Overview: As mentioned in my previous update with which this post replies, I stated; I still believe a trend change is upon us, even more so now that we have reached COMP 1879 although the coming week may have some surprises. Well we certainly did get some surprises and the reaction was a little stronger than I had anticipated. First we got some stronger than expected economic data, well maybe not so much stronger, just not as weak. The biggest surprise (at least to me) was the rally after the debate in which John Kerry clearly won the 1st of 3 debates. I was under the impression that Wall St was a big fan of the incumbent and thought Kerry's performance might scare the market, but either those minds have been changed about John Kerry or George Bush is still expected to win re-election regardless of the outcome of the debates. Anyway, let's move on and review the Econ #'s for the week...
Economic #'s: The economic #'s have done nothing less than exhibit a Jekyll and Hyde mentality over the last 6 months, so why should this week be any different? We started out the week with increasing New Home Sales, apparently if you do build it they will come! Then we saw a slightly lower Consumer Confidence, but a much better than expected GDP revised upward .5% to 3.3%. Initial Jobless Claims increased by 29K to 369K for the week, flat Personal Income and Personal Spending, a better than expected Chicage PMI, decreasing Auto Sales, but an increase in Truck Sales. Mich Sentiment came in a tad lower, Construction Spending doubled expectations and a fairly flat but steady ISM Index rounded out the week.
The upcoming Econ #'s for the week ahead are Factory Orders, ISM Services, Initial Jobless Claims, Consumer Credit, Avg Workweek, Nonfarm Payrolls, Unemployment Rate and Wholesale Inventories. All eyes will be on the Nonfarm Payrolls as I am sure this will be the most anticipated indicator for the week. Will we get Jekyll or Hyde or something in between? We shall soon see, beware of whipsaws...
As a side note, last weeks Housing #'s, GDP and PMI seemed to prop the market nicely and the Bradley turn came into play on the 28th in a very timely manner. Window dressing and fund shuffling should be complete, but in this past week bad news just did not seem to matter. Oil has reached the $50bbl level, but how will we handle $55 or $60 should we go there? Once October starts in earnest I will be watching closely to how the market reacts to warnings and higher oil prices especially since I do not believe we have heard the last about either issue just quite yet.
What can we expect now?: As mentioned, I was slightly taken aback by Mr. Markets strong response after the debate. This move in general just seemed out of the ordinary to me and todays move could have been a blow off top. Then again, maybe we are in for some heavy volatility going into the election where we may just oscillate (range bound) with no real local top or bottom being put in place for the near term. It is difficult to say, but I still expect us to stick to our current trend of lower highs and lower lows. The move this week was parabolic in nature and already has us approaching overbought territory. The VIX/VXN/VXO are at incredibly low levels signaling major complacency. We currently sit at COMP 1942 which is not only a resistance area, but it also happens to be a .618 Fib retrace level off our previous low. On top of this we have another Bradley turn date on/around Oct 4th-6th. Keeping this in mind, can we continue to rally? We sure could, but I still feel a correction is coming. I am just not sure we get the deep retrench I was originally looking for. It really depends on how additiional warnings are received, whether oil prices behave and if the Econ #'s can continue to strengthen or at least keep from weakening any further. And of course election day is swiftly coming upon us. Below are a few COMPQ charts to ponder...
NOTE: I continue to hold a USPIX position
Disclaimer: This disclosure is not a recommendation to buy or sell or to do as I do. It is to let people know what I think about current market conditions, what it is that I am doing and for no other purpose than to create a track record.
Fibs, Pitchfork and Trombones
Fib and Channel Chart
Generic Chart (note that we are at the top BBand and the lower BBand is curling down giving the bands a fluted appearance...
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