Market Talk / July 30 - Aug 5

[Fivetears]

Market Update 09:15 am: Negative bias persists in pre-market trading as futures trade continues to deteriorate heading into the opening bell. Despite another day of earnings reports underscoring a surprisingly good quarter, the market's focus shifting from earnings to economic data coupled with rising oil prices to start off what is historically the worst month for stocks, according to Stock Traders Almanac, leaves investors little incentive to get back on the buying track after such a strong performance last week.
http://finance.yahoo.com/mo

 

[FundSurfer]

This is odd. Inflation shown increasing but the dollar drops. Usually the dollar will jump on expectation that Fed may get more hawkish and raise rates. I'm guessing that the inflation rise was less than some expected and thus they figure that the economy slow down will weigh heavier that inflation in the next Fed decision.


Inflation gauge edges higher

Reuters
Inflation gauge edges higher
Tuesday August 1, 3:07 pm ET
By Zubin Jelveh


NEW YORK (Reuters) - U.S. consumer spending in June grew at its slowest pace this year while a measure of inflation reached its highest mark in nearly four years, a government report released on Tuesday showed.
Meanwhile, a separate report showed factory activity was stronger than expected in July, suggesting businesses were picking up spending as consumer purchases slowed.

The Commerce Department said inflation rose 0.2 percent in June, while personal income increased 0.6 percent in the month and nominal spending was up 0.4 percent. The latter two figures both matched Wall Street expectations.

The figures were also broadly in line with recent evidence that economic growth is slowing as a housing-led slowdown in consumer spending takes hold.

.......continued

 

[Spaf]

Daily Yak

The Kingdom of TSP
Daily Edition
August 1, 2006 Closing​

Yak, Doodles, Tea Leaves & The Tin Box

Kingdom Yak:
Pro-Yak...................................Reports indicate a strong economy!

Con-Yak..................................Lube and the M.E. are strong worries!

Jester-Yak...............................I don't get it? If the economy is strong we worry over rates? If it is weakening we worry over slow growth?

Doodles:
Socks [$SPX] Closed at..............1270.92, dn -5.74
Volume (CMF) (money flow).........-0.058, decreasing.
Averages (MACD) (trend)............+3.297, increasing.
Momentum (S-STO) (signal).........90.97, increasing.
Strength (RSI) Overbought/sold....[70] 54.43 [30]

Lube (NYM) Closed at..................74.91, up +0.51
Oil Markers................................<70= ok, 70-75= worry, >75= panic.

Tea Leaves:
Charts & Stuff............................Yellow / Yellow [doodles +3-2 / Lube > 70]

Tin Box:
Position....................................100% socks
Stops [$SPX].............................Alert: 1267. Trail: 1254.

 

[Birchtree]

Companies are keeping more of the revenue they get from their customers, as opposed to paying it out on expenses like wages, interest costs on debt, or charges for materials and services provided by suppliers. Current estimates put S&P 500 sales in the second quarter about 25% higher than they were in the second quarter of 2003. Earnings grew by more than 50% over the samne three years. Analyst have been predicting profit margins were on the brink of collapse for nearly two years now, and so far they've been wrong. Although the rising cost of raw materials has put downward pressure on margins, the biggest cost of most companies - labor - has remained remarkably tame, putting upward pressure on margins. All you G riders are right to fear the Bull. It's a dangerous world and a great time to invest.

 

[Birchtree]

I just realized we closed today with a new all-time high for the Dow Utilities. They will begin to pull up the Dow Transports. Dow 11,722.98 is in sight. The close was 438.21 and we now have bottoms above bottoms. Previous low was on 10/05 at 380.98 and then on 4/06 at 382.49. This could potentially mean clear sailing for the next several months. But remember to fear the Bull.

 

[robo]

Stocks: Is the Fed Out of the Game?

The Federal Reserve watchers are debating what the FOMC (Federal Open Market Committee) will do with short term interest rates next week. Will they hike rates again, or will they pause? The feeling is that what the Fed does with short term interest rates is going to determine how the markets move over the next few weeks.

We suggest a heretical alternative. What the Fed does at this point in the cycle is basically irrelevant. In fact, we claim that the Fed will follow, not lead, the markets in upcoming policy decisions. Here's why:

The Federal Reserve has control of the short term supply of money and the rent on that money, which is known as interest rates. The supply of money consists of very short term loans between banks and other short term debt instruments. In normal times (and we are definitely in normal times), the Fed does not attempt to set longer term interest rates -- the bond market does that. The workings of the free market are a more powerful force and the Fed recognizes that fact. Thus, whatever the Fed does can only affect short term interest rates directly and their policy moves only have an indirect effect on longer term rates.

Since the last Fed rate hike, the bond market has made a policy move on long term rates. It has decided that long term rates are too high and has racheted those rates lower in a contramove to the Fed hike in short term rates. Thus, we have the 30-year bond rate currently at 5.068%, which is below the overnight rate the Fed controls, which is at 5.25%. The latter rate is called the "Federal Funds" rate and represents the interest rate banks charge each other for overnight loans to each other. In fact, the 90-day Treasury Bill, which is substantially affected by Fed interest rate policy, is currently yielding 5.119%, a lower rate than the overnight rate. The free markets are speaking with one voice now and they are saying, "The Fed has gone too far in hiking short term rates."

Now, if the Feds raise rates again at the next meeting, will the markets change their mind about whether the Feds went too far? Not likely. The market is likely to react by lowering longer term rates to compensate for the increased probability that the Fed's error will help drive the economy closer to recession. If the Fed instead stands pat, they will have validated the "decision" of the market to lower long term rates. Either outcome is likely to be good for bonds, but if the Fed does raise rates, it would probably send the stock market plunging. We're not certain of that because the bond market would probably compensate by lowering long term rates and it's those rates which more directly affect the stock market. Thus, the plunge might be rather short-lived in stocks.

The only outcome which would be bad for the markets would be a lowering of rates by the Fed. The reason that would be bad is that it would send a signal that the Fed was very concerned about the economy slipping into recession. The bond market would take it as a sign the Fed wants to stimulate the economy and raise the inflation rate. The stock market would discount the lower earnings that come in a recession. We don't think the Fed is likely to lower rates next week.

 

[Birchtree]

I like this action today - can we do 1290 on SPX before the close, please. Snort. The targets are being hit left and right.

 

[JOVARN]

Here is a side bar item of interest.
My 25 year old son just decided to pull his head out of his derriere and get his teaching degree after he attended Community College for the past 6 years . So since he has supported himself by playing beach Volleyball for the past 3 years he is flat broke. He got an offer he could not pass up from a 4 YR school so he applied for a HUD housing grant to live off campus a mile away from the school, nothing special converted motel rooms. The HUD employee at the off campus housing refused his admission because his credit report shows a non collected Cingular Cell Phone bill of $185.00.
The complex manager said that the HUD official told her to remove my son from the list until the debt is resolved. The motel person told me that he had no choice as the credit bureau computer is linked to HUD.
The long arm reaches out yet again.

 

[fabijo]

Anyone know how to read the Chaikin Money Flow indicator? I just read about it today on stockcharts.com. Looking at the S&P for the past 3 years, using 21 average for the Chaikin Money Flow, it looks like the buying and selling are getting alot closer to breaking even with each other. I'm trying to figure out what that's saying about the market. Does it mean bulls/bears are about 50/50? If so, is this any different than what it's been before May?

 

[Spaf]

Anyone know how to read the Chaikin Money Flow indicator? I just read about it today on stockcharts.com. Looking at the S&P for the past 3 years, using 21 average for the Chaikin Money Flow, it looks like the buying and selling are getting alot closer to breaking even with each other. I'm trying to figure out what that's saying about the market. Does it mean bulls/bears are about 50/50? If so, is this any different than what it's been before May?

See the Technical Analysis forum. You will see CMF in there. It's a fairly good indicator of what the volume of money is doing.

If you would like, feel free to expand the information in CMF as indicators all have strengths and weaknesses. Some of the information is just basic and could use more research.

Also you might try www.stockcharts.com and use their gallery view of some of our funds $SPX, AGG, EFA, and $EMW, with the charts having CMF

 

[Oldcoin]

Anyone know how to read the Chaikin Money Flow indicator? I just read about it today on stockcharts.com. Looking at the S&P for the past 3 years, using 21 average for the Chaikin Money Flow, it looks like the buying and selling are getting alot closer to breaking even with each other. I'm trying to figure out what that's saying about the market. Does it mean bulls/bears are about 50/50? If so, is this any different than what it's been before May?

http://www.investopedia.com/articles/technical/03/021903.asp

Link to a short article on Chaikin Oscillator.

 

[Mike]

The S&P broke 1280 twice today, but retreated when it hit ~1283. Is that the real resistance level?

Looking at the bottom of the trading range as a re-entry point (<1240). If the Fed raises rates again at its meeting coming up, I think we'll get there. If not, we may still get there, though I'm not sure how (perhaps via a surge in middle east conflict / Iran problem / hurricanes / spiking oil prices).

 

[Spaf]

Daily Yak

The Kingdom of TSP
Daily Edition
August 2, 2006 Closing​

Yak, Doodles, Tea Leaves & The Tin Box

Kingdom Yak:
Pro-Yak...................................Bulls rule! Socks up on strong earnings.

Con-Yak..................................Lube and storms are up too!

Jester-Yak...............................Maybe we have a rates cease and a cease-fire in the making.

Doodles:
Socks [$SPX] Closed at..............1278.55, up +7.63
Volume (CMF) (money flow).........-0.034, increasing.
Averages (MACD) (trend)............+4.183, increasing.
Momentum (S-STO) (signal).........89.33, decreasing.
Strength (RSI) Overbought/sold....[70] 57.36 [30]

Lube (NYM) Closed at..................75.81, up +0.90
Oil Markers................................<70= ok, 70-75= worry, >75= panic.

Tea Leaves:
Charts & Stuff............................Yellow / Red [doodles +4-1 / Lube > 75]

Tin Box:
Position....................................100% socks
Stops [$SPX].............................Alert: 1267. Trail: 1254.

 

[Birchtree]

A nice little rally today - 11,300 would be great - fear the BULL.

 

[Show-me]

Fyi

From the STA.

1. August is the worst S&P month last 15 years
2. First nine day of August are historically weak.
3. Monday before August expiration Dow up 8 of last 10
4. Mid-August stronger than beginning and end.
5. Beware of “Summer Rally” hype.

 

[Griffin]

Re: Fyi

From the STA.

1. August is the worst S&P month last 15 years
2. First nine day of August are historically weak.
3. Monday before August expiration Dow up 8 of last 10
4. Mid-August stronger than beginning and end.
5. Beware of “Summer Rally” hype.

The market is going to do what it wants regardless of what it has done historically. I would not be suprised to see some consolidation tomorrow due to some initial profit taking, concerns over the FOMC meeting and a weak jobs report. I expect the foreign markets will have a great day until the US market opens. If we do get a weak day, consider it a blessing and a buying opportunity.

Resistance was weakened as we set higher highs today and higher lows. Ceilings were broken, how much better can it get? Too much caution could be very costly.

Although I moved into the I-fund today, I am definitely viewing the S-fund as cash cow since the dollar tends to strengthen relative to foreign currencies during these big recovery rallies.

Yeah, I'm predicting the big rally to start.

 

[Spaf]

Daily Yak

The Kingdom of TSP
Daily Edition
August 3, 2006 Closing​

Yak, Doodles, Tea Leaves & The Tin Box

Kingdom Yak:
Pro-Yak...................................Bulls still rule! Socks advance. Storm weakens.

Con-Yak..................................Lube still in critical area.

Jester-Yak...............................Yea, big reports tommorrow and then the FOMC meeting next Tuesday!

Doodles:
Socks [$SPX] Closed at..............1280.27, up +1.72, at pivot point.
Volume (CMF) (money flow).........-0.008, increasing.
Averages (MACD) (trend)............+4.976, increasing.
Momentum (S-STO) (signal).........89.31, high.
Strength (RSI) Overbought/sold....[70] 58.01 [30]

Lube (NYM) Closed at..................75.46, dn -0.35
Oil Markers................................<70= ok, 70-75= worry, >75= panic.

Tea Leaves:
Charts & Stuff............................Yellow / Red [doodles +5-0 / Lube > 75]

Tin Box:
Position....................................100% socks
Stops [$SPX].............................Alert: 1267. Trail: 1254.

 

[Mike]

Re: Fyi

From the STA.
3. Monday before August expiration Dow up 8 of last 10

To clarify, this is next week, yes?

 

[tsptalk]

I believe it would be the 14th.

 

[robo]

The S&P broke 1280 twice today, but retreated when it hit ~1283. Is that the real resistance level?

Looking at the bottom of the trading range as a re-entry point (<1240). If the Fed raises rates again at its meeting coming up, I think we'll get there. If not, we may still get there, though I'm not sure how (perhaps via a surge in middle east conflict / Iran problem / hurricanes / spiking oil prices).

A comment from Henry about the current environment:

"If the market runs away from us, then we will just have to let it go, as this author is not going to chase performance, especially not in the current environment."

Maybe the Fog will start to clear soon.... I Hope!! The Dog Days with lots of other geopolitical problems, Equals trading range....

Henry is partially long...