In last weeks update with which this post replies, I was looking for some consolidation of sorts with the possibility of the mini-turn on/around the 12th to play a part in that. As we now know that was not meant to be and while we did seem to tread water in the earlier part of the week, Options Expiry Friday was our biggest losing day on the COMPQ. The mini-turn on/around the 12th could be considered a non-event or even more explicitly a continuation pattern of the current downward move. While it may not be worth mentioning, we do have another mini-turn on/around the 19th and whether or not we can expect this turn to play a similar part as the previous is what I will look at after going over last weeks Econ #'s.
The Econ #'s for the week were mostly mixed with some fairly mild deviations from what was expected or had been previously announced in the prior month. The Trade Balance actually came down this month with the Treasury Budget heading North, Export Prices were slightly down with Import Prices being unchanged. Retail Sales came in considerably lower and could very well be the biggest stick in the mud pertaining to the weeks market action. Business Inventories fell, PPI came down with Core PPI being flat, the NY Empire State index rose considerably with Inital Jobless Claims going up by 9K. Capacity Utilization was down a touch and Industrial Production fell off. The Philly Fed came in strong, PPI and Core PPI were basically flat and Michigan Sentiment came in a bit higher than the previous month, yet slightly lower than expected. As for the week ahead, it should be a relatively quiet week with Building Permits, Housing Starts, Initial Claims and LEI as the only numbers on tap.
So what can we expect for the week ahead? Well, as mentioned there is a mini-turn scheduled on/around the 19th which may or may not effect the current trend, the market appears to be heavily oversold and Options Expiry is out of the way. With very few Econ #'s scheduled, this may be a week where more eyes will actually focus on some of the good earnings reports we have seen and others we will get over the course of the week. While expectations are very high (too high in my opinion), we have seen some relatively good reports from heavyweights like YHOO, INTC and IBM. The YoY numbers have been very good along with revenus and growth, but the forward looking statements have been a little less encouraging. So while we may just continue to follow the path of least resistance, I am still in the camp that a consolidation period or even a relief rally bounce is overdue. I don't know and I could be wrong, but it seems that it would be too easy to continue straight down to new lows before getting a relief bounce. Is a headfake due before we go on to a lower low? In the chart below there may be what could be considered an inverse H&S pattern in the works where 1896=L.Shoulder, 1865=Head and Fridays close of 1883=R.Shoulder. The neckline would be 2079 and 2055 respectively. Just some food for thought...
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