THE DOT - if this turns orange or red be alert

Wednesday, February 3, 2010

Wednesday brainstorming - part 1

1. The 48h bounce run its course but it should turn around today as it also reached even slightly exceeded the price levels. Otherwise we can assume the correction is already over for this wave.
We have to see how today's market plays out but it should reverse or rise - since the short term oversold situation is resolved. Support lines were defended but the 20 day MA is about to cross the 50 day MA ( a flat running one) which points to an extended correction as I expected. In any case a stronger bounce will occur by mid Feb for 2 weeks in any case hence its a delicate situation. The full moon in Leo was on the Mars which triggered this spike but should fade away now. Although another special effect kicks in slowly which makes me very positive for the second half of Feb.

2. The consumer sentiment lies the admin of Obama tries to spread shows an weird discrepancy with the ABC numbers


ABC Consumer Index Drops To Lowest Reading Since Fall, Divergence From UMich Propaganda Reading At Record

The most recent ABC Confidence index came in at -49, just five points higher than the all time low of -54 set last January and is now at the lowest level since last fall. The prior week reading was -48, and the consensus for this week was -45, implying a substantial miss from expectations. The persistent deterioration in this index is increasingly at odds with other consumer readings, considering that the other two CONfidence indices, the UMichigan consumer sentiment and the Conference Board consumer confidence index both increased in January from the December readings. Currently the relative divergence between the ABC index and the UMich and Conference Board is at record wides. We sincerely hope that the government will soon come out with an index that tracks the credibility of all its other indexes.

From the ABC press release:

Americans’ ratings of the buying climate have softened to their worst level since fall, holding consumer confidence near its record low.
The ABC News Consumer Comfort Index stands at -49 on its scale of +100 to -100, in a 2-point range the past four weeks and just 5 points from its all-time low in 24 years of weekly polls, -54 last January. Its long-term average is -13.
Improved ratings of the buying climate led an advance in December, with the CCI reaching -41 the first week of January. That’s evaporated: Seventy-eight percent now call it a bad time to buy things they want and need, up 8 points in seven weeks.
The other two components of the index have been steadier, but remain weak. Fifty-five percent rate their own finances negatively and 91 percent say the national economy’s in bad shape.

Readings across the index' main verticals were as follows:

INDEX – Views of the economy overall are the worst of the index’s three measures. Only 9 percent of Americans rate it positively, 29 points below the long-term average and in single digits for 10 weeks straight.
Just 22 percent call it a good time to spend money, 15 points worse than average. And 45 percent rate their personal finances positively, 12 points below average and below a majority for 77 of the last 80 weeks.

TREND – The index has been below -40 for a record 93 consecutive weeks. It’s just a point above the -50 mark, a level its reached 23 times since the recession began in December 2007, compared with just once previously, in February 1992, in weekly polls since December 1985. As noted, the CCI showed faint signs of life late last year, reaching -41 Jan. 3, a 16-month high. But it took a sharp 6-point tumble the next week and has been basically flat since.

GROUPS – The index as usual is higher among better-off Americans, but has been negative across the board for 49 weeks straight, the longest such run in available data since 1990. It’s -6 among those with the highest incomes but -75 among those with the lowest, -39 among people who’ve attended college vs. -70 among those who never finished high school (their lowest since November), -46 among homeowners but -61 among renters (their lowest since October) and -47 among men vs. -52 among women.
Notable this week is the racial gap, -51 among whites (a point from their lowest ever) vs. -47 among blacks; it’s only the 8th time since 1990 the index has been numerically higher among blacks than whites (five of those since President Obama’s inauguration).
Partisan gaps have been narrower this year. This week the index is -46 for Republicans vs. -51 for Democrats (and -49 for independents). That 5-point Republican-Democratic gap compares with an 18-point gap last year, 41 points in 2008 and 32 points long-term.

The fact that an increasingly wide margin between "confidence" indexes can possibly exist is an observation that surpasses mere methodology constraints. At this point it is obvious that procyclical indices like the UMich, which are primarily driven by a reaction to the market levels, will continue growing ever higher, which in turn will drive the low-volume algos to push the market higher yet, creating a closed loop. Yet for all those who couldn't care less about the stock market, which is a sizable portion of the population the sad economic reality is getting worse and worse.

No comments:

About Me

I am a professional independent trader