Your Economy (No Politics)

[Bullwinkle]

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



OVERVIEW:
Another week under the belt and it is that time once again to review the past week and look into the next. While the markets have not plummeted, we continue to grind lower. On Wednesday the 24th we witnessed a reversal that may have been a turning for the markets as prior to Wednesday we had been riding along the 50DMA of most major averages. This support was broken and as mentioned in the previous update with which this post replies; Most indices are currently testing the 50DMA support with the INDU being at its 50/200DMA and the R2K having already fallen below its 50DMA. The 50DMA was decisively breached on the COMP, SPX and DJIA. Some other notable declines in the retail, banking, housing and drug sectors. Since a picture is worth a thousand words, have a look at these charts…


Not pretty... The stocks within these averages have taken a beating. CoT data is mostly the same for the majors (COMP, DJIA, NDX) with the exception that Gold Commercial Shorts continue to pile on and Oil open interest was through the roof, but has now fallen off some. The data can be reviewed here #msg-7253670 Equity funds reported net cash inflows totaling $360 Mln, including ETF activity with inflows totaling only $5 Mln excluding ETF activity. Non-domestic funds reported net cash inflows totaling $596 Mln and $489 Mln excluding ETFs and Money Market funds reported net cash inflows of $13.5 Bln. The U$D more or less remains in a choppy range and after testing the 50DMA at 88.5, headed lower to finish out the week below 88. Gold had been weakening upon the U$D’s new found strength, but for the moment appears to have found support in the $436-$437 area. Oil briefly tested $68bbl before retreating to $66bbl and the CRB recovered from the dip to 316 and ran to 320 before ending the week where it essentially started at 317. The 10-yrs and 30-yrs T-Note yields continue to soften at 4.189% and 4.381% respectively…


ECONOMIC #’s:
A relatively quiet week on the economic front, but what little we did get we saw our usual series of mixed messages…

Existing Home Sales fell -2.6% to 7.16 Mln vs 7.35 Mln reported in June and below the 7.25 Mln expected. Total sales were lower in 3 of 4 regions. They fell 7.5% in the West to a rate of 1.61 Mln units, 3.3% in the Northeast to a rate of 1.19 Mln units, and 1.8% in the Midwest to 1.61 Mln units. Resales held at a 2.74 Mln-unit rate in the South. The supply of homes available for sale increased to 4.6-months worth in July, the highest since November 2003, from 4.4-months worth the previous month. The median price of an existing home rose 0.5% to $218K last month from $217K in June. The median price is up 14% higher compared with June 2004. Sales of single-family homes declined 2.3% to a 6.24 Mln annual pace in July. Sales of condos and co-ops dropped 5% to a 915K annual pace.
New Home Sales rose 6.5% to 1.41 Mln vs 1.324 Mln reported in June and above the 1.328 Mln expected. New home sales rose 36% in the West to 495K and rose in the Northeast by 10.1% to 98K. Sales fell 13.5% in the Midwest to 205K and fell in the South by 3.5% to 612K. The percentage of homes costing $250K or more fell to 37%, the lowest level since March 2004. The number of homes for sale at the end of the month rose to 460K from 452K and the supply of new homes for sale at the current pace fell to 4-months from June's 4.1-months.
MBA Mortgage Applications fell -0.7% to 756.2 in the week ended Aug. 19 after a 2.2% gain in the previous week. on a seasonally adjusted basis, applications for mortgages to buy homes fell 2.2%, but refinancing’s rose 1.2%. Refi’s accounted for 43.7% of total applications last week, up from the prior week's 42.4%, while adjustable-rate mortgages slipped to 28.1% from 28.9%. The average contract interest rate for 30-year fixed-rate mortgages ticked down to 5.78% last week, off from 5.79% a week earlier, while 15-year fixed-rate mortgages nosed higher to 5.41% from 5.40% and 1-year ARMs averaged 4.84%, off from the prior week's 4.85%. Overall, mortgage volumes were up 0.1% on a 4-week moving average basis
Durable Orders fell -4.9% vs 1.9% reported in June and below the –1.5% expected. Excluding transportation, orders fell -3.2%, the biggest drop since April 2004 after a 3.6% rise in June. Orders for non-defense capital goods excluding aircraft declined -3.7% last month after rising 4.8% in June. Shipments of such equipment, which the government uses to construct Qtrly gross domestic product figures, fell -0.5% after falling -0.2%. Spending on new equipment and software rose at an 11% annual rate from March through June after an 8.3% pace in the previous Qtr. Orders for transportation equipment dropped -8.6% in July after declining -1.6%. Automobile orders rose 1.5% and bookings for civilian aircraft slumped -20.2%. Machinery orders decreased -6.2% last month, the biggest decline since April of last year after increasing 10.3% in June. Orders for computers and electronic products dropped -5.9% after jumping 7.2%. Communications equipment orders fell -7.1% with orders for military equipment slumping -16.6% last month after increasing 27.8%. Excluding defense, durable goods orders fell -4.5%. Inventories of durable goods rose 0.6% after falling -0.4% with unfilled orders increasing 1% after rising 2.8%.
Initial Jobless Claims fell to 315K vs 319K previously reported with forecasts inline at 315K. The 4-week average rose to 315K from 314K. Average weekly claims fell 6.3% to 324K from the same period of 2004. Average monthly payroll gains rose 2.3% from a year earlier to 191K. The insured employment rate was unchanged at 2% with 43 states and territories reporting fewer claims, while 10 had more.
Help Wanted Index rose to 39 vs 38 previously reported with forecasts inline at 38. In the last 3-months, help-wanted advertising increased in 5 of the 9 U.S. regions. Largest increases occurred in the East South Central (4.7%), Pacific (4.7%), and West North Central (2.7%) regions. The Conference Board Help-Wanted OnLine Data Series shows that the number of new online job ads fell slightly to 1,97 Mln in July from just over 2 Mln in May and June.
Michigan Sentiment Index fell to 89.1 vs 92.7 reported in July with forecasts having been for 92.5. The current conditions index, which reflects Americans' perception of their financial situation and whether it's a good time to buy big-ticket items, fell to 108.2 in August from 113.5 in July. The expectations index, based on optimism about the next 1 to 5-years was 76.9 after 85.5 last month.
Oil Inventories as reported by the DoE (Dept of Energy) and API (American Petroleum Institute). Crude according to DoE rose by 1.8 Mln bbls, but according to API rose by 771K Mln bbls. Gasoline according to DoE fell by –3.2 Mln bbls and according to API fell by –3.8 Mln bbls. Distillates according to DoE rose by 1.4 Mln bbls, but according to API rose by 355K bbls.

A much busier week ahead as we will get Consumer Confidence, Factory Orders, FOMC Minutes, GDP & Chain Deflator, Chicago PMI, Auto & Truck Sales, Initial Claims, Personal Income & Spending, ISM Index, Construction Spending, Average Workweek, Hourly Earnings, Nonfarm Payrolls and Unemployment Rate…


This past week we saw a proposal to enhance CAFE or the Corporate Average Fuel Economy standards for "light trucks," a category including minivans, pickup trucks and sport utility vehicles. The Gigantic SUVs and Super-Size Pickups are not subject to CAFE regulations at all, because they exceed a weight of 8,500 Lbs. What’s more, the new standards are looking to increase gas mileage by a measly 2-mpg within the next 6-years. Let me say that again, “2-mpg within the next 6-years!”. Not only are the most fuel intensive vehicles exempt, but a 2-mpg gain over the next 6-years is an absolute joke… This is NOT legislation, this is a slap in the face. The country’s dependency on oil, which the majority having to be imported is one of the driving forces behind economic insecurity, soaring gas prices and global climate change. Not only does this do little to nothing to address the aforementioned, but it does nothing to help out consumers. If that were not enough, a provision in the 2005 energy bill could negate the benefits of the NHTSA proposal altogether by permitting automakers to inflate fuel economy estimates with credits for vehicles capable of running on both gas and alternative fuels.

What’s really mind boggling is that the technology already exists which IS capable of bringing us closer to 40-mpg as opposed to the 27.5-mpg by 2015. The Sierra Club projects that this standard could conserve more oil per day than the amount the United States currently imports from the Persian Gulf region. Not only would drivers enjoy fuel savings, but the new technology investment would generate new jobs. This approach would have a multi-pronged effect; environmentally responsible, potentially save billions of barrels of oil, lower the price at the pump and create jobs. According to David Friedman, director of research for the Clean Vehicles Program at the Union of Concerned Scientists (UCS), an environmental organization, “the administration’s effort to restructure the CAFE system could have led to major technological improvements, but the potential was thrown out the window and instead basically ends up being a bunch of new loopholes." It is quite obvious to me that this government has no intention of seeing technology and the alternative sources we have at our fingertips flourish. Not only that, but they are doing everything in their power for corporate America and leaving Americans out of the equation altogether. What will it take for people to realize we are being herded like sheep and forced to accept the unacceptable?

Knowledge is Power…


WHAT CAN WE EXPECT NOW?:
As mentioned in last week’s update with which this post replies; The COMP is working at it’s 50DMA with next support at the 50% Fib or 2130 followed by 61.8% at 2100. The SPX is also chipping away at its 50DMA with next support at the 50% Fib or 1214 followed by 61.8% at 1207. The DJIA is in a situation where it bounced off of its 50/200 DMA’s, which are currently entwined. The bounce occurred off of the 38.2% Fib at 10512, but if the DJIA should turn back down below this current support level then next support comes into play at the 50% Fib or 10448. The R2K is leading all of the indices to the down side, it has broken its 50DMA and is currently sitting at the 61.8% Fib or 640, this would be the place for a bounce to occur, if not then next support is at the full retrace of the June dip or 625… This is much pretty much the same story going forward into next week, but we have some interesting geo-cosmic activity coming into play. On/around the 29th we have a Bradley Turn date and on Sept 3rd we are looking at a New Moon. Shortly thereafter is Labor Day and the end of Wall St vacation season. What effect any of these may have is yet to be seen, but I sense somewhere in here between now and the week following Labor Day, a relief rally may materialize. I also tend to believe it will be a short lived event (possibly into mid-Sept) as we get a lower high and turn back down in earnest. Of course I am only speculating here, but I am seeing so many set-ups for a possible H&S patterns to be put in on all of the major indices. Some are forming in a shorter timeframe over the last 4-5 months while others are forming in a longer timeframe reaching back as far as the Election Rally. The ST set-up has a left shoulder and head in place with the right shoulder yet to be formed. On the LT set-up, the left shoulder is in, but the head is still under construction. If we do get a relief rally next week, a short-term lift would be what is needed to start the right shoulder. While we are oversold across the board and riding the lower BBand -- sentiment, complacency and seasonality could fuel a larger move in the near future and that move most likely would be to the downside. Of course, anything can happen so be on your guard. As for Oil, the U$D and Gold -- the trends are still suspect in the short term and as mentioned last week, each of these are one news event away from a major move in one direction or the other. The U$D looks weak and should eventually test 85. Gold may find support in here, it is oscillating in this region, which just happens to be a fairly solid support area and 50% fib retrace. Oil will take on a life of its own, most likely feeding off of Hurricane Katrina news. How that hurricane goes, so goes Oil (for the time being).

Technically speaking, Bullish Advisors are at 56.8% with Bearish Advisors at 25.0%. The VIX is in an uptrend, but still rather low at 14 and VXN is oscillating between 15-16. The CBOE Equity P/C Ratio is at .814 with a 21DMA of .619. This is the highest weekly close I have seen in some time, but is not unexpected. As mentioned many times before, we were in a coiled downtrend for a lengthy amount of time and were due for a pop to the upside. The last time we saw action like this was the New Year leading into April. The RSI 5-Days are Oversold across the board after ending the week Neutral for 5 consecutive weeks. The Highs/Lows, A/D, McClellan and stocks above 200DMA are all in down 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…

SPX vs 3 Peaks & A Domed House posted earlier in the week: #msg-7519668






























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:
Sold EYET this week on the buyout news >8^)

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.