Your Economy (No Politics)

[Bullwinkle]

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



OVERVIEW:
Basically what we saw this past week was some reaction to what most likely will be a string of weak and/or choppy economic data. I question the forecasts but the Econ data reflects weakness whether expected or not. Mortgage Apps continue to slide and the costs of Katrina are looking to be in $200 Bln range, but too many seem to be rationalizing the economic impact of this cataclysmic event. With that said, Gold set a new 17-year high, the U$D fumbled around but found some support and oil showed some weakness. Is it really any surprise that oil should be due for a correction after hitting $70bbl or that Gold should start making a move into the holiday season or that the U$D looks more like a hanger on than a currency of strength? More importantly the signals of impending weakness are present, but is anybody listening? The CoT’s data is quite interesting as open interest has climbed considerably with the exception of oil where a plunge is taking place. Short and Long positions can be reviewed at #msg-7253670 -- Equity funds reported net cash inflows totaling $1.472 Bln or $833 Mln xETF activity with Domestic funds reporting net cash outflows totaling -$35 Mln as Non-domestic funds reported net cash inflows totaling $1.507 Bln and Money Market funds reporting net cash inflows of $5.409 Bln. The U$D is bumping the bottom side of the 50DMA and Gold sets a new high not seen in 17 years. Oil is slipping and touching down on its 50DMA and while looking somewhat resilient in the $63 area, I believe I see that an H&S has formed. The CRB is also touching down on its 50DMA and some more weakness may lie ahead, test of 310 looks to be in the cards. The 10-yrs and 30-yrs T-Note yields showing some strength as we are now at 4.262% and 4.555% respectively…


ECONOMIC #’s:
The numbers pretty much speak for themselves so I will only give a condensed version of the past weeks econ activity…

Michigan Sentiment - September 76.9 v. 89.1

Net Foreign Purchases - July $87.4B v. $80.9B

Current Account - Q2 -$195.7B v. -$198.7B

Philadelphia Fed Index - September 2.2 v. 17.5

NY Empire State Index - September 17.0 v. 23.0

Initial Jobless Claims - 9/10 398K v. 327K

Business Inventories - July -0.5% v. 0.0%

CPI - August 0.5% v. 0.5%

Core CPI - August 0.1% v. 0.1%

Industrial Production - August 0.1% v. 0.1%

Capacity Utilization - August 79.8% v. 79.8%

Retail Sales - August -2.1% v. 1.8%

Retail Sales ex-auto - August 1.0% v. 0.5%

Treasury Budget Deficit - August $50.0B v. $41.1B

PPI - August 0.6% v. 1.0%

Core PPI - August 0.0% v. 0.4%

Trade Deficit - July 57.9B v. 59.5B

MBA Mortgage Applications slipped 1.4% in the holiday-shortened week ended Sept. 9 compared to the prior week. On a seasonally adjusted basis, applications for mortgages to purchase homes increased by 2.9%, while refinancings fell 6.7%. Refinancings acounted for 42.9% of total applications last week, down from 44.8% a week earlier, while adjustable-rate mortgages rebounded to 28.2% from 26.5%. Average contract interest rates for 30- and 15-year fixed-rate mortgages rose last week to 5.72% and 5.29%, respectively, from 5.64% and 5.18% a week earlier. The rate on one-year ARMs averaged 4.82% last week, up from 4.81%. The 4-week moving average tracking overall activity in mortgage applications was off 0.1%.

Oil Inventories as reported by the DoE (Dept of Energy) and API (American Petroleum Institute). Crude according to DoE fell by -6.6 Mln bbls, but according to API fell by –3.1 Mln bbls. Gasoline according to DoE rose by 1.09 Mlm bbls and according to API rose by 5.6 Mln bbls. Distillates according to DoE fell by –1.1 Mln bbls, but according to API rose by -1.4 Mln bbls.

Econ activity slows down considerably next week as we will get an FOMC meeting, Building Permits, Housing Starts, Initial Claims and LEI…


Remember the old cliché’ “an ounce of prevention is worth a pound of cure?” Throw that out the window with the bathwater, we are far beyond prevention. No amount of medicine will save this patient, he is on life support. Vision is a thing of the past and the “me” society is at the helm. There is nothing rational about what is taking place today -- not only in our markets, but in our lives and in our world. The US economy is oozing warning signs -- most of which have been ignored, rationalized or reduced to myths. The real question comes down to one thing and one thing only and that is how much more ammo can the powers that be throw at these markets? A bombardment of OPM with a single goal in mind, we have been reduced to the largest debtor nation in history all in the name of putting up a façade of economic strength by propping the markets at all costs. Generation upon generation may be on the hook for trillions of dollars, but who cares, right? Certainly not the powers that be and just like GM or F selling cars below cost in the name of a sale -- the Fed, Corporate Conglomerates, Fund Managers, Foreign Investors and Institutions continue to put lipstick on this pig by throwing good money after bad into an overextended bear market rally prolonging the overdue pain. Another old cliché’ that comes to mind is “you can run, but you can’t hide”. Time and time again we have seen the markets perform contradictory to what reality is telling us, but without the blink of an eye it is washed away in a sea of money and empty promises. Once the reality sets in that we cannot continue to print, borrow and steal in order to make ends meet, the landslide will begin as we inch ever closer to the edge of the cliff. Armageddon? no, don’t think so… Economic collapse? maybe... Recession? oh yeah. After that then we can talk about the bursting of bubbles and many a dream, but I digress. I know, you have heard it all before time and time again, gloom doom and the end of the world, blah blah blah! Times are a changing my friends and the end result will not be pretty as the company’s on the fringe who did not get well over the last 2-years will be wiped off the map. Accountability will surface and so will the dead fish... I do not need to tell you of all the issues at hand, all you need to know is straw upon straw continue to be added to this camel’s back and while I would prefer to see the glass as half full, I would only be fooling myself to believe that and to tell you otherwise would not only be untrue to myself, but untrue to you as well. I refuse to paint a rosy picture when so much is in disarray, I will leave that to the Bulls and the Fed and anyone else who seems to think that our economic future is so bright we need to where shades…

Knowledge is Power…


WHAT CAN WE EXPECT NOW?:
As mentioned in last week’s update with which this post replies; All of the major indices are bumping the upper Bband and could not be any more neutral without being in oversold territory. I expect them to reach this condition early on and then possibly begin to sell off as the week progresses. I have been looking for a time frame of around mid-Sept for this to occur and if a sell off should take place, I will be watching for that right shoulder to form on some of the indices I had pointed out in my previous updates. Of course on the other side of the coin is that we see new highs established, but I am not so sure that all indices will follow this pattern and may create a divergence of sorts. While we did finish out the week on a green note, I believe investors were just getting square on their positions surrounding Options Expiry. I made a mistake and thought this coming week was expiry, my bad, but of no consequence. What is noteworthy though is the extreme amount of shares exchanged. We are talking 3.1 Bln on the NYSE and 2.5 Bln on the COMP, whoa! That’s some freakish volume. My first tendency is to believe that a big up move is coming and if it does it will be the biggest bull trap since the tech bubble burst, quite simply I see a set-up. The P/C ratio, VIX/VXN, Sentiment, etc. -- you know, all the usual suspects are just that, suspect… The bottom line is we are in for some explosive movement in one direction or the other. I was looking for a peak around mid-Sept and I think we may have gotten it. If this holds true, then the lower high with a lower low is in the cards. If not, you know the drill (new highs and/or white water rapids kind of chop). I tend to believe we are past the new high juncture, but it cannot be ruled out. I am not sure how much bad data can be priced into the market, but I do not see it. I do not see the market looking 6-12 months ahead ether and I certainly do not see any rationale. What I do see is a very dangerous market to be sure. If you remember nothing else, remember this: it is a very crowded room and there is only one fire exit… This week we get a dose of Fed-Speak and most likely we see another rate increase. This will in turn probably give some support to the U$D, but I expect it will be short lived. Gold may take a small breather here as the new high becomes the old high and another new high is set in fairly short order (give or take a week or two). Oil is due for some consolidation, no big surprise here as we may do a plunge back into the 50’s. All in all, in the weeks ahead I am looking for tests of U$D 85, Gold $485 and Oil $57…

Technically speaking, Bullish Advisors are at 53.2% with Bearish Advisors at 26.6%. The VIX is in a range between 12-14 and VXN between 14-16, both leaning towards the former. The CBOE Equity P/C Ratio is at .522 with a 21DMA of .612. The RSI 5-Days are Neutral across the board. The $NASI Daily (Summation), $NAMO Daily (McClellan), NAHL Daily (Highs/Lows), $NAAD Daily (Advance/Decline) and Bullish %'s are in downtrends and charts thereof can be viewed below with the major indices…






























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 (dumped GCH and put the $$$ towards Gold)
Individual Stocks; BHP, SWWC
Speculative Stocks; ANO

SWING:
Stopped out of WPTE, took the loss and moved into a PMPIX position earlier in the week. This may be a 2-3mos hold… We’ll see what transpires

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.