Your Economy (No Politics)

[Bullwinkle]

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



OVERVIEW:
What a tough week and my thoughts and prayers are with those in the gulf region. As another week goes by, the majority of us sit idly by watching the unthinkable happen again. More on this later, but for now it is time to review the past week and look into the next. The markets continue to show resilience contained within a range bound area. What amazes me the most is that it seems like everything short of another terror attack has occurred and the markets just keep hanging around. We had the tragedy in the gulf, which in turn gave us rocketing gas and oil prices followed by poor economic numbers which showed slowing growth, yet here we sit. What am I missing? Is this an ominous sign or what? Anyway, the COMP moved back above its 50DMA where it currently resides at 2141 bumping the underside of the 38.2% Fib. The SPX in a similar move is residing at 1218 which is right at the 50DMA and bumping the underside of the 38.2% Fib. The DJIA has been weaker where the 50DMA has crossed under the 200DMA residing at 10447 or the 50% Fib. Last but not least, the R2k has moved above its 50DMA residing at 667 and sitting right at its 38.2% Fib. For the most part, these indices are moving in unison although the small caps and tech laden COMP appear to be fairing better than the others. CoT data for the most part remains the same with open interest climbing slightly on the majors (COMP, DJIA, NDX) Gold Commercial Shorts declining and Oil open interest heading back up. The data can be reviewed here #msg-7253670 Equity funds reported net cash outflows of -$891 Mln (-$544 Mln xETF activity) with Domestic funds reporting net cash outflows totaling -$1.437 Bln as Non-domestic funds reported net cash inflows totaling $546 Mln. Money Market funds reported net cash outflows of -$12.1 Bln. The U$D more or less tanked, a total of 2-pts in as many days residing at 86.27 with Gold waking up on the U$D’s weakness jumping nearly 20-pts in a few days time and currently residing at 444-oz. Oil set another new high at $70-bbl, but has fallen back and settled at $67.57 to end the week, mostly in part due to the announcement of the tapping of the SPR for 60 Mln bbls. This will be interesting to watch… The CRB did a moon shot setting an all-time high at 336 before falling back to 331, which is still above the previous all-time high at/around 325. The 10-yrs and 30-yrs T-Note yields continue to soften and are now at 4.029% and 4.292% respectively…


ECONOMIC #’s:
A busy week on the economic front and for the most part the numbers were not pretty. You will have to excuse my laziness, but this week I am only going to give a condensed version of the issues at hand…

Consumer Confideance for Aug was 105.6 vs 103.6 previously reported with expectations having been for 101.0…
Factory Orders for July was –1.9% vs 0.9% previously reported with expectations having been for –2.4%…
Auto & Truck Sales GM reported a 16% decline for Aug compared with a year ago, while Ford and Daimler-Chrysler reported modest gains of 6.3% and 5.0% respectively…
Construction Spending for July was flat at 0.0% vs –0.6 previously reported with expectations having been for 0.5%…
Personal Income for July was 0.3% vs 0.5 previously reported with expectations having been for 0.5%…
Personal Spending remained at 1.0% vs 1/0% and was forecast for 1.0%…
GDP for Q2 came in at 3.3% vs 3.4% previously reported with expectations having been for 3.4%…
Chain Deflator remained at 2.4% vs 2.4% and was forecast for 2.4%…
Chicago PMI for Aug was 49.2 vs 63.5 previously reported with forecasts having been for 61.0…
ISM Index for Aug was 53.6 vs 56.6 previously reported with expectations having been for 57.0…
Hourly Earnings for Aug was 0.1% vs 0.4% previously reported with expectations having been for 0.2%…
Initial Jobless Claims rose to 320K vs 317K previously reported with expectations having been for 315K.
Nonfarm Payrolls for Aug was 169K vs 242K previously reported with expectations having been for 190K…
Unemployment Rate for Aug was 4.9% vs 5.0% previously reported with expectations having been for 5.0%…
MBA Mortgage Applications seasonally adjusted index of mortgage applications which includes both purchase and refinancing loans fell -4.5% to 722.5 the week ended Aug. 26. In the previous week, the index fell -0.7%. The seasonally adjusted purchase index dropped -3.6% to 470.6, adding to the previous week's 2.2% loss. The seasonally adjusted refinancing index fell -5.4% to 2,187.8, more than erasing the previous week's 1.2% gain. The average interest rate on fixed 30-year mortgages fell 0.05% in the latest week, to an average 5.73%. That average, excluding fees, compared with 5.78% the previous week.
Oil Inventories as reported by the DoE (Dept of Energy) and API (American Petroleum Institute). Crude according to DoE fell by 1.5 Mln bbls, but according to API rose by 1.0 Mln bbls. Gasoline according to DoE fell by –500K bbls and according to API fell by –1.7 Mln bbls. Distillates according to DoE rose by 2.7 Mln bbls, but according to API rose by 4.4 Mln bbls.

Econ activity slows down a bit next week with the following on tap: ISM Services, Productivity, Fed’s Beige Book, Initial Claims, Wholesale Inventories, Consumer Credit, Import & Export Prices…


What can be said about Hurricane Katrina that hasn’t already been said? Not much, but here's my interpretation anyway... Obviously it could not have been prevented from happening, but the response to this catastrophe is nothing short of disgraceful. What we now see happening in the affected areas of the Gulf Coast is airlifts, airdrops, rescue and relief by land, sea and air, a much more welcome sight indeed. Unfortunately it is too little too late for those who did not make it through the first 5-days of abandonment after this disaster and unfortunately it is not over yet. The proportions of devastation will most likely exceed that of 9/11, definitely in size and most likely in scope. It is quite evident that we were not prepared in Sept’02 and it is quite evident we are not prepared now. What kind of a learning curve must we go through before we finally get it right?

In the days leading up to the landfall of Katrina we knew this was an enormous storm of great strength, a category 5 with winds in excess of 200mph was to make landfall and we knew where it was going to hit as it was bearing down on Louisiana (in particular) and Mississippi. There had even been discussion prior to landfall of how the New Orleans would turn into a toxic soup because it was below sea level and between weakening levees. We also knew (at least on the local and Federal level) that flood control spending for southeastern Louisiana had been chopped from $69 million in 2001 to $36.5 million in 2005, according to budget documents. Federal hurricane protection for the Lake Pontchartrain vicinity in the Army Corps of Engineers' budget dropped from $14.25 million in 2002 to $5.7 million this year. Both the New Orleans Times-Picayune newspaper and a local business magazine reported that the effects of the budget cuts at the Army Corps of Engineers were severe.

Having known all of these things well in advance, one would think that every effort would have been made to be ready to go once the storm passed through. A plan of action needed to be drawn and our leaders most certainly had been forewarned of this ominous presence off the coast. Instead of being met with a proactive measure erring on the side of caution, it was met with a reactionary and lacking response. On Tuesday while looters moved throughout the cities being caught on videotape during news coverage broadcasts, you should have been asking yourself how is it that news crews can get in and do their thing, but the national guard had not. By Wednesday you should have been asking yourself how is it that some oil pipeline capacity had been restored but relief by air or sea had not. By Thursday you should have been asking yourself whether our government going to do anything for these poor souls, but they had not. By Friday, you should have been asking yourself why are people being allowed to die and why isn’t our government doing anything about it? The argument of flooding or the coast not being clear yet did not seem to stop the news crews, the oil pipeline repairs or the looters, but it kept all relief efforts on the sidelines? Whether the war effort has taken reserves away or not does not wash. The resources are in place as we have now seen as of Saturday the 3rd… Also Floridians received a prompt and timely response, as they should have in their plight of multiple hurricanes that hit them just last year. So what makes that situation any different than this one? Based on the way we have dealt with past hurricanes, I don’t think I should have to tell you how peculiar this is…

While we will hear all of the excuses, explanations and the like, none of which are acceptable. What’s more is the president himself has said that the lack of response to this tragedy was unacceptable. Some comforting words coming from the commander in chief who unwillingly cut his vacation short and returned to the White House on Wednesday or 2-3 days after the storm had passed. Then there is Homeland Security, you know, that special task force who has received billions upon billions of dollars to cope with such homeland disasters, where have they been hiding? I find it astonishing that those who are suppose to have our best interests at heart only do so when it is of a convenience for them. Are they as inept, lazy and/or lame as they appear to be? Is it the cultural divide as suggested that led to a prejudiced response? Personally I cannot help but think that there is more to all of this than meets the eye where a specific requirement was met through an exploited tragedy. An opportunity to do a trial run on what they see as an expendable population to study the effects of lawlessness and how Martial Law might be implemented somewhere down the road should an “event horizon” take place here in the states. But I will not bore you with my conspiracy theories. All you need to know is that something is more than not right about all of this with which we watched play out on our TV screens. And if you really have the desire to figure it out for yourself, you can connect the dots. Katrina was just a preview…

Which now brings me to the fact that many people are unable or unwilling to think outside of the box. You should be asking yourself what if, not why… As we peer through a window of tragedy in the form of Katrina’s aftermath, this is a much different window than that of 9/11 or the Iraq War. While some tough questions deserve to be asked, they will be sidestepped and in the end we will not get an honest answer. The closest thing to an honest answer requires one to disseminate information and sometimes think about the unthinkable. Over the last 5-years we have seen a lot of American’s lose their lives due to some extraordinary circumstances. If something of epic proportions should take place where our leaders are too busy saving their own asses as opposed to saving ours, I certainly hope you have a back up plan. All I can say with certainty is do not depend on our government to save you. After witnessing first hand what can happen when people are cut off from civilization and exposed to the elements, self-preparedness is a step everyone should take to some extent. Stock up on food, water, etc. and do not be so eager to discount the unthinkable. It is this type of thinking that did not foresee 9/11, the repercussions of the Iraq War and now Katrina. It is this kind of thinking that has taken many lives. Thinking the unthinkable just may save your life someday. The “it won’t happen” or “can’t happen here” mentality flies in the face of reality. It can happen, It has happened and It will again…

Knowledge is Power…


WHAT CAN WE EXPECT NOW?:
As we continue to defy gravity, fundamentally speaking the surroundings are crumbling and I only see things getting worse from here. The surroundings are mostly news driven events and the aftermath of Katrina will be in the headlines for days and weeks to come. We have a long way to go on this one and while there may be a rally of sorts off of the Labor Day Holiday, I do not expect it to be genuine. As mentioned in last week’s update with which this post replies; 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 so-called 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. This pretty much sums up my thoughts going forward, nothing has changed. The Bradley had little if no effect although the week ahead may show the contrary. The same support and resistance areas are in play and were mentioned earlier in the overview. The same H&S patterns that I mentioned last week are still on my watch list. The same sentiment and complacency exists albeit not at the extremes we saw prior to this latest pull back off of the highs. Things appear ripe for a take down and the bad news we have endured will most likely not go unanswered, it’s just a matter of time and like the levees in New Orleans will most likely break. If we do manage to avoid a real decline over the coming months, I do not expect us to get far. It will most likely be volatile range bound activity and I would consider us lucky if that is the case. As for Oil, the U$D, Gold and as mentioned several times over the last couple of weeks; each of these are one news event away from a major move in one direction or the other. Need I say more? The U$D still looks weak and ready to test 85. Gold found support in the previously mentioned solid support area of $433 or 50% Fib retrace and looks poised to launch. Oil fed off of Hurricane Katrina news, but with the tapping of the SPR and $70bbl having been taken out, we may see a correction due to the tapping of the SPR although Katrina’s aftermath is still in question.

Technically speaking, Bullish Advisors are at 51.1% with Bearish Advisors at 27.23%. The VIX is in a range of 13-14 and VXN is oscillating between 15-16. The CBOE Equity P/C Ratio is at .612 with a 21DMA of .609. The RSI 5-Days are Neutral across the board once again and as mentioned earlier, the majors seem to be moving in unison. The Highs/Lows, A/D, McClellan and stocks above 200DMA are all in overall down trends, but have been making a move toward the upside or at the very least attempting to do so. 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:
On Tuesday took a position in WPTE

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.