and gold are both slightly lower. The Yen, is making a fairly sizable move higher as Japan’s Central bankers said they will spend 920 billion yen on economic stimulus and the central bank added 10 trillion in “liquidity injections.” What’s another 11 trillion among friends, eh? Evidently not enough to really move the Yen lower like they want, so far they are getting the opposite reaction as the carry trade continues to unwind. While a trillion Yen is “only” the equivalent of about $11 billion (roughly $120B total), when talking injections in the multi-trillions like this, it is safe to say that the Yen is quickly on its way to a major restructuring, it’s just a matter of time before it’ll take a trillion yen just to buy a bowl of rice.
And here in the States, it’s also getting harder to buy a bowl of rice as Disposable Incomes dropped after adjusting for inflation. Yet on the surface, Personal Income rose .2% in July. That was, however, below the consensus of .3%. Consumer Spending, as they track it, supposedly rose .4%, not a good thing when your income only rises .2% (unless you like debt). Here’s Econoday’s spin:
Yes, who would have thought that an uptick in inflation would be good? Give us a break, I’m not buying it. The Fed is trying to create the illusion of inflation as they jawbone and manipulate data, but there is no way I believe that wages are rising for more than a nanosecond in this current environment. Wages won’t make any progress until hiring picks up, and even this report shows that the consumer will be pressured as spending more than you earn is not a sustainable relationship no matter how much the Fed and the market pumpers would like it to be. How come we can’t cheer and strive for balance? Could it be that it doesn’t help the debt pushers?
Also keep in mind that the largest segment of the population, the Baby Boomers, are now past their peak earning years and that they are moving beyond it much faster than they are being replaced. This means that overall earnings in our nation will continue to be pressured as will outflows from the markets. The next significat demographic uptick in peak earners won’t influence our economy until the year 2022 (unless the debt pushers can pull all of their income forward in time too – which is not likely especially as the social mood changes).
There is a lot of economic data coming this week, culminating with the Employment Report on Friday. Should be interesting.
From a technical perspective, I’m still counting the August 25th low as the bottom of wave 1 of 3. It looks like an a,b,c for wave 2 has occurred since that time and that we are near the completion of wave c. If that is correct, we should see significant declines soon. The alternative is that we bottomed the larger degree wave 1 and this is a more significant wave 2 which I give lower odds.
Friday’s action was VERY interesting as the HFT machines all got on the long side all day long. On the surface it looked strong producing a 92% up day, the 12th 90%+ up day since the April top to go along with 13 90%+ down days! This is nutty action for sure, it shows great distress and internal conflict in the market – not something that is bullish. Amazingly, despite the 92% ramp, we still received yet another Hindenburg Omen, the 5th in this cluster as the number of new lows rose dramatically over Thursday’s count, despite the ramp. That is a sign of sickness, a strong internal divergence.
I have heard a lot of talk that it’s vacation time again in the Hamptons, so be careful as the trading volumes are likely to be low… yet as we exit the month of August and roll into September, keep in mind that September is statistically one of the weakest months of the year. And here we are poised with multiple layers of Head & Shoulders patterns, 5 Hindenburg Omens, and a wave count saying that 3 of 3 is soon up to bat in the rotation.
Beatles - You Never Give Me Your Money:
Equity futures are roughly flat to slightly lower so far this Monday – hey, you know some HFT ramp attempt is coming, it will only take one knucklehead to get the ball rolling into ramp mode, the others computers will sniff out that transaction before it’s even executed and it’ll be game on! There’s an open gap in the charts up to 1067 that everyone is watching… normally I would expect that gap to fill before resuming the downtrend:
Meanwhile, bonds are higher, the dollar is roughly flat, while oil and gold are both slightly lower. The Yen, is making a fairly sizable move higher as Japan’s Central bankers said they will spend 920 billion yen on economic stimulus and the central bank added 10 trillion in “liquidity injections.” What’s another 11 trillion among friends, eh? Evidently not enough to really move the Yen lower like they want, so far they are getting the opposite reaction as the carry trade continues to unwind. While a trillion Yen is “only” the equivalent of about $11 billion (roughly $120B total), when talking injections in the multi-trillions like this, it is safe to say that the Yen is quickly on its way to a major restructuring, it’s just a matter of time before it’ll take a trillion yen just to buy a bowl of rice.
And here in the States, it’s also getting harder to buy a bowl of rice as Disposable Incomes dropped after adjusting for inflation. Yet on the surface, Personal Income rose .2% in July. That was, however, below the consensus of .3%. Consumer Spending, as they track it, supposedly rose .4%, not a good thing when your income only rises .2% (unless you like debt). Here’s Econoday’s spin:
Highlights
The consumer made a comeback in July-in both income and spending. Personal income in July posted a 0.2 percent gain, following no change in June. The July figure was a little lower than the consensus expectation for a 0.3 percent rise. More importantly, the wages & salaries component rebounded 0.3 percent after slipping 0.1 percent in June. This component would have been even stronger had it not been for a dip in government payrolls from laying off temporary Census workers. Private industry wages and salaries gained 0.5 percent in July, following a 0.1 percent dip in June.
The Fed is depending on the consumer to counter a faltering housing sector and Bernanke & Company got its wish at least for July. Overall personal consumption increased 0.4 percent in July, following a flat number in June. The latest beat the market forecast for a 0.3 percent gain. By components, durables jumped 0.9 percent, nondurables rose 0.3 percent, and services gained 0.4 percent
Who would have thought that an uptick in inflation would be good? Given the deflation mongering in some sectors, a 0.2 percent rise in the headline PCE price index for July looks good, following two months of down 0.1 percent. The core rate edged up 0.1 percent after a flat reading in June. The median forecast for the core had called for a 0.1 percent uptick.
Year on year, personal income growth for July came in at up 3.0 percent, advancing from up 2.4 percent in June. PCEs growth improved to 3.4 percent in July, compared to 3.2 percent in June. Year-ago headline PCE inflation firmed to 1.5 percent from 1.4 percent in June. Year-ago core PCE inflation is unchanged at 1.4 percent.
Today's report is not stellar but it is welcome news that the consumer sector bounced back and should help support overall economic growth.
Yes, who would have thought that an uptick in inflation would be good? Give us a break, I’m not buying it. The Fed is trying to create the illusion of inflation as they jawbone and manipulate data, but there is no way I believe that wages are rising for more than a nanosecond in this current environment. Wages won’t make any progress until hiring picks up, and even this report shows that the consumer will be pressured as spending more than you earn is not a sustainable relationship no matter how much the Fed and the market pumpers would like it to be. How come we can’t cheer and strive for balance? Could it be that it doesn’t help the debt pushers?
Also keep in mind that the largest segment of the population, the Baby Boomers, are now past their peak earning years and that they are moving beyond it much faster than they are being replaced. This means that overall earnings in our nation will continue to be pressured as will outflows from the markets. The next significat demographic uptick in peak earners won’t influence our economy until the year 2022 (unless the debt pushers can pull all of their income forward in time too – which is not likely especially as the social mood changes).
There is a lot of economic data coming this week, culminating with the Employment Report on Friday. Should be interesting.
From a technical perspective, I’m still counting the August 25th low as the bottom of wave 1 of 3. It looks like an a,b,c for wave 2 has occurred since that time and that we are near the completion of wave c. If that is correct, we should see significant declines soon. The alternative is that we bottomed the larger degree wave 1 and this is a more significant wave 2 which I give lower odds.
Friday’s action was VERY interesting as the HFT machines all got on the long side all day long. On the surface it looked strong producing a 92% up day, the 12th 90%+ up day since the April top to go along with 13 90%+ down days! This is nutty action for sure, it shows great distress and internal conflict in the market – not something that is bullish. Amazingly, despite the 92% ramp, we still received yet another Hindenburg Omen, the 5th in this cluster as the number of new lows rose dramatically over Thursday’s count, despite the ramp. That is a sign of sickness, a strong internal divergence.
I have heard a lot of talk that it’s vacation time again in the Hamptons, so be careful as the trading volumes are likely to be low… yet as we exit the month of August and roll into September, keep in mind that September is statistically one of the weakest months of the year. And here we are poised with multiple layers of Head & Shoulders patterns, 5 Hindenburg Omens, and a wave count saying that 3 of 3 is soon up to bat in the rotation.
Beatles - You Never Give Me Your Money:
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