Replies to post #4129 on Your Economy (No Politics) (YE1)

[Myself °¿°]

Thanks Bull

[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 previous update with which this post replies; I expect this week to continue with the same range bound volatility that we have come to know and love. Being as we are near the bottom of these ranges that I outlined earlier, I believe we may see some movement towards the top of the ranges. This is exactly what we saw as the indices tested the tops of those ranges although we did exceed my upside target on the DJIA where 10454 was reached on an intraday level, but ended the week within the specified levels which were stated as follows; I expect them to remain within the ranges of +/-10 pts for COMP 1900-1970, SPX 1125-1170 (edit from 1160) and DJIA 10000-10350. The SPX reached 1178 and the COMP reached 1973, but both remained within the defined ranges. The CoT data open interest had been moving up, but is still relatively low historically speaking. The DJIA has moved up slightly, the NDX has started to head back down and the SPX has flattened. Equity fund flows saw an influx of cash, roughly $1.0 Bln although $800 Mln went into non-domestic funds. Oil moved back to $51bbl and so far has not stayed below $50bbl for an extended amount of time. The FOMC rate hike effect was in play as it gave us a bounce back to 84.5 on the U$D, which is still attempting to crack the elusive 85 area. The 10-yrs and 30-yrs Yields also got a bounce with bond prices heading lower and Gold was knocked back down to $426 although we did see a decent upward move in the XAU and HUI.

Economic #’s:
For the most part Econ #’s were pretty good this week with the exception of ISM and WLI. But as usual most of these numbers must be taken with a grain of salt as they are constantly revised and change from week-to-week and month-to-month…

Construction Spending rose 0.5% to an annually adjusted $1.05 Tln which matched what had been previously reported for February, but beat expectations of 0.3%. Private residential building saw a 0.3% increase, although it was a sharp slowdown from the 1.1% rise in February. Nonresidential private construction climbed 1.1%, a significant rise from the 1.4% drop previously reported and the biggest 1-month gain in this category in 5 months. Strength in this area was led by a 2.6% jump on office construction and a 2.0% rise in commercial building.
MBA Mortgage Applications rose 0.2% on a seasonally adjusted basis in the week ended April 29 compared to the prior week. Refi’s applications rose 0.4%, while applications for mortgages to purchase homes moved up 0.1% on a week-to-week basis. Refi’s accounted for 39.1% of applications activity last week, off from the prior week's 39.3%, while adjustable-rate mortgages slipped to 33.4% from 34.7%. Last week's average contract interest rates for 30- and 15-year fixed-rate mortgages were 5.74% and 5.31%, respectively, down from 5.75% and 5.33% a week earlier. The rate on one-year ARMs eased to 4.14% to 4.15%.
ISM Index/Services fell to 61.7% from 63.1% in March, expectations were for 60.9%. New orders fell to 58.8% in April from 57.1% and the employment index fell to 53.3% from 57.1%. The price index slipped to 61.9% from 65.6% while inventories rose to 54.5% from 52.5%. 14 of 17 industries were expanding in April, led by utilities and insurance. Entertainment was the one industry that contracted, and two sectors reported the same level of activity.
ICSC-UBS Weekly Chain Store Sales rose 0.5% in the week ended April 30th, compared with a 0.3% decline the week before. Compared with the same week a year earlier, sales momentum slowed to a 3.0% increase after a 4.0% rise the preceding week.
Auto/Truck Sales rose 6% in April but demand failed to stem sales declines at GM, down 4.1% and Ford, down 1.4%. Chrysler on the other hand saw sales rise 9.3%, but the biggest sales went to Honda, Toyota and Nissan rising 18%, 26% and 32% respectively.
Factory Orders rose 0.1% and beating a previously reported 0.5% decline. The small gain pushed total factory orders to $378.2 Bln in March and was better than expectations of a 1.2% drop. Some of the weakness in durable goods orders was revised away to show a March decline of 2.3% instead of the initially reported 2.8% drop, a huge plunge in orders for durable goods which make up a little more than half of total factory orders.
FOMC Meeting saw the Fed raise by .25% to 3.0% as was widely expected. The official (eh-hem) press re-release can be read in full at #msg-6230951
Initial Jobless Claims rose 11K to 333K with expectations having been for a 2K increase to 324K. The 4-week average of new claims stood at 321.5K, down by 2K and the lowest in 8-weeks. The number of people collecting unemployment checks rose by 38K to 2.589 Mln in the week ended April 23rd. The 4-week average of continuing claims dropped by about 24K to a 4-year low of 2.61 Mln. The insured unemployment rate remained at 2.0%.
Productivity rose by 2.6% after gaining 2.1% in the previous report and beating expectations of a 1.8% increase. Unit labor costs moved up at a 2.2% pace, an acceleration from an upwardly revised 1.7% 4th-quarter advance.
Hourly Earnings rose to 0.3% which remained the same as previously reported, but better than the 0.2% expected. The average workweek increased to 33.9 from a previously reported 33.7 with total hours worked increasing 0.9%.
Nonfarm Payrolls rose to 274K, handily beating expectations of 174K and the previously reported 110K which was revised upward by 36K to 146K. The largest increases in hiring were seen by services, construction and goods producing industries.
Unemployment Rate remained the same at 5.2% and as expected which are currently at yearly lows. For the 31st month in a row, more than 20% of the unemployed had been out of work longer than 6 months.
Consumer Credit rose by $5.5 Bln or an annual rate of 3.1% compared to $5.6 Bln previously reported and expectations of $6.0 Bln. Credit card debt increased 0.6% in March, while non-revolving credit like auto loans increased 4.7%.
Oil Inventories as reported by the DoE (Dept of Energy) and API (American Petroleum Institute). Crude according to DoE rose 2.6 Mln bbls, but according to API rose 10.2 Mln bbls. Gasoline according to DoE rose 2.2 Mln bbls, but according to API rose 649K bbls. Distillates according to DoE rose 300K bbls, but according to API fell 697K bbls.
WLI (Weekly Leading Index fell to 134.4 in the week ended April 29 compared with an downwardly revised 134.7 in the prior week. The index's annualized growth rate was down to 3.0% compared with 3.2% in the prior week.

Next week we get Wholesale Inventories, Trade Balance, Treasury Budget, Initial Jobless Claims, Retails Sales, Business Inventories, Import/Export Prices and Michigan Sentiment.


Inflation… While it has not been evident according to the Fed and their indicators, it is truly evident in everyday life out here in the real world. Priced a new vehicle lately? How about a home? Even the prices for used items has risen. We have the obvious forms of inflation; at the pump, tuitions, insurance, medical bills, prescription drugs, food, energy and the like. Then we have the less obvious sources of inflation such as the SPR (Strategic Petroleum Reserve) near full capacity, which has been getting filled during the heighth of oil prices. Here we have more oil available to us than we can refine and not enough capacity to bring it to market. This has done nothing more than support those high prices at the pump. Then there is the pledge to not raise taxes, yet taxes have been raised whether we realize it or not under the guise of various forms of legislation, fees and other variants which are hidden in the fine print of contracts and labels. To top it all off we have been encouraging China to drop its peg to the U$D, which undoubtedly will raise the price of imported goods and simultaneously jack interest rates in the USA. And if that weren’t enough, let’s add in the recently proposed resurrection of the 30-yrs T-Bonds. Starting to see a trend here? On the other side of the coin we have the Fed who is raising rates to tame inflationary pressures, but is constantly telling us that “longer-term inflation expectations remain well contained”. If consumers have yet to see prices being passed along, can you imagine what we are in for if/when rampant inflation does exist? So what we have today is a Fed that won’t cop to inflation, but is diligently fighting these supposedly non-existent forces. Make no mistake about it, our government is working very hard at inflating the economy, essentially creating a problem to fix a problem. More appropriately akin to cutting off your nose to spite your face. The bottom line is the US Government is doing everything in its power to inflate and while they continue to tell us that these forces are being contained just remember this; they are the ones creating the very monsters that they so adamantly claim to be slaying. Quite simply put, we have seen the enemy and it is us…

What can we expect now?:
I expect more of the same this week, range bound volatility. Being as we are near the top of these ranges that have been outlined, I believe we may see some movement towards the bottom of the ranges. As mentioned earlier the COMP ran up to 1973, the SPX 1178 and DJIA 10454, but all have rescinded from these levels. The indices most likely will remain within the ranges of +/-10 pts for COMP 1900-1970, SPX 1125-1170 and DJIA 10000-10450 (edit from 10350). While we could just as easily retest the high end of the ranges set into motion last week, I believe we will see a sideways to downward movement for the week ahead. Whether we hit the lower end of these ranges is yet to be seen, Mr. Market did not seem to know exactly how to react to the employment data and we may see some kind of a delayed effect on Monday after being fully digested over the weekend. In the upcoming week we have Trade Balance and Treasury Budget #’s coming up and if these are exceedingly disappointing they may provide the impetus to get us moving downward and testing the lower end of the range sooner rather than later. Eventually I expect the lower end of the specified ranges to be breached decisively, whether it happens this week or not may rely more on a news driven event than a technical one.

On a technical note, Bullish Advisors are at 43.5% with Bearish Advisors at 30.4% and even with an up week these continue to soften. The VIX/VXN trends are both putting up bullish flag like chart patterns which are looking more like downward channels although this may change in the week to come. CBOE Equity P/C Ratio is at .802 with a 21DMA of .708. When looking at an EPC chart one can see that this has been stuck in a range for a better part of the last 9 months with ~.500’s to ~.800’s being that range and the extremes of .400 not being reached since Nov’04 and 1.20 not being reached since Aug’04. The RSI 5-Days and RSI 5-Wks are Neutral across the board with the indices being very close to Overbought territory. The $NASI Daily (Summation), The $NAMO Daily (McClellan), The $NAHL Daily (Highs/Lows), The $NAAD Daily (Advance/Decline) and BP%'s are all in downward trends where the 50DMA has clearly crossed under the 200DMA.

Charts for all of these indicators are posted below for your viewing pleasure +plus some annotated charts of resistance zones on the various indices…




















NOTE:
I continue to hold a USPIX position which I will flip long when the time is right.

CORE:
Funds; HSGFX, PCRDX, PRPFX, QRAAX, RSNRX ,TAVIX. Individual Stocks; ANO, BHP, SWWC

SWING: BGO, GSS, NXG

Disclaimer:
This disclosure is not a recommendation to buy or sell or to do as I do. It is only to give my thoughts on current market conditions and share the positions that I am holding for tracking purposes only. I am not a day trader and only attempt to identify up/down trends and play the swings.