Replies to post #2030 on Your Economy (No Politics) (YE1)

[Bullwinkle]

CORRECTION: >>>CYCLE/TREND Update for the Week Ahead>>>

I stated that a New Moon was due tonight, Dec 5th. This is incorrect. New Moon will be on Friday, Dec 12th. Nobody probably cares, but I felt I should correct my error and do not want to mislead anyone who may have read that.

[Bullwinkle]

>>>CYCLE/TREND Update for the Week Ahead>>>

Overview:
It's that time once again to review last week and look forward into the next. As mentioned in my previous update with which this post replies: Not much has changed and we most likely will continue the path of least resistance. TA, FA and news mean nothing at this point. Overbought? Yes... Does it matter? So far, no... While this still may be the case, I sense that perception is beginning to change. Maybe we are just in a consolidation period, but just maybe the poor economic numbers and geo-political news are beginning to have an effect on the markets' psyche. Volatility has picked up considerably and futures have been selling off in afterhours. Oil has fallen further to just above $40bbl, Gold has tumbled along with it and the U$D has strengthened moderatley. While jaw boning about support for U$D and the cutback thereof was at an all time high this past week with Japan leading the way backed by much if not most of the G7, the U$D miraculously found its footing. Who is providing this support and for how long is a mystery, but I would venture a guess that it be the Fed and probably for just long enough to cool heads overseas. While treasury auctions for the 5 Yrs went like hot cakes, 10 Yrs were given the cold shoulder. We also received some high profile earnings warnings from the likes of the semiconductor sector via ALTR, XLNX and CYMI. This should not be ignored as this is most likely only a prelude to the downwardly revised GDP #'s for 2005. Insider sales are at all time highs and have been for 3 consecutive months. Some insiders sell just to sell no matter where the price is, look at ALSC for instance. Others and those in the majority sell after a great run and before a decline begins.

Economic #'s:
It doesn't get much worse than this, across the board (with the exception of sentiment) we had a dismal representation of an economy on solid footing. Per expectations; Productivity was revised lower and Chain Store Sales slumped, Consumer Credit rose $1.7 billion to $7.7 billion, Export Pricing was flat with Import Pricing on the rise and as a matter of fact Import prices rose to a 10-mos high. Wholesale Inventories surged to 1.1%, Initial Jobless Claims were up by 22K and came in at 357K total. Not only that but Challenger, Gray and Christmas reported job cuts in excess of 100K+ for the 3rd straight month. Core PPI came in flat while PPI shot up 0.5% and the Treasury Budget was $5 billion in the red at -$58 billion. The only Econ # resembling anything positive was the Michigan Sentiment prelim # of 95.7 or 2.2pts higher than expected. After seeing all of these numbers, I would think that one would conclude that there is a real disconnect between sentiment and reality.

As for the upcoming week, it will be a busy one... Retail Sales, Business Inventories, Trade Balance, Capacity Utilization, Industrial Prioduction, FOMC Meeting, NY Empire State Index, Building Premits, Current Account Deficit, Housing Starts, Initial Claims, Philly Fed, CPI and Core CPI. Top it off with Options Expiry and if you thought last week was volatile, buckle up because next week should be a doozey!


Christmas Rally? I hear people speak of an ensuing Christmas Rally, well guess what? We have already had it. This is it, this is and has been the Christmas Rally. It morphed from election euphoria right into what people have been waiting for, I am not so sure people realize that. Is there more to come? Could be, but if you are waiting for a rocket launch I have news for you, this has been it and the rocket boosters have now been ejected. What we will be waiting to see from here is if we continue higher or stall out and reenter the atmosphere. What we have is a lot of people in fear of missing anymore of this current move, let's call them the bagholders because that is what they will probably be. Ralph Acampora has hit the stage calling for DOW 13,000. JP Morgan and Smith Barney have revised their S&P targets to 1300 and above. I just read somewhere that even Stephen Roach is not as bearish on next year as he once was revising estimates by 25%. All we need now is for CNBC to prance out Abby Joseph Cohen and Elaine Garzarelli with deer antlers on their heads and this rally could be cooked. Overly bullish tone and what seems as everyone expecting a big surge and January effect to take place and while I am not saying we won't get them, just don't be surprised if we don't because it has already taken place.

What can we expect now?:
Wish I knew, where is a falling star when you need one? Let's just say that my outlook has not changed much the last couple of weeks and I still believe we are vulnerable here. Even if we do move higher, the downside risk is tremendous and far outweighs the upside reward. Bullish Advisor's are at a resounding 60.8% with Bearish Advisor's at 21.7%. We have not seen the extent of these levels since Dec. 2000. While RSI's have fallen some, weeklies are still overbought. P/C Ratios, McSum Oscillator and VIX/VXN are all starting to show weakness, the kind of weakness that precedes a drop. We also had a Bradley Turn date on/around the 3rd that so far has held as a turn down and we are at a 12wks Cycle inflection point on the COMP that may be marking a top for this run. With that said we also have a New Moon on the 12th (had mistaken it as the 5th).

NOTE: I continue to hold a USPIX position and while I have been contemplating putting some $$$ to work in other areas, I have not. Cash is also a position and I want to be extremely careful before I do anything else.

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 am doing and give my thoughts on current market conditions. I am not a day trader and only attempt to identify up/down trends and play the swings.