AI
Sunday, February 27, 2005 2:57:24 AM
~:~:~CYCLE/TREND Update for the Week Ahead~:~:~
Overview:
It’s that time once again to review the past week and look into the next. As mentioned in the last update with which this post replies; I think we could very well see 100pts get shaved off of the COMP in fairly short order. A lot may depend on Econ #’s, but another thing I have noticed besides weak follow through is that bad news seems to be having an affect again. I have to say that in the beginning the week this all certainly seemed to be spot on. S.Korea announces distribution of the U$D, Oil spikes on concerns of OPEC tightening supply and foreign countries making purchases via the Euro, The U$D tanks and Gold goes into the $430’s. Fear is in the air, then the following day S.Korea retracts their statement and the markets settle down and make a move back to the upside as if nothing ever happened. Now I am sure our Federal Gov’t must have gave the Koreans a courtesy call and asked them what the F*** they were thinking by making such an announcement (would have loved to been a fly on the wall during that conversation). All in all it still did not change anything even though the statement was claimed to have been taken out of context. S.Korea is the 2nd of a handful of nations holding an extraordinary amount of U$D backed securities to tell the world of their intentions, the first being Russia. Oil still went over $51 bbl, Gold still held the $430’s and the U$D continues to wallow at 82 and change. Yet the markets are right back where we were prior to the last Bradley turn on the 16th which looked like a legitimate change in trend. Whatever it is that’s propping up the indices, it continues to defy logic. The SMH and SOX index have been moving up, yet we just got a Book-to-Bill of 0.80. The DJIA and SPX are near Dec’04 tops once again, the DJTA has moved up out of its basing pattern while the COMP and R2K are similar in structure and ready to test overhead resistance again (and for the 3rd time). Will the 3rd attempt be the charm?
Economic #’s:
Econ activity was rather slow this week, although it seemed like a full schedule due to the trade shortened week, but what numbers we did get came in mixed as usual…
Consumer Confidence slipped to 104.0 from a revised 105.1 a month earlier while expectations were for 103.0. While expectations about business conditions worsened, consumers' views about labor conditions improved slightly. Those saying that jobs were hard to get fell to 22.6% from 24.3%, while those saying jobs were plentiful were essentially unchanged at 20.9%. Consumers' assessment of current economic conditions were mixed, those saying current business conditions were bad fell to 15.6% from 18.1%, while those saying conditions were good slipped to 24.9% from 26.1%. The survey by the Conference Board was based on a sample of 5,000 households.
ICSC-UBS Weekly Chain Store Sales slipped to -0.1% from the previous weeks increase of 0.1%. Compared with the same week a year ago, sales increased 1.8% after a 1.7% rise the preceding week. Overall sales are soft although ICSC expects retail sales will increase by 2.5%, on a year-over-year basis.
CPI inched up to 0.1% from a month earlier -0.1%, but below expectations of 0.2%. Core CPI which excludes food and energy came in at 0.2% or the same as a month earlier and in line with expectations. In the past year CPI has risen 3% while the core rate is up 2.3%. Average weekly earnings are down 0.1% with real weekly earnings falling 0.2%. In the past year real weekly earnings are down 0.7%.
Mortgage Applications were off slightly as the Index of Mortgage Apps fell 0.6% from 732.3 to 727.9 while the Purchasing Index fell 1.3% from 423.3 to 417.8. Index of Refi’s eased by 0.1% with Refis’ making up 49.3% of all mortgage applications and off from 49.9% the week earlier. ARM’s applications held steady at 30.9%. The rate rose with 30 yrs fixed mortgages at 5.67% from 5.50%, 15 yrs fixed mortgages at 5.19% from 5.09% and 1 yrs ARM mortgages at 4.18% from 4.10%. Consumer Comfort Index came in at a –11 or slightly below the previous weeks –10 reading.
Initial Jobless Claims came in at 312K or an increase of 9K from the previous report and above expectations of 308K. It was the first increase after 3 straight weekly declines. The number of Americans receiving state jobless benefits fell 62K to 2.65 Mln while the 4-week moving average of continuing claims fell 40.3K to 2.70 Mln with the insured unemployment rate holding steady at 2.1%. Help Wanted Index increased to 41 from 38 as Ad lineage grew in 8 of 9 regions over the last 3 months.
Durable Orders fell -0.9% from a months earlier revised 1.4%, expectations were for an increase of 0.1%. The fall in orders was the largest since Oct’04 and was mainly attributable to transportation. Demand for new motor vehicles fell 3.8% and a plunge in demand for civilian aircraft of 27.1%. Excluding transportation new orders rose 0.8%.
GDP increased to 3.8% and above expectations of 3.7%, an increase of 0.7% from the previous quarter. Chain Deflator rose to 2.1% from the previous and expected 2.0% increase previously reported. Consumer spending, which accounts for more than 2/3rds of the economy, expanded at a 4.2% annual pace compared with 4.6% initially reported. Spending reached a 3-year high of 5.1% in the third quarter.
WLI (Weekly Leading Indicator) fell to 133.9 compared to 134.4 a week earlier although the index's annualized growth rate rose to 2.1% from 1.9% in the prior week.
Oil Inventories as reported by the DoE (Dept of Energy) and the API (American Petroleum Institute). Crude according to DoE rose by 600K bbls, but according to API rose 3.41 Mln Mln bbls. Distillates according to DoE rose by 700K bbls, but according to API rose 1.47 Mln Mln bbls. Gasoline according to DoE rose by 1.8 Mln bbls, but according to API rose by 5.74 Mln bbls.
In the years leading up to Y2K we heard comments like “it’s the new economy” or “paradigm shift”. Today we are hearing comments like “goldilocks economy” and “fundamental shift”. This reminds me of how the term “shellshocked” transformed into a newer and less evil sounding term of “posttraumatic stress disorder”... Politically correct terms gloss over the nature of its being and being politically correct does not change the outcome because the symptoms remain the same. The one thing that hasn’t changed is the “it’s different this time” rhetoric with the added emphasis of “really!”. What we have today is a repeat of Y2K, only we will call it Y2K+. While Y2K+ has yet to be fully recognized, I will not get into the much more troubling factors and fundamentals that are facing us today. History has a funny way of repeating itself and we are witness to that as it occurs under our very noses while the average investor relentlessly hits the punch bowl. One thing is for sure, once the drinking stops one hell of a hang over awaits.
What can we expect now?:
Good news, bad news, it really makes no difference. As mentioned earlier the markets are in a world of their own and can/will do most anything at anytime as seen this week. I find this to be a dangerous time. I am still seeing poor breadth with lagging sectors such as Retail, Banks, Biotech and Technology. These are usually the leaders, not the followers. Fund inflows are in decline since the beginning of Feb. with more and more money finding its way into International funds. Negative divergence between price action and RSI/MACD continues. New highs are not overly exceeding new lows on the COMP although the NYSE seems to be painting a different picture. Volume has been patchy with some days weaker than others. Either this is the mother of all head fakes or we are in for a very big surprise. COT’s and specialists are all on the other side of the small speculating longs. Either we are seeing new leadership in the markets where rotation is the key and rate sensitive sectors are taking the hit or the gamblers are being allowed to run the gambit. One thing is for sure and that is that we are much closer to a top than we are a bottom, we have been and still are in the same boat. I would not go as far as to rule out range bound volatility for an undetermined amount of time, but I cannot help but get the feeling that this is the head fake of all head fakes where the complacent little guys are about to get whacked.
On a technical note, we have Bullish Advisors at 54.1% with Bearish Advisors at 21.4%, VIX/VXN as previously mentioned are near all-time lows but seem to go no lower and have come out of the downward channel and appear to be base lining. I feel this is significant and will be watching closely to see if they can/will break lower and resume the channel. The Equity P/C Ratio is at .632 and with its 21DMA at .590. The RSI 5-Days are Neutral across the board. The RSI 5-Wks are Overbought on the INDU, nearly so on the SPX and Neutral on the COMP. $NASI (Summation) remains below the 50/200DMA’s while the $NAMO (McClellan) is in an uptrend above both the 50/200DMA, but a crossover of these DMA’s to the downside since Jan’05 still remains intact. $NAHL (Highs/Lows) has turned up and crossed both 50/200DMA’s but the 50DMA is closing in on the 200DMA as a trend of lower highs still exists while the $NAAD (Advance/Decline) is looking kind of toppy with the 50DMA crossover below the 200DMA since early Feb’05 still remaining intact. BP%'s are mixed where INDU has crossed over the 50DMA, SPX is touching the 50DMA and the COMP is still struggling to get back above the 50DMA. We are also in for another Bradley turn date this week on/around the 4th, it will be interesting to see if this cycle sticks, if it’s a 1-4 day event or a non-event. Bradley’ are now on many a radar, so it is of no surprise that they are even less effective than in the past.
As for charts this week I have posted a host of generics for viewing and would like to draw your attention to a COMP chart from Thur the 24th posted on the Your Economy board #msg-5544161 in which some key channels and Fibs exist. The COMP is nearing the formidable resistance zone once again in the 2080 area. Depending on which bottom you use from the Dec’04 top, 2008 = 38.2% Fib and 1900 = 61.8% Fib. This coupled with the double top in this area and previous resistance makes this the key area to watch in the coming week…
NOTE: I continue to hold a USPIX position which I will flip long when the time feels right. LT Holds: HSGFX, PCRDX, PRPFX, QRAAX, RSNRX and TAVIX
Disclaimer: This disclosure is not a recommendation to buy or sell or to do as I do. It is to let people know what I am doing and give my thoughts on current market conditions. I am not a day trader and only attempt to identify up/down trends and play the swings.
Overview:
It’s that time once again to review the past week and look into the next. As mentioned in the last update with which this post replies; I think we could very well see 100pts get shaved off of the COMP in fairly short order. A lot may depend on Econ #’s, but another thing I have noticed besides weak follow through is that bad news seems to be having an affect again. I have to say that in the beginning the week this all certainly seemed to be spot on. S.Korea announces distribution of the U$D, Oil spikes on concerns of OPEC tightening supply and foreign countries making purchases via the Euro, The U$D tanks and Gold goes into the $430’s. Fear is in the air, then the following day S.Korea retracts their statement and the markets settle down and make a move back to the upside as if nothing ever happened. Now I am sure our Federal Gov’t must have gave the Koreans a courtesy call and asked them what the F*** they were thinking by making such an announcement (would have loved to been a fly on the wall during that conversation). All in all it still did not change anything even though the statement was claimed to have been taken out of context. S.Korea is the 2nd of a handful of nations holding an extraordinary amount of U$D backed securities to tell the world of their intentions, the first being Russia. Oil still went over $51 bbl, Gold still held the $430’s and the U$D continues to wallow at 82 and change. Yet the markets are right back where we were prior to the last Bradley turn on the 16th which looked like a legitimate change in trend. Whatever it is that’s propping up the indices, it continues to defy logic. The SMH and SOX index have been moving up, yet we just got a Book-to-Bill of 0.80. The DJIA and SPX are near Dec’04 tops once again, the DJTA has moved up out of its basing pattern while the COMP and R2K are similar in structure and ready to test overhead resistance again (and for the 3rd time). Will the 3rd attempt be the charm?
Economic #’s:
Econ activity was rather slow this week, although it seemed like a full schedule due to the trade shortened week, but what numbers we did get came in mixed as usual…
Consumer Confidence slipped to 104.0 from a revised 105.1 a month earlier while expectations were for 103.0. While expectations about business conditions worsened, consumers' views about labor conditions improved slightly. Those saying that jobs were hard to get fell to 22.6% from 24.3%, while those saying jobs were plentiful were essentially unchanged at 20.9%. Consumers' assessment of current economic conditions were mixed, those saying current business conditions were bad fell to 15.6% from 18.1%, while those saying conditions were good slipped to 24.9% from 26.1%. The survey by the Conference Board was based on a sample of 5,000 households.
ICSC-UBS Weekly Chain Store Sales slipped to -0.1% from the previous weeks increase of 0.1%. Compared with the same week a year ago, sales increased 1.8% after a 1.7% rise the preceding week. Overall sales are soft although ICSC expects retail sales will increase by 2.5%, on a year-over-year basis.
CPI inched up to 0.1% from a month earlier -0.1%, but below expectations of 0.2%. Core CPI which excludes food and energy came in at 0.2% or the same as a month earlier and in line with expectations. In the past year CPI has risen 3% while the core rate is up 2.3%. Average weekly earnings are down 0.1% with real weekly earnings falling 0.2%. In the past year real weekly earnings are down 0.7%.
Mortgage Applications were off slightly as the Index of Mortgage Apps fell 0.6% from 732.3 to 727.9 while the Purchasing Index fell 1.3% from 423.3 to 417.8. Index of Refi’s eased by 0.1% with Refis’ making up 49.3% of all mortgage applications and off from 49.9% the week earlier. ARM’s applications held steady at 30.9%. The rate rose with 30 yrs fixed mortgages at 5.67% from 5.50%, 15 yrs fixed mortgages at 5.19% from 5.09% and 1 yrs ARM mortgages at 4.18% from 4.10%. Consumer Comfort Index came in at a –11 or slightly below the previous weeks –10 reading.
Initial Jobless Claims came in at 312K or an increase of 9K from the previous report and above expectations of 308K. It was the first increase after 3 straight weekly declines. The number of Americans receiving state jobless benefits fell 62K to 2.65 Mln while the 4-week moving average of continuing claims fell 40.3K to 2.70 Mln with the insured unemployment rate holding steady at 2.1%. Help Wanted Index increased to 41 from 38 as Ad lineage grew in 8 of 9 regions over the last 3 months.
Durable Orders fell -0.9% from a months earlier revised 1.4%, expectations were for an increase of 0.1%. The fall in orders was the largest since Oct’04 and was mainly attributable to transportation. Demand for new motor vehicles fell 3.8% and a plunge in demand for civilian aircraft of 27.1%. Excluding transportation new orders rose 0.8%.
GDP increased to 3.8% and above expectations of 3.7%, an increase of 0.7% from the previous quarter. Chain Deflator rose to 2.1% from the previous and expected 2.0% increase previously reported. Consumer spending, which accounts for more than 2/3rds of the economy, expanded at a 4.2% annual pace compared with 4.6% initially reported. Spending reached a 3-year high of 5.1% in the third quarter.
WLI (Weekly Leading Indicator) fell to 133.9 compared to 134.4 a week earlier although the index's annualized growth rate rose to 2.1% from 1.9% in the prior week.
Oil Inventories as reported by the DoE (Dept of Energy) and the API (American Petroleum Institute). Crude according to DoE rose by 600K bbls, but according to API rose 3.41 Mln Mln bbls. Distillates according to DoE rose by 700K bbls, but according to API rose 1.47 Mln Mln bbls. Gasoline according to DoE rose by 1.8 Mln bbls, but according to API rose by 5.74 Mln bbls.
In the years leading up to Y2K we heard comments like “it’s the new economy” or “paradigm shift”. Today we are hearing comments like “goldilocks economy” and “fundamental shift”. This reminds me of how the term “shellshocked” transformed into a newer and less evil sounding term of “posttraumatic stress disorder”... Politically correct terms gloss over the nature of its being and being politically correct does not change the outcome because the symptoms remain the same. The one thing that hasn’t changed is the “it’s different this time” rhetoric with the added emphasis of “really!”. What we have today is a repeat of Y2K, only we will call it Y2K+. While Y2K+ has yet to be fully recognized, I will not get into the much more troubling factors and fundamentals that are facing us today. History has a funny way of repeating itself and we are witness to that as it occurs under our very noses while the average investor relentlessly hits the punch bowl. One thing is for sure, once the drinking stops one hell of a hang over awaits.
What can we expect now?:
Good news, bad news, it really makes no difference. As mentioned earlier the markets are in a world of their own and can/will do most anything at anytime as seen this week. I find this to be a dangerous time. I am still seeing poor breadth with lagging sectors such as Retail, Banks, Biotech and Technology. These are usually the leaders, not the followers. Fund inflows are in decline since the beginning of Feb. with more and more money finding its way into International funds. Negative divergence between price action and RSI/MACD continues. New highs are not overly exceeding new lows on the COMP although the NYSE seems to be painting a different picture. Volume has been patchy with some days weaker than others. Either this is the mother of all head fakes or we are in for a very big surprise. COT’s and specialists are all on the other side of the small speculating longs. Either we are seeing new leadership in the markets where rotation is the key and rate sensitive sectors are taking the hit or the gamblers are being allowed to run the gambit. One thing is for sure and that is that we are much closer to a top than we are a bottom, we have been and still are in the same boat. I would not go as far as to rule out range bound volatility for an undetermined amount of time, but I cannot help but get the feeling that this is the head fake of all head fakes where the complacent little guys are about to get whacked.
On a technical note, we have Bullish Advisors at 54.1% with Bearish Advisors at 21.4%, VIX/VXN as previously mentioned are near all-time lows but seem to go no lower and have come out of the downward channel and appear to be base lining. I feel this is significant and will be watching closely to see if they can/will break lower and resume the channel. The Equity P/C Ratio is at .632 and with its 21DMA at .590. The RSI 5-Days are Neutral across the board. The RSI 5-Wks are Overbought on the INDU, nearly so on the SPX and Neutral on the COMP. $NASI (Summation) remains below the 50/200DMA’s while the $NAMO (McClellan) is in an uptrend above both the 50/200DMA, but a crossover of these DMA’s to the downside since Jan’05 still remains intact. $NAHL (Highs/Lows) has turned up and crossed both 50/200DMA’s but the 50DMA is closing in on the 200DMA as a trend of lower highs still exists while the $NAAD (Advance/Decline) is looking kind of toppy with the 50DMA crossover below the 200DMA since early Feb’05 still remaining intact. BP%'s are mixed where INDU has crossed over the 50DMA, SPX is touching the 50DMA and the COMP is still struggling to get back above the 50DMA. We are also in for another Bradley turn date this week on/around the 4th, it will be interesting to see if this cycle sticks, if it’s a 1-4 day event or a non-event. Bradley’ are now on many a radar, so it is of no surprise that they are even less effective than in the past.
As for charts this week I have posted a host of generics for viewing and would like to draw your attention to a COMP chart from Thur the 24th posted on the Your Economy board #msg-5544161 in which some key channels and Fibs exist. The COMP is nearing the formidable resistance zone once again in the 2080 area. Depending on which bottom you use from the Dec’04 top, 2008 = 38.2% Fib and 1900 = 61.8% Fib. This coupled with the double top in this area and previous resistance makes this the key area to watch in the coming week…
NOTE: I continue to hold a USPIX position which I will flip long when the time feels right. LT Holds: HSGFX, PCRDX, PRPFX, QRAAX, RSNRX and TAVIX
Disclaimer: This disclosure is not a recommendation to buy or sell or to do as I do. It is to let people know what I am doing and give my thoughts on current market conditions. I am not a day trader and only attempt to identify up/down trends and play the swings.
**Happy Trading**
Your Economy #board- 1948
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