Your Economy (No Politics)

[Bullwinkle]

CYCLE/Trend Analysis Update for the Week Ahead

It is that time once again to review the markets action for the past week and look ahead to the following week for some direction. As previously mentioned in my last update with which this post replies, I was not exactly sure what to expect but stated that we could easily see a sell the FOMC news scenario play out and that appears to be exactly what we got. We had been moving higher since June 22nd in anticipation of the FOMC meeting and looking back now it seems to make perfect sense that regardless of the Fed move, we were due for a pullback. The big question now is do we continue to move down or will we bounce, but before we get into that let's review the Econ #'s for the week...

A full plate of Economic Indicators to review and once again many mixed messages being sent to the market place. Personal Income came in flat with Personal Spending slightly rising, Consumer Confidence shot up big time while the Chicago PMI fell off a cliff. Auto/Truck Sales were down, Construction Spending fell and the ISM Index came in slightly lower. The Average Workweek and Hourly Earnings came in a tad lower while Factory Orders came in a touch higher. The big news of the week (besides the FOMC) was the employment #'s. Initial claims were up by 1K and the NonFarm Payrolls really disappointed by coming in at 112K or less than half of what was expected. The Unemployment gauge remained at 5.6%.

So what does this tell us about the economy? It tells me that one months #'s are hard to gauge for overall economic growth, but this type of mixed message scenario has been playing out all year long and while I hear talking heads pound the table on just how strong the economy is, I would in turn pound the table back at them on just how fragile this recovery remains to be. For the most part things look good on the outside if you look to the markets and with the help of the housing boom and heavy handed Fed this has been a recovery of major proportions since bottoming in 2002, but just how much longer can consumers continue to borrow, Government continue to run up debt and the Fed continue to print money before the overall economy really gets its legs under it? As they say don't fight the Fed, but sooner rather than later this economy will need to put up some continuously good economic data.

With that said, what we have on tap for next week should make for a relatively quiet week on the Econ #'s front with ISM Services, Initial Claims, Consumer Credit and Wholesale Inventories as the only things scheduled for the week to come as we enter into another trade shortened week in observance of the 4th of July.

So what can we expect for the week Ahead? For starters we have 3 days for investors to digest all of last weeks Economic data, we have concluded end of quarter with companies closing their books for the 2nd quarter and most if not all Mutual Funds' window dressing should be in place. Now begins warnings season and we have already witnessed a number of high profile companies warn. If what we have seen to date is a precursor of what is to come, then this could get a little dicey. As for the COMPQ we are still in an overall uptrend which started back on May 17th, but the 200DMA is dead ahead and the last couple of trading days has us heading in that direction. Should we have a date with this trendline then the target looks to be in the 1960-1980 area and this would be the 4th time we retest the 200DMA since early June. Then there is the issue of COMPQ 2055 put in a few days ago. Along with the prior 2059 top from April 26th this could form what looks to be a possible double top. Now if the 200DMA does not hold then the double top would appear to be in place and there is not a whole lot to keep us from falling to the 1930's area. If that does not hold then a retest of 1840-1865 is not out of the question, but since I am getting a little ahead of myself here let's just keep a keen eye on that 200DMA for the time being before jumping to any conclusions... Have a great 4th of July weekend!