Your Economy (No Politics)

[Bullwinkle]

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



OVERVIEW:
It’s that time once again to revisit the past week and look into the next. As mentioned in the previous update with which this post replies; Oil looks poised for another new high. AND Over the last week or two I have been cautioning about nervousness percolating below the surface and that the markets appear to be running out of gas and looking for a top. A wall of worry is not always a good thing and does not necessitate a bullish move, it can also be quite bearish as well. I also mentioned the following; I tend to believe that over the next couple of weeks it will become clearly evident that fundamentals will mean something again. What we do know is that we barely made new highs and have now fallen back, that a divergence exists between indices and indicators alike and that we have had 5 consecutive weeks of increasing interest rates and 6 consecutive weeks of falling T-Notes. The U$D has been weakening, Gold has been gaining strength and the scent of inflation is in the air. We have a bit of a role reversal going on where the DJIA has held up relatively well putting in a choppy sideways pattern and test of the 50/200DMA. The SPX looks to be forming a bit of a bear flag while the COMP and R2K look poised to test their 50DMA’s. We are now in the 6th consecutive week of rising mortgage rates, but 30-yrs bonds found footing around the 200DMA and bounced smartly ending a bid for a 7th consecutive drop in T-Note rates. The U$D has been weak and now resides just under 87 with Gold busting a move that saw an intraday level of $449 before settling in at $446 to end the week. Speaking of busting a move, Oil & Gas are off on a tangent. CoT data is mostly the same and you can catch a glimpse of CoT graphs here #msg-7253670 Equity Fund flows saw outflows of -$432 Mln with the usual strength in ETF inflows of $527 Mln, Non-domestic Fund inflows of $1.154 Bln and International Fund inflows of $1.024 Bln. The CRB ran to 323 and on the verge of setting all-time highs with the 10-yrs and 30-yrs T-Note yields taking a breather and falling back to 4.238% and 4.441% respectively…


ECONOMIC #’s:
Without getting too deep into the Econ #’s, let’s briefly go through what was presented over the past week starting with getting the FOMC out of the way where another .25% interest rate increase to 3.5% occurred courtesy of Alan Greenspan & Co.

As for numbers, we saw Q2 preliminary Productivity come in at 2.2%, slightly higher than the forecast 2.0% increase but below the 3.2% seen in the previous Qtr. Next we have Wholesale Inventories for June coming in at 0.7%, almost double the forecasts of a 0.4% increase and more than twice the previously reported 0.3% for May. The US Treasury Budget for July was -$52.8 Bln, below forecasts of -$56.7 Bln and the -$69.2 Bln reported in the prior month. Initial Jobless Claims fell to 308K where 315K had been expected and 314K reported in the prior week. Retail Sales rose 1.8%, slightly below forecasts for a 2.0% rise and a touch above 1.7% previously reported for June, but excluding Auto Sales this number came in at a meager 0.3% increase or 1/3 the prior report of 0.9% and half of the expected 0.6% forecast. Business Inventories came in at a flat 0.0% after reporting a 0.1% increase for May and an inline 0.1% expected for June. Import Prices fell –0.1% in July after falling –0.4% the prior month with Export Prices rising 0.2% in July after falling –0.1% in the prior month. The Trade Balance (or imbalance) continued to swell to -$58.8 Bln for June after a previously reported -$55.3 Bln and above the -$57.2 Bln expected. The preliminary Michigan Sentiment took a dive to 92.6 from an expected and previously reported 96.5…

MBA Mortgage Applications slipped 0.9% in the week ended Aug. 5 compared to the prior week. The seasonally adjusted decrease reflected a 3.3% drop in refinancing applications, with the number of applications for mortgages to purchase homes gaining by 0.9%. Refinancings accounted for 40.9% of total applications last week, down from 41.7% a week earlier, while the proportion of adjustable-rate mortgages rose to 29.7% from 28.5%. Average contract interest rates on 30- and 15-year fixed-rate mortgages rose on a week-to-week basis to 5.91% and 5.49%, respectively, from 5.83% and 5.41%, the MBA said. The rate on one-year ARMs averaged 4.88% last week, up from 4.78% a week earlier. Overall, the four-week moving average of mortgage applications is down 1.5%

Oil Inventories as reported by the DoE (Dept of Energy) and API (American Petroleum Institute). Crude according to DoE rose by 2.8 Mln bbls, but according to API rose by 6.0 Mln bbls. Gasoline according to DoE fell by 2.1 Mln bbls, but according to API fell by 1.5 Mln bbls. Distillates according to DoE rose by 2.6 Mln bbls, but according to API fell by 724K bbls.
On tap for the week ahead we get numbers for NY Empire State Index, Building Permits, Housing Starts, CPI, PPI, LEI, Capacity Utilization, Industrial Production, Initial Claims and the Philly Fed…


I was made aware of a frightening article by fellow poster FinancialAdvisor, who posted the story and link with which I am referring to on the Your Economy board. Before I give you the link to this article, I want to ask you “what lengths do you think our leaders are willing to go in order to secure a major portion of the worlds oil supply?”… Here is a list of countries with the largest oil reserves in billions of barrels (Year-end 2004):

1. Saudi Arabia: 263
2. Canada*: 17*
3. Iran: 132
4. Iraq: 115
5. Kuwait: 99
6. UAE: 98
7. Venezuela: 77
8. Russia: 72
9. Libya: 39
10. Nigeria: 35
11. US: 29
12. China: 17

Source: EIA, BP Statistical Review
*Canada's oil sands not counted in this total

After reviewing these numbers, it is quite evident that the USA is pretty low on the food chain of oil reserves, that is until you consider Iraq is now under US control. Right behind Iraq is Iran, how engaging! The two combined along with current US reserves would surpass that of what Saudi Arabia controls. Now I am only speculating here, but I believe the Government may/could/will go to what I would consider to be extreme lengths in order to get control of Iranian oil and ¼ of the worlds oil supply. What do I mean by extreme lengths? Well we all know how the Iraq war is going, whether we are winning or not, it is an unpopular war. So to gain public support for an attack on Iran would most likely be slim to none. BUT what if our Government staged a fake attack in the USA in order to gain support and justify a war against Iran? Implausible? Maybe... Impossble? Hardly...

Here is a quote from a recent press conference held by US Defense Secretary Donald Rumsfeld about Iran;

"It is true that weapons clearly, unambiguously from Iran have been found in Iraq," Rumsfeld told reporters.

"It's a problem for the Iraqi government. It's a problem for the coalition forces. It's a problem for the international community. And ultimately, it's a problem for Iran," he said.”

The article in full can be found here #msg-7298352

Here’s the link and thanks to FA for providing it…. Just read it with an open mind and look around at what is happening in the USA and the world today (a 2-part article --one after the other-- recommend reading both parts): http://www.infowars.com/articles/terror/nuclear_terror.htm

Knowledge is power, enlighten yourself…


WHAT CAN WE EXPECT NOW?:
First off we have an Option Expiry week ahead of us, always good for keeping people guessing. We also get a full plate of inflation data, problem is most of it is manipulated. We could see some support for the markets this coming week although I believe it will be short lived should we get the spin-doctor effect from CPI, PPI LEI data. All things being equal, sideways chop or an acceleration to the downside may ensue, it is really all about perception although a move to higher highs is least likely at this point as we move further into August. I am seeing flares go off (look to the technically speaking portion of this update below). There is no fear and complacency is as thick as San Francisco fog. The DJIA is chopping sideways, but I see a possible bear flag forming on the SPX. The R2K has a broadening bottom with the TRAN and COMP possibly forming an H&S. All of these indices look poised to test their 50DMA’s… Fib’s are interesting, the SPX & DJIA bounced off of their 32.8% retrace levels with the COMP at its 32.8% tine and the R2K at its 50% tine. Current support areas are as follows: DJIA 10600, SPX 1225, COMP 2100 and R2K 640. A break of these may see DJIA 10400, SPX 1210, COMP 2050 and R2K 625 (within a reasonable fudge factor range). Earnings are done for the most part and the positives are running thin with nothing of any real substance on the horizon. Kind of a dead zone ahead as it is way too early to take on positions for any impending end of year rally, especially with the markets being relatively overvalued in here. Nervousness has taken hold, but fear is still missing as the dippers are still in force. A good tree shaking would not surprise me. Interest rates continue to rise as do prices at the pump. Too many blowing off $67 bbl oil as no big deal. If consumers tighten the purse strings, watch out! We have some correcting to do, the big question is when and by how much… As for Oil, the U$D and Gold, I really see no reason for the trends in place to change. Hurricane season is just getting started although one would think $67 bbl oil would constitute a correction, I wouldn’t bet on it just yet. The U$D looks poised to test 85 and Gold looks ready to take on $456. Obviously this can all change in the blink of an eye, but I think the set-ups are sending a message…

Technically speaking, Bullish Advisors are at 59.1% with Bearish Advisors at 19.3%, look out!!! The VIX at 12.75 and VXN at 15.5, there’s no fear whatsoever. The CBOE Equity P/C Ratio is at .625 with a 21DMA of .587. The last time we rose out of a tight down trending range, the market corrected big time (look to Dec-Jan). The RSI 5-Days are Neutral across the board again, this is the 4th week in a row that the indices closed out the week in Neutral territory. The Highs/Lows, A/D, McClellan and stocks above 200DMA have all changed trends. The $NASI Daily (Summation), $NAMO Daily (McClellan), NAHL Daily (Highs/Lows), $NAAD Daily (Advance/Decline) and Bullish %'s and major indices can all be viewed in the charts provided below…































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

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

SWING:
EYET

Disclaimer:
This disclosure is not a recommendation to buy, sell or do as I do. It is only to give my thoughts on current market conditions and share the positions that I am holding. I am not a day trader and invest mostly in funds or baskets of stocks and attempt to identify up/down trends and occasionally perform swing trades.