Wednesday, August 25, 2010 2:53:40 AM
Industrial Production and Death Crosses - Weekly Market Outlook
by Price Headley
Aug 24 2010
Indecision anyone? That's what we all got a plate-full of last week, with a very bullish Tuesday, a very bearish Thursday, and a surprising rebound after what started out to be a pretty rough Friday. All told, the S&P 500 only ended up losing 7.56 points last week (-0.70%) on 'average August' volume, slightly upsetting sure-fire talk that the next apocalypse was just was just around the corner (which it may well be, but it had other plans for the weekend).
We'll lay out the fine details for the index charts below. First, let's dig in with the bigger economic picture.
Economic Calendar
No sense in skirting the key issue - new unemployment claims surged to multi-month highs last week, reaching 500K... the greatest number since November, and a clear question mark for the pending recovery.
We won't deny it's a nasty number. We'll just ask the question nobody else has... how many of those new claims were former census workers? Unemployed is still unemployed, but the answer may offer some perspective on the last several months. Interestingly, continuing clams were a tad lower, to 4.478 million.
New, Initial Unemployment Claims
Elsewhere, we saw healthy stability on the inflation front; producer prices were up about 0.2% - much better than the expected 0.5% dip. No deflation yet.
Housing starts were down to 546K, but better than expected. Building permits were down as well, to 565K, which was worse than expected. Don't over-react though (despite the media's ability to do so), as this is about the time builders start to slow things down for the year.... a convenient fact ignored by the 'crash loving' press.
The rest of the important news was all in the industrial front.... everything from the NY 'Empire' Manufacturing Index to the Philadelphia Fed's leading indictors. Let's call it a mixed bag, tough net-positive. The two 'biggies - industrial production and capacity utilization - rolled in at +1.0% and 74.8%, respectively. Both were improvements, and both were better than estimates. Most importantly, both point to continued economic growth that ultimately fuels bullishness.
Industrial Production & Capacity Utilization
Economic Calendar
As for the coming week, much less is in store, though what we've got on the plate is big stuff.
We'll kick things off on Tuesday with existing home sales; they should be lower. New homes sales will be reported on Wednesday. The pros are looking for flat numbers. Though flat = disaster for homebuilders at this juncture.
We'll also get durable orders numbers on Tuesday, which should be up by 0.5%. Of course, considering the low bar set by June's 0.9% dip, any upside may not mean much, as it will be easy to muster.
Don't sweat Friday's Q2 GDP guesstimate. It's old news anyway (as we near the third quarter), and it's still not the final number. If you want something to worry about on Friday, watch out for the Michigan Sentiment Index instead. Experts are looking for a slight dip.
S&P 500
Like we said above, last week was pretty modest for the market... about a 0.7% dip for the SPX, and a decent 'save' on Friday to leave things off on a not-disastrous note. Unfortunately, that's not going to cut it for the bulls at this point - they need a decisive string of gaining days to reignite last month's bullishness.
Why's that? Because, while the S&P 500 has shown us a couple of glimmers of hope over the last week and a half, we've also come much closer to a couple of the proverbial 'death crosses'.... bearish crosses of key moving averages that suggest a much bigger - and bearish in this case - shift in the market's broad momentum.
Specifically, the 100-day line (gray) is about a day away from falling under the 200-day average (green), while the 20-day line (blue) is just a couple of points away from moving below the 50-day moving average line (brown). Until we see those two problems undone, even solid bullish hints will be tainted.
That being said, at this point we have to reiterate the importance of the ceiling at 1129 (dashed), which has been a key downside reversal level twice for the S&P 500 over the last three months. Getting above those levels may also unwind the brewing death crosses anyway, so mark your charts there until further notice - it will make or break us
By the way, the lower 50-day Bollinger band (2 standard deviations) at 1035 is the next major likely floor for the SPX,
S&P 500
NASDAQ Composite
The bulk of what was said about the S&P 500's chart also applies to the NASDAQ's, and vice versa. So, we'll not waste time or space rehashing the same points here. Rather, we'll point out a couple of the NASDAQ's more unique aspects... like the fact that it actually closed higher last week, by 6.28% (+0.29%). And, it wasn't just Friday's late bounce that pulled off that trick; Tuesday's and Wednesday's strength was still better than Thursday's big dip.
It may seem like a trivial detail on the surface, but given the fact that the NASDAQ generally leads [both up and down], the small victory offers a legitimate glimmer of hope.
On the flipside, and partially thanks to last week's indecision, it's becoming fairly clear that the composite is trading within a range, between 2157 and 2311 (green, dashed). You could actually make a decent case that the lower edge of the range could fall anywhere between 2077 and 2139 (traced by blue lines), but we'll start with a floor of 2157 given last week's action. On both sides of the range, however, the Bollinger bands are starting to squeeze tighter and tighter.
As was the case with the S&P 500, even "a little bullishness" just won't be enough to do the NASDAQ any good. We need to see this index clear all of its key moving averages as well as 2311 before we can feel comfortable with a bullish outlook. Anything less, and it's just too vulnerable to a breakdown.
NASDAQ Composite
http://www.bigtrends.com/articles/weeklyoutlook/13597-industrial-production-and-death-crosses-weekly-market-outlook.html
by Price Headley
Aug 24 2010
Indecision anyone? That's what we all got a plate-full of last week, with a very bullish Tuesday, a very bearish Thursday, and a surprising rebound after what started out to be a pretty rough Friday. All told, the S&P 500 only ended up losing 7.56 points last week (-0.70%) on 'average August' volume, slightly upsetting sure-fire talk that the next apocalypse was just was just around the corner (which it may well be, but it had other plans for the weekend).
We'll lay out the fine details for the index charts below. First, let's dig in with the bigger economic picture.
Economic Calendar
No sense in skirting the key issue - new unemployment claims surged to multi-month highs last week, reaching 500K... the greatest number since November, and a clear question mark for the pending recovery.
We won't deny it's a nasty number. We'll just ask the question nobody else has... how many of those new claims were former census workers? Unemployed is still unemployed, but the answer may offer some perspective on the last several months. Interestingly, continuing clams were a tad lower, to 4.478 million.
New, Initial Unemployment Claims
Elsewhere, we saw healthy stability on the inflation front; producer prices were up about 0.2% - much better than the expected 0.5% dip. No deflation yet.
Housing starts were down to 546K, but better than expected. Building permits were down as well, to 565K, which was worse than expected. Don't over-react though (despite the media's ability to do so), as this is about the time builders start to slow things down for the year.... a convenient fact ignored by the 'crash loving' press.
The rest of the important news was all in the industrial front.... everything from the NY 'Empire' Manufacturing Index to the Philadelphia Fed's leading indictors. Let's call it a mixed bag, tough net-positive. The two 'biggies - industrial production and capacity utilization - rolled in at +1.0% and 74.8%, respectively. Both were improvements, and both were better than estimates. Most importantly, both point to continued economic growth that ultimately fuels bullishness.
Industrial Production & Capacity Utilization
Economic Calendar
As for the coming week, much less is in store, though what we've got on the plate is big stuff.
We'll kick things off on Tuesday with existing home sales; they should be lower. New homes sales will be reported on Wednesday. The pros are looking for flat numbers. Though flat = disaster for homebuilders at this juncture.
We'll also get durable orders numbers on Tuesday, which should be up by 0.5%. Of course, considering the low bar set by June's 0.9% dip, any upside may not mean much, as it will be easy to muster.
Don't sweat Friday's Q2 GDP guesstimate. It's old news anyway (as we near the third quarter), and it's still not the final number. If you want something to worry about on Friday, watch out for the Michigan Sentiment Index instead. Experts are looking for a slight dip.
S&P 500
Like we said above, last week was pretty modest for the market... about a 0.7% dip for the SPX, and a decent 'save' on Friday to leave things off on a not-disastrous note. Unfortunately, that's not going to cut it for the bulls at this point - they need a decisive string of gaining days to reignite last month's bullishness.
Why's that? Because, while the S&P 500 has shown us a couple of glimmers of hope over the last week and a half, we've also come much closer to a couple of the proverbial 'death crosses'.... bearish crosses of key moving averages that suggest a much bigger - and bearish in this case - shift in the market's broad momentum.
Specifically, the 100-day line (gray) is about a day away from falling under the 200-day average (green), while the 20-day line (blue) is just a couple of points away from moving below the 50-day moving average line (brown). Until we see those two problems undone, even solid bullish hints will be tainted.
That being said, at this point we have to reiterate the importance of the ceiling at 1129 (dashed), which has been a key downside reversal level twice for the S&P 500 over the last three months. Getting above those levels may also unwind the brewing death crosses anyway, so mark your charts there until further notice - it will make or break us
By the way, the lower 50-day Bollinger band (2 standard deviations) at 1035 is the next major likely floor for the SPX,
S&P 500
NASDAQ Composite
The bulk of what was said about the S&P 500's chart also applies to the NASDAQ's, and vice versa. So, we'll not waste time or space rehashing the same points here. Rather, we'll point out a couple of the NASDAQ's more unique aspects... like the fact that it actually closed higher last week, by 6.28% (+0.29%). And, it wasn't just Friday's late bounce that pulled off that trick; Tuesday's and Wednesday's strength was still better than Thursday's big dip.
It may seem like a trivial detail on the surface, but given the fact that the NASDAQ generally leads [both up and down], the small victory offers a legitimate glimmer of hope.
On the flipside, and partially thanks to last week's indecision, it's becoming fairly clear that the composite is trading within a range, between 2157 and 2311 (green, dashed). You could actually make a decent case that the lower edge of the range could fall anywhere between 2077 and 2139 (traced by blue lines), but we'll start with a floor of 2157 given last week's action. On both sides of the range, however, the Bollinger bands are starting to squeeze tighter and tighter.
As was the case with the S&P 500, even "a little bullishness" just won't be enough to do the NASDAQ any good. We need to see this index clear all of its key moving averages as well as 2311 before we can feel comfortable with a bullish outlook. Anything less, and it's just too vulnerable to a breakdown.
NASDAQ Composite
http://www.bigtrends.com/articles/weeklyoutlook/13597-industrial-production-and-death-crosses-weekly-market-outlook.html
**Happy Trading**
Your Economy #board- 1948
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