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 mentioned in the last update with which this post replies: This week will most likely follow the same trend as the past week, but your guess is as good as mine as to what will transpire in the coming week. Well as we now know, we did not follow the same trend. The Fed has been very active, the markets have been very volatile, so what is one to do? You set tight stops and/or hedge your bets and see what transpires… We have been teetering on the brink of something which looked more like weakness than that of strength, but the “your guess is as good as mine” part of that statement should have been a clue that we could move either way. What we saw was an absence of up/down volatility and a pick up in buying volume as the indices continued their trends higher through the high traffic areas and secondary resistance I have been highlighting over the last few weeks led by the COMP where the succession of lower highs were broken (although this pattern of lower highs has yet to be broken by the R2k, SPX or DJIA)… The other indices are all at the upper trend line of their downward channels and the R2k, which has closely mimicked the COMP has yet to follow suit. Some earnings continue to trickle in, but for the most part we are winding down on the earnings front. Market focus will most likely shift away from earnings and towards the holiday shopping season. The CoT’s data open interest on the majors is in a slight up trend, but still relatively low historically and showing a build of Commercial longs on SPX (small) and DJIA (continuation). The NDX continues to have a slight build of Commercial shorts while gold open interest and Commercial shorts are heavy but showing a slight decline. Oil open interest follows suit, but a build in Commercial longs is evident à All data can be viewed at #msg-7253670 -- Equity Fund flows as detailed by AMG Data Services reported net cash inflows totaling $463 Mln and outflows totaling -$2.275 Bln excluding ETF activity. Excluding ETF activity Domestic funds reported net cash outflows -$2.478 Bln for the 7th consecutive week and the first time since 9/1/04. Money Market funds reported net outflows totaling -$14.811 Bln. As for the U$D, Gold and Oil -- the U$D gained support via the Fed move touching 91 for the 1st time since May’04 with Gold in turn moving lower to test support at $455 and finishing out at $456. Oil dipped to $59bbl, but managed to finish out above $60bbl. The CRB is still below its 50DMA, but managed to bounce off of its lower trend support line and finish out the week at 318. The 10-yrs and 30-yrs T-Note yields continue to show strength and moved higher to 4.657% and 4.852% respectively…


ECONOMIC #’s:
You will have to excuse my laziness in not following up with a more in depth analysis of the numbers. In most cases there is a disconnect between what the numbers portray and what is actually going on…

 
 Nonfarm Payrolls - Oct	 56K vs -8K  Expectations  100K 
 Unemployment Rate - Oct  5.0% vs 5.1%  Expectations  5.1% 
 Hourly Earnings - Oct    0.5% vs 0.1%  Expectations  0.2% 
 Average Workweek - Oct   33.8 vs 33.8  Expectations  33.7 
 ISM Services - Oct       60.0 vs 53.3  Expectations  57.0 
 ISM Index - Oct          59.1 vs 59.4  Expectations  57.0 
 Factory Orders - Sep    -1.7% vs 2.9%  Expectations –1.0% 
 Productivity - Q3        4.1% vs 2.1%  Expectations  2.6% 
 Initial Claims - 10/29   323K vs 331K  Expectations  330K 
 Chicago PMI - Oct        62.9 vs 60.5  Expectations  57.4 
 Personal Income - Sep    1.7% vs -0.9% Expectations  0.5% 
 Personal Spending - Sep  0.5% vs -0.5% Expectations  0.4% 
 Construc Spending - Sep  0.5% vs 0.6%  Expectations  0.5%

Auto/Truck Sales October sales were down 11.0% industry wide. The seasonally adjusted annual sales rate was 14.7 Mln vehicles, indicating what sales would be for the full year if they remained at the same pace for all 12-months, according to Autodata Corp. Full-year sales for 2004 were 17 Mln. General Motors Corp. said its U.S. sales fell 22.7% in October from a year ago, led by a 30.3% decline in sales of trucks and SUVs. Ford Motor Co.'s U.S. sales fell 23.0% in October from a year ago. Sales of Ford, Lincoln and Mercury trucks and SUVs fell 30.0% compared to last October, while car sales slipped 3.7%. Chrysler Group said its car sales rose a whopping 37.0% and the Dodge Stratus sedan had its best October in nearly 10 years. But truck and SUV sales fell 9.5% and Chrysler's overall sales were flat for the month. Chrysler's sales were up 6.9% for the first 10-months of the year.

MBA Mortgage Applications dropped 4.8% in the week ended Oct. 28 compared to the prior week. Also on a seasonally adjusted basis, applications for mortgages to purchase homes fell 6.2%, while refinancings dropped 2.8%. Refinancings accounted for 43.65% of total applications last week, up from the prior week's 42.5%, while adjustable-rate mortgages eased to 29.4% from 29.5%. The average contract interest rate on 30- and 15-year fixed-rate mortgages rose to 6.21% and 5.75% last week, respectively, from 6.06% and 5.57% a week earlier. One-year ARMs averaged 5.39%, up from 5.37%. The four-week moving average tracking overall mortgage activity was down by 4.2%.

Oil Inventories as reported by the DoE (Dept of Energy) and API (American Petroleum Institute).
Crude according to DoE rose 2.7 Mln bbls; according to API fell –2.3 Mln bbls.
Gasoline according to DoE rose 1.0 Mln bbls; according to API rose 3.9 Mln bbls.
Distillates according to DoE rose 200K bbls; according to API rose 2.1 Mln bbls.

Econ activity for the week ahead and the following expectations are as follows: Consumer Credit ($6.0 Bln), Wholesale Inventories (0.4%), Import Prices (N/A), Export Prices (N/A), Initial Claims (325K), Trade Balance (–$61.0 Bln), Mich Sentiment (76.5), Treasury Budget (–$50.0 Bln)…


You know what I find amusing? When CNBS trots out the CEO’s of big oil companies. Actually I find a lot of things CNBS does amusing, but to make my point let’s stick with the CEO’s of big oil and the subject of refineries. These guys blame the environmentalists as to why refineries have not been built over the last 30 years. I had no idea environmentalists had such authority. If this were true, these so-called environmentalists would be running the country, not big oil. Let’s be frank, environmentalists equate to nothing more than a flea on a dog. The truth of the matter is that there is enough oil, not enough refineries and big oil likes it that way. When confronted with competition, they lobby against it. When confronted with a consumer backlash and a congressional proposal of a tax on the record profits, they call this a disincentive to encourage supply growth. What supply growth? We have plenty of supply… What we need is for these guys to put more on the table, be it refined material or money from the fixed game. These guys literally have us over a barrel and then have the nerve to tell us if there were tax incentives to build a refinery they would do it? All of a sudden the environmentalists are no longer an issue. So if the taxpayer pays for it, they will build it. These guys are greedy bloated pigs, power drunk with the backing of a president who gives them a license to pillage and plunder. As it is this industry receives more tax incentives than any other industry, they skirt more environmental laws than any other and have no regulations against their activity of price control. What a rig…

Next we have the Presidents new war, the war on the flu… This could very well be Bush’s new Bin Laden. In a speech given at the National Institutes for Health, the word “pandemic” was repeated as often as “terror” during a war speech. And not to be lost on that theme, terror was mentioned as well. For an enlightening article go to #msg-8329164 This guy is like a broken record, a fear monger of epic proportions and then has the nerve to tell us that we need more vaccine manufacturers and the reason why there aren’t enough of them in the USA is because of litigation. This guy is a piece of work, he manages to fit “his” agenda into every facet of “our” society. The biggest problem I have with this President is that more often than not, he is part of the problem, not the solution. It is his policies that cut spending and incentives for the health sciences that handcuff the progress in the field of vaccinations and disease control, not litigation. It is his ideology that keeps science at bay, from flourishing and helping so many with health problems and crippling disease. If he were to promote the health sciences the way he promotes OIL for instance (with endless tax incentives and support) they could find a way to cure what ails the world, but then we would not even be having this discussion. Health sciences benefit ALL, not just the few within the inner circle of power. And do not confuse health science with big pharma, these big drug companies are as much of a problem to the benefits of biotech as oil is to refining competition and alternative energy. They do not want to cure you, they just want to keep you alive and buying their drugs.

Grand Theft American Style…


WHAT CAN WE EXPECT NOW?:
As mentioned a little earlier, the COMP has broken its cycle of lower highs, but R2k, SPX and DJIA have yet to confirm this trend. The week ahead should prove to be an interesting one. The bottom line is that it is still too early for a Christmas rally and may very well remain range bound for the remainder of the year. Even if new highs were to materialize, I doubt we get much further than the established highs. I have seen many call for SPX 1300, but I just don’t see it… For now COMP 2180 should prove to be formidable resistance as the other indices are currently at the upper trend line of their downward channels. All of the indices are overbought and riding the upper Bband where ROC is rolling over and CMF is still looking to turn positive (with the exception of the COMP). Equity Fund flows correlate with the CMF readings although it has yet to become apparent via price action. The PC ratio is in an area (.50) that tends to be closer to forming tops than bottoms although it is not of the extremes and may be only that of another buy the dip opportunity. Either way, the weakness I had anticipated last week may come into play this week. Also of note is an island cluster developing on the COMP as volume fell off considerably on Friday where we saw advancing issues barely surpass declining issues. New lows were rather high in comparison to new highs and new lows outpaced new highs on the NYSE. As for Oil, U$D and Gold, oil continues to remain strong but is still in a downtrend and most likely will continue to weaken. The U$D most likely remains in the 89-91 range, although an attempt at 92 is not out of the question. Gold remains in a strong up trend and could correct to $440 without breaching the lower trend support although I doubt we retrace that far. Current support is at $455 followed by stronger support at $450. If the trend in MACD holds true, then we should find support right about here.

Technically speaking, Bullish Advisors are at 46.4% with Bearish Advisors at 26.8%. The VIX/VXN have broken below the new range of VIX 14-16 (to 13) and VXN 16-18 (to 15) although if one were to draw a lower trend line we are testing that support as we speak. The CBOE Equity P/C Ratio ended the week at .675 with a 21DMA of .668. The RSI 5-Days are Overbought across the board. The $NASI Daily (Summation), $NAMO Daily (McClellan), NAHL Daily (Highs/Lows), $NAAD Daily (Advance/Decline), stocks above 200DMA and Bullish %'s are all remain in downtrends, but are beginning to turn up with the exception of the McClellan which has been steadily rising and appears to have topped. Charts of the aforementioned can be viewed below along with the major indices…






























NOTE:

CORE Funds: HSGFX, PCRDX, PRPFX, QRAAX, RSNRX ,TAVIX, SRPIX

Speculative Stocks; ANO, GSX

SWING: USPIX, PMPIX, XLE

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.