Your Economy (No Politics)

[Bullwinkle]

~:~:~Market Trend Update for the Week Ahead~:~:~



Overview:
Up, down and round-n-round pretty much sums up the past week as we more or less ended where we started, albeit slightly weaker. As mentioned in the previous update with which this post replies; I expect next week to be range bound and somewhat volatile, similar to what we experienced this past week with a bias towards the downside. Bingo! Low volume that is diverging from price trend shows weakness at hand. If it were not for the amount of corporate stock buybacks currently occurring, the bottom would probably fall out of this market. As quoted by Trim Tabs; “Corporate liquidity (L1) has been bullish by a record $2 billion daily so far this week based on actual stock buybacks. From Friday, June 3, through Wednesday, June 8, new cash takeovers and completed cash takeovers averaged a combined $1.7 billion daily. We estimate that actual stock buybacks are averaging $1.3 billion daily. Thus, corporate buying is $3.0 billion daily. On the side of the corporate liquidity ledger, new offerings averaged $550 million daily, and Dealogic reports that only one deal for $200 million is scheduled to be priced tonight and less than $1 billion is currently scheduled for sale next week. In addition, we estimate that insider selling is averaging $400 million daily. Thus, corporate selling is $950 million daily, which is only a third of corporate buying”. Not much has changed as far as CoT data goes where open interest is lower than at anytime all of last year on the Naz and DJIA, but slightly above the lows seen this past March. Equity fund flows saw an increase of $1.7 Bln with ETF inflows accounting for 56% of that, but the biggest jump was seen in the Money Market funds with $21.5 Bln in net inflows, the largest to the sector since Oct’03. Also Tax Exempt Money Market net inflows were $7 Bln and the largest inflows into that sector since July’04. I would say something is afoot… Oil has been bouncing between $53-$55bbl and settling in at $53.54bbl while the CRB is holding above 300 at 305. The U$D continues to strengthen against the Euro, but the Yen has held its own bouncing between 106.5 to 108.5 over the last month and a half. The real story is the way that Gold appears to be decoupling from the U$D whereas a $3.50 rise in Gold to $426.90 occurred while the U$D moved up 0.67 to 88.61. Whether or not this is a new trend in the making is yet to be seen.

Economic #’s:
Econ #’s were mostly mixed and leaning toward unfavorable, so what else is new?

Consumer Credit rose at an annual rate of 0.7% or $1.3Bln, the slowest increase in 5-months. The prior reporting period had seen an increase of $6.9 Bln and expectations had been for $7.5 Bln increase. Credit card debt decreased 0.6% in April, the 2nd straight month of decline. Non-revolving credit like auto loans rose 1.5%. The increase in consumer credit in March, meanwhile, was revised to 3.9% from 3.1%.
Wholesale Inventories rose 0.8%, twice as much as forecast and above the previously reported 0.6%, which brought the total value of inventories to $350 Bln. Sales jumped 1.5% in April, the most since March 2004. The amount of time wholesale goods went unsold, known as the inventory-to-sales ratio, fell to 1.18 months, the lowest since January, from 1.19 months in March. Manufacturing inventories rose 0.1% in April, the smallest gain this year, after a 0.7% jump in the previous month. The inventory-to- shipments ratio fell to 1.24 months from 1.25 months. Inventories of durable goods at wholesalers, which include imported cars and computers, rose 0.4% in April after rising 0.2%. Machinery inventories rose 0.9% after a 1.5% rise. Automotive stockpiles increased 1.5% as sales slowed. Sales of all durables jumped 1.5% after falling 0.3%. Stockpiles of non-durable goods increased 1.4% in April after a 1.2% rise the month before. Sales of such goods rose 1.5% after a 0.8% increase in March.
MBA Mortgage Applications rose 6.5% to 755.5, offsetting the previous week's 2.8% loss. Refi applications climbed 10.3% to 2362.1, after dropping 1.2% the previous week. The purchase index rose 3.6% to 479.3, after falling 4.1% the previous week. Refi’ s increased as a percentage of all mortgage applications, at 42.9% of total applications, from 41.2% the previous week while applications for ARMs fell to 31.7% of total applications from 33.3% the previous week. Fixed 30-year mortgage rates averaged 5.55% last week, excluding fees, down 6 basis points from 5.61% the previous week. Interest rates for 15-year fixed-rate mortgages remained at 5.13% last week while 1-year adjustable-rate mortgages, or ARMs, remained at 4.09%.
Import/Export Prices On the Imports side: All Commodities -1.3% in May 2005 -- Petroleum & Petroleum Products -6.5% in May 2005 -- All Imports Excluding Petroleum -0.3% in May 2005 ... On the Exports side: All Commodities -0.1% in May 2005 -- Agricultural Commodities +2.0% in May 2005 -- Nonagricultural Commodities -0.4% in May 2005 ... Import prices are up 5.7% in the past 12 months, down from the 8.7% year-over-year gain in April. Economists were expecting import prices to fall 0.2% while April import prices were revised to a 1.2% increase from 0.8% earlier. For the 2nd month in a row, prices of Chinese imports rose by 0.1% although prices of imports from most other countries and regions fell in May.
Initial Jobless Claims fell by 21K to 330K from an upwardly revised 351K in the prior week with expectations having been for 335K. The 4-weeks moving average that smoothens out the impact of seasonal factors and one-time items declined to 332K from 334.5K in the previous week. The number of people continuing to collect state jobless benefits decreased to 2.588 Mln in the week that ended May 28 from 2.592 Mln the prior week. The insured unemployment rate held at 2% in the week ended May 28.
Trade Balance widened to $57 Bln from a downwardly revised $53.6 Bln which was previously reported as $55 Bln. Expectations had been for $58 Bln. Imports rose 4.1%, the biggest increase since Nov’02, to a record $163.4 Bln. Exports also were a record. April's record imports reflected the highest prices ever for petroleum and a jump in purchases of Chinese textiles. The trade gap with China widened to $14.7 Bln from $12.9 Bln a month earlier, reflecting an 11% increase in textile imports. Textile imports rose 52% so far this year from the same four months of 2004, the report showed.
Treasury Budget dropped to -$35.3 Bln in May, the lowest deficit in 4-years for the month with -$62.5 billion a year ago in May and beating expectations of -$45 Bln. Total receipts in May were up 32.2% to $152.7 Bln, compared with $115.5 Bln the previous May while Outlays were up 5.6% to $188 Bln. So far in the fiscal year, receipts are up 15.4% to $1.37 Tln from $1.19 Tln last year. Outlays are up 7.2% year to date at $1.64 Tln. The deficit reached $228.7 Bln in the year's first 4-months compared with $187.3 Bln in the year-earlier period. Last year, the gap reached a record $617.6 Bln.
Oil Inventories as reported by the DoE (Dept of Energy) and API (American Petroleum Institute). Crude according to DoE fell by 3.0 Mln bbls, but according to API fell by 13.8 Mln bbls. Gasoline according to DoE fell by 100K bbls, but according to API rose by 1.1 Mln bbls. Distillates according to DoE rose by 1.3 Mln bbls, but according to API rose by 3.1Mln bbls.

Next week’s Econ activity picks up considerably with PPI/Core PPI, CPI/Core CPI, Retail Sales, Business Inventories, NY Empire State Index, Capacity Utilization, Industrial Production, Fed’s Beige Book, Building Permits, Housing Starts, Initial Claims, Philly Fed, Current Account (deficit), Michigan Sentiment…


Companies that promote and further along violations of civil rights (i.e. Patriot Act = Martial Law) should be exposed and boycotted. A couple that comes to mind off the top of my head is FDX (Federal Express) and SY (Sybase). The FDX story: #msg-6492720 and the SY story: #msg-6642438 While I am all for a secure nation (who in their right mind isn't?), it must be implemented in a responsible way. Proper checks and balances must be put in place. Half ass random security while infringing on the rights of its citizens is not the type of security we need. These acts are overreaching and do not address the issues with which our nation is facing today. In the meantime, the threat of terrorism is being used to invade our privacy. To date the security being provided is nothing more than a steppingstone for all to eager profiteering companies and big brother to stick their nose where they do not belong. The Federal Gov’t has become more “hands off” by cutting corners and pushing its responsibilities off onto the States and the public in general while underfunding the instruments for success. If dollars earmarked for security were being spent properly on equipment and personnel then the tasks at hand can be executed with precision and within the realm of the laws already in the books. We do not need more laws, we need the laws we have to be implemented. Articles such as the ones posted are only a preview of wasted time, effort and money while infringing on Americans’ rights. This is just the beginning of more of the same with bigger and broader implications. Paranoia is running high and it is being exacerbated by the partisan wrangling on Capital Hill. None of the important proposals made by the non-partisan 9/11 commission have yet to be implemented http://www.cbsnews.com/stories/2005/06/06/national/main699889.shtml This tells me that a vulnerable America still exists today and rogue actions being taken by corporate America just adds salt to the wounds… While I do believe we are somewhat safer than we were pre-9/11, it is not because of the actions of these corporations who are lining up to profit from our discomfort, it is mainly due to the 9/11 event itself and the fact that it can happen in any of our backyards. We are far and away from being nearly as safe as we could be. Instead of applying a band-aid to a compound fracture, our leaders need to get their priorities straight while living within the constitution and start addressing the concerns in an honest and forthright manner. Now I would like to leave you with a couple of quotes worth pondering;

“They who would give up an essential liberty for temporary security, deserve neither liberty or security.” -- Benjamin Franklin
“We cannot defend freedom abroad by deserting it at home” -- Edward R. Murrow

What can we expect now?:
The markets look ripe for a decline, whether it starts next week or not I am unable to say. We could see an undetermined amount of volatile range like activity, but many indicators lead me to believe that something is afoot. The price/volume divergence that has been in place for much of this ramp, various indicators that are rolling over, the EPC which is in the .400’s, the CoT’s low open interest, the high cash positions being held, high bullish sentiment returning, very low VIX/VXN and the McClellan heading downward. Also of note are COMP decliners leading advancers and down volume leading up volume, albeit slight in nature but occurring nonetheless. While the COMP new lows have not overtaken the new highs, the new lows have been increasing while new highs are waning. Maybe it’s just me, but the COMP in general looks fatigued. When considering that the COMP has been leading the overall markets, this could be a troublesome precursor of things to come. Also of note is the Fib timeline and Bradley Turn combo, which occurred on Friday. Then we have upcoming earnings on the grill. While a ramp is usually seen into Q2 earnings starting around the beginning of June, we will need to see volume pick up to make a further run from here. This latest ramp started in early May, so could a summer rally have come a little early? And if the way INTC’s mid-Qtr update was received is any guide, then Q2 earnings could be in for some tough sledding. We also get CPI, PPI and the Fed Beige Book in the week ahead, all of which will be closely watched and dissected for inflationary ills. Any or all of the aforementioned items could be the catalyst to a back slide and just as we climbed a wall of worry we are vulnerable to slide down a slippery slope of hope… As for Oil, U$D and Gold we most likely continue down the path of least resistance. The odd thing is that path looks to be up for all. Can we have a rising U$D, Gold and Oil all at the same time? Sooner or later one or more of these will move away from its current trend, but at this time I am not looking to venture out on that limb… The U$D is expected to go higher, Gold is expected to go lower and Oil is a coin toss. I will take the contrarian view for speculation purposes only and say that over the next couple of weeks the U$D will crack, followed by Gold with Oil moving onto new highs. Too many expect things to be scripted, I feel the script will be broken.

On a technical note, Bullish Advisors are at 50.6% with Bearish Advisors at 20.9%, quite a shift from the previous 47.8% and 25% reported last week. The VIX/VXN trends are still teetering at the lower ends of their ranges. CBOE Equity P/C Ratio is at .475 with a 21DMA of .580 as the ranges tighten as previously mentioned the week before. The All Index P/C ratio is at .399. The RSI 5-Days and RSI 5-Wks are Neutral across the board on the COMP, SPX and DJIA. The $NASI Daily (Summation), The $NAMO Daily (McClellan), The $NAHL Daily (Highs/Lows), The $NAAD Daily (Advance/Decline) and BP%'s are all still in overall downward trends (with the intermediate trends being up) where the 50DMA has clearly crossed under the 200DMA with the exception of the $NAMO in which the 50DMA has crossed back over the 200DMA. The trend is now moving out of its topping pattern and into a downward decline. The averages are yet to be effected by this current trend and may reverse. On another note, I am still seeing a lot of possible H&S patterns developing; INDU, SPX, NASI and all of the BP%’s…

Annotated charts of the major indices and charts for all of the indicators mentioned are posted below for your viewing pleasure…


























NOTE:
I continue to hold a USPIX position, which I will flip to UOPIX when appropriate.

CORE:
Funds; HSGFX, PCRDX, PRPFX, QRAAX, RSNRX ,TAVIX. Individual Stocks; ANO, BHP, SWWC

SWING: Took a position in XLE last week

Disclaimer:
This disclosure is not a recommendation to buy or sell or to do as I do. It is only to give my thoughts on current market conditions and share the positions that I am holding for tracking purposes only. I am not a day trader and only attempt to identify up/down trends and play the swings.