Tuesday, June 28, 2011

Morning Update/ Market Thread 6/28

Good Morning,

Equity futures are continuing to rise during this last week of the month, and last week of scheduled POMOs to the tune, as Carl Sagan would say, “billions and billions.” Unfortunately, with these billions it’s the inverse chance of finding intelligent life. The dollar is down, bonds are down, oil is up, gold & silver are up, and food commodities are mixed.

Yesterday the dollar tried to push through overhead resistance, but that down slopping upper trend line of the descending wedge turned it around once again:

My suspicion is that this wedge will break to the upside once we’re past the end of the month. However, do not rule out the possibility that the “Fed” is still going to be stealthily buying with both hands to keep the façade from falling over. The current façade is built upon nothing but printing and fraudulent accounting. The one supposed bright spot is earnings, but earnings are trumped mark-to-fantasy earnings, just one of many “modern” accounting shenanigans.

This morning April Case-Shiller data was released with the 10 city index coming in positive for the first time in 8 months, up .8% unadjusted. Remember, this data is old, it is for April which is the beginning of spring and thus you expect strength. When seasonally adjusted, this data was flat, 0.0%. Of course any number that is even slightly positive, even if completely weak on a historical basis, gives the shills something to base their latest bottom calls upon. Of course anyone with an ounce of patience and common sense will be far more patient than that – not Econoshill:
Indications are building that home prices are beginning to recover, the latest is Case-Shiller data for April that show no change in its adjusted composite index of 10 major metropolitan areas. Case-Shiller data are three-month moving averages which indicate actual gains for April given contraction in prior months. There's still a lot of cities showing negatives but many areas out West, where some of the heaviest of the price contraction hit, are now moving into positive ground including LA and San Francisco. Year-on-year, however, the contraction is deepening, to minus 3.1 percent though this reading is compared against stimulus-boosted sales a year ago.

Unadjusted readings are very positive though seasonality plays a big part in the housing market which benefits from warm weather. The unadjusted composite 10 index is up 0.8 percent in the month though the year-on-year rate remains negative at minus 3.1 percent (the same reading as the adjusted rate).

Today's report falls in line with recent price indications in both the existing and new home sales reports. Housing data tomorrow will be highlighted by pending home sales which the National Association of Realtors has already promised will be very strong.

Below is the entire Case-Shiller report, it’s a much more balanced read than Econoday, however even they inject their hopeful bias, despite pesky facts like having 6 of the 20 cities they track hit new index lows:

Case Shiller April

No, the home price adjustment is not over. However, a big chunk of it is, and as I’ve pointed out we are nearing the peak of Option-Arm resets and that will continue to pressure prices for at least another year – once that anchor is removed from the market it will at least stand a chance.

Yesterday the Dallas “Fed” Survey plunged to a negative 17.5 reading from the prior negative 7.4. Of course this was unexpected and was hardly mentioned in the business press. When you combine the negative manufacturing data of the past couple of months, you wind up with the most negative situation since 2008, which was formerly the most negative of modern records… well, we just beat that according to this chart compiled by Zero Hedge which shows the combined two month change:

“Consumer” Confidence is released at 10 Eastern – the sun is out, the irradiated birds are singing, nothing but blue skies…