Your Economy (No Politics)

[Bullwinkle]

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



OVERVIEW:
It’s that time once again to review the past week and look into the next. As usual, the markets never cease to amaze at what it is capable of and this week was no different. The volatility over the last couple of weeks is most likely a prelude to what we can expect over the next couple of months. Mortgage rates continue to climb, large caps and canaries are sagging, questionable retail sales going forward, high prices at the pump and soon in the mail, inflationary pressures and slowing growth are going to linger as we move ahead. As mentioned in the last update with which this post replies; The last couple of trading days for the week ended on a green note, but we may have only been witnessing some month end -- Qtr end window dressing. This seems to be the case, one of positioning before a semi-brutal sell off. Wednesday was especially rough, everything got hit even energy, oil and gold. I also mentioned how the transports were the big winner in the prior week, but it was given back as quickly as received. I then followed up and with some resistance levels and how we were sitting right at those as the week closed out and mentioned the following; My feeling is that these areas will be marked as a lower high before a move to a lower low, but we could see a continued move toward the lower highs off of the year’s highs. As we now know, any move toward the lower highs was snuffed out early on in the week. The A/D, new H/L’s and volume were rather extreme. Friday we saw a slight reprieve, but seemed to be that of a white knuckle -- hangers on type of day. Also of note is that the SPX and DJIA decisively broke below their 200DMA’s with the COMP and R2k testing theirs, but managing to stay above. The CoT’s data continues to show very low open interest on the majors with Oil heading back up after a brief decline and Gold OI still through the roof. The SPX picked up a large amount of Commercial shorts. Long & Short positions can be viewed at #msg-7253670 – As detailed by AMG Data Services, Equity funds reported net cash inflows totaling $1.763 Bln ($396 Mln xETF activity) in the week ended 10/5/05, with $2.134 Bln ($816 Mil xETF’s) going to Non-domestic funds and domestic funds reporting net cash outflows totaling -$371 million (-$420 Mil xETF’s). International funds reported net inflows of $1.898 Bln ($580 Mil xETF’s)with all Developed and Emerging regions reporting inflows, including and excluding ETF activity. High Yield Corporate Bond funds reported net cash outflows of -$69 Mln with Money Market funds reporting net inflows of $4.989 Bln. Oil took a hit this week moving into the low 60’s and closing the week at $61-62bbl while Gold which looked weak early on, moved up into the high 470’s or roughly $475-477 an oz. The U$D continued to hang in the 89 area with an attempt at 90. The CRB remains quite volatile and about to test its 50DMA once again as the CRB finished out the week at 325. The 10-yrs and 30-yrs T-Note yields finished out the week at 4.361% and 4.569% respectively…


ECONOMIC #’s:
In this week’s economic report I will just let the numbers speak for themselves for the most part…

Consumer Credit - August $4.88B v. $6.5B

Wholesale Inventories - August 0.5% v. 0.1%

Nonfarm Payrolls - September -35K v. 211K

Unemployment Rate - September 5.1% v. 4.9%

Hourly Earnings - September 0.2% v. 0.1%

Average Workweek - September 33.7 v. 33.7

Initial Jobless Claims - 10/01 390K v. 369K

ISM Services - September 53.3 v. 65.0

Factory Orders - August 2.5% v. -2.5%

ISM Index - September 59.4 v. 53.6

Construction Spending - August 0.4% v. 0.3%

Auto/Truck Sales General Motors and Ford Motor witnessed an approximate 24% and 20% decline, respectively, in total sales in September. The total sales of Toyota Motor (TOM), Nissan (NISA) and Hyundai (HYU) rose by 10%, 16.4% and 95%, respectively. Hyundai 95%, WOW!

MBA Mortgage Applications slipped 1.1% in the week ended Sept. 30 compared to the prior week. Also on a seasonally adjusted basis, applications for mortgages to purchase homes dropped 1.9%, while refinancing applications nosed 0.1% higher on a week-to-week basis. Refinancings accounted for 44.5% of last week's total applications, up from 43.9% in the prior week, while adjustable-rate mortgages reached 29.8% from 28.8%. Average contract interest rates for 30- and 15-year fixed-rate mortgages rose last week to 5.94% and 5.55%, respectively, from 5.85% and 5.44% a week earlier. The rate on one-year ARMs averaged 5.13%, up from 5.02%. The 4-week moving average of overall mortgage applications activity was off 1.9%.

Oil Inventories as reported by the DoE (Dept of Energy) and API (American Petroleum Institute). Crude according to DoE fell by 300K bbls, but according to API fell by –4.2 Mln bbls. Gasoline according to DoE fell by –4.3 Mln bbls and according to API fell by –4.8 Mln bbls. Distillates according to DoE fell by –5.6 Mln bbls, but according to API fell by –4.9 Mln bbls.

Econ activity for the week to come starts out with the FOMC Minutes followed by Import/Export Prices, Initial Claims, Trade Balance, Treasury Budget, CPI, Retail Sales, Capacity Utilization, Industrial Production, Michigan Sentiment and Business Inventories…


I am going to keep this week’s spin short and sweet… DeLay, Frist, Rove. This is just the tip of an iceberg that has been concealed from scrutiny for far too long. These few are nothing in the big scheme of things and I cannot recall a dirtier administration which makes Harding and his cohorts look like choir boys.

Those that were smart enough or not drunk with power got out while the getting was good. Here’s the head count, it is quite a lengthy list. It also includes those who were forced out due to the fact that they would not yield to a morally and fiscally corrupt ideology...

http://www.geocities.com/ywaciv/bodies.html

Soon to be added: Alan Greenspan

Once this administration steps aside I believe the real dirt will be exposed and the public outrage will be a hostile one. I pity the next president…


Wake Up America…


WHAT CAN WE EXPECT NOW?:
Last week and as mentioned we tested resistance; This week we will look at overhead resistance. We will start with a test of COMP 2151 or 38.2% Fib off of June low and currently bumping the 50DMA above -- SPX 1228 at its 38.2% Fib off of Aug low and currently bumping the 50DMA above -- DJIA 10576 or 38.2% Fib off of Aug low and currently bumping the 50DMA above -- R2k 667 or 38.2% Fib off of the June low and currently bumping the 50DMA above. We basically got the lower high that I had been looking for and are now back to the test of support levels mentioned in the update prior to my last; In the week ahead I am looking for more of the same, weakness across the board mainly spurned by weak economic numbers and the aftermath of Rita although Rita remains a wild card. The market may use it to push the market up because of the comparisons having been made to Katrina and in this light was far less destructive. Then again it could be a set-up to sucker in more gamblers. COMP 2100 -- SPX 1210 -- DJIA 10400 -- R2k 650 are at their respective lines in the sand. I do not believe these support areas will hold, but we may see a bounce in here. I am more inclined to watch for a test of COMP 2055 or 50% Fib followed by 2016 or 61.8% Fib -- SPX 1203 or 38.2% Fib followed closely by 1190 or 50% Fib -- DJIA 10363 or 50% Fib followed by 10277 or 61.8% Fib -- R2k 643 or 50% Fib followed by 629 or 61.8% Fib. While I may have been a little early on this call and we saw a post Rita bounce, these areas are now in play. With that said, we are oversold and testing the Lower Bband on all of the majors, so another bounce would not be out of the question in here. More than likely any strength we see would be a good selling opportunity because I feel things ultimately will get worse before they get better. We have a long way to the holiday season, which starts just after Thanksgiving. Between now and then, I see pain and ultimately a test of COMP 1950, but there are some key support levels yet to be tested and that’s getting a little ahead of ourselves. So let’s just stick with what’s to come in the week ahead and that would be a test of the support levels outlined above. As for the U$D, Oil and Gold, I think we follow the same script as we have been seeing. The U$D test of 90 is in, now we either oscillate in this area or start to see some weakness. Even in the light of dollar strength, Gold is staying put and I believe we are on the brink of a breakout to new highs. Oil is and will always carry wild card status for the unforeseeable future, but a correction has been overdue and I am still standing by my $55-57bbl retest. If and when we get there, it will be time to get back in for the next leg up. If (and that is a big if) this area I have outlined does not hold, I highly doubt we breach $50bbl. Again, this is looking a little too far ahead in a very volatile climate where much can happen in a short amount of time, so let’s stick with the week ahead and see if $60bbl holds in the week ahead.

Technically speaking, Bullish Advisors are at 49.5% (first dip below 50% since earlier in the year) with Bearish Advisors at 27.8%. The VIX and VXN have spiked above their ranges of 12-14 and14-16 respectively. The CBOE Equity P/C Ratio ended the week at .609 with a 21DMA of .603. The RSI 5-Days are Oversold across the board. The $NASI Daily (Summation), $NAMO Daily (McClellan), NAHL Daily (Highs/Lows), $NAAD Daily (Advance/Decline), 200DMA and Bullish %'s are all in downtrends, most of which since Aug with the McClellan showing divergence back in June. Funny thing about divergences is that they take a while to play out. You know a divergence is present, but more times than not is only clear in hindsight. Charts of the aforementioned can be viewed below along 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 was sold this week -- Opened an SRPIX position with the proceeds**
--will reenter XLE after an oil correction finishes taking place--

Individual Stocks; BHP, SWWC
Speculative Stocks; ANO

SWING:
PMPIX

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.