Post by brosin on Aug 26, 2010 21:22:14 GMT -5
Courtesy of Brian Shannon at Alphatrends
Caldaro: Overnight the Asian markets were mostly higher. Europe opened higher and closed +0.55%. US index futures were higher overnight as well, and at 8:30 the weekly Jobless claims improved: 473K v 500K. The market opened higher to SPX 1058, and then pulled back to 1055 by 10:00 where it had closed yesterday. Another rally attempt to break through the OEW 1058 pivot followed. Around 10:30 the SPX hit 1061 and became slightly overbought on the hourly chart. A pullback followed. At 2:00 the FED made the following press release: www.federalreserve.gov/newsevents/press/other/20100826a.htm. The pullback continued until about 3:00 when the SPX hit 1045. Again, at this point, another rally attempt followed. By 3:30 the SPX hit 1053, but rolled over to end the day at SPX 1047.
For the day the SPX/DOW were -0.75%, and the NDX/NAZ were -1.15%. Bonds gained 11 ticks, Crude rose 80 cents, Gold slipped $2.00, and the USD was lower. Support for the SPX remains at 1041 and then 1032, with resistance at 1058 and then 1090. Short term momentum hit slightly overbought this morning and then declined to oversold. Tomorrow, the first revision to Q2 GDP at 8:30. Then a speech from FED chairman Bernanke, and the bi-weekly Consumer sentiment report at 10:00.
Early today the market continued its rally off of another positive setup yesterday morning at SPX 1040. Within the first hour or so of trading the SPX again failed to break through the 1058 pivot. A pullback followed into the mid 1050's for a couple of hours. But when the market did not attempt a rally off of that consolidation it headed lower again. Short term OEW charts continue to be negative. A rally through the 1058 pivot would turn them positive. Important support remains at the 1041 pivot. Yesterday's parameters remain. Best to your trading!
Cobra: No hard evidences today, but 2 speculations, for fun only.
I said yesterday, whether the 08/25 bullish reversal bar means a bottom, needs a follow-through. Too bad, there’s no follow-though today. So does this mean that 08/25 is not a bottom? The chart below shows the most recent bottom pattern: A bullish reversal bar followed by Dark Cloud Cover all had led to a huge up bar the next bar which for now is tomorrow. The question is whether the 4th time will be different? Anyway, at least whether the market has bottomed, we have to see tomorrow, agree?
Well, too bad, no follow-through as bulls couldn’t break above the overhead resistance, instead making it look a lot like a typical breakdown then go back to kiss the breakdown point goodbye pattern. So the short-term trend is still down and I hold both long and short overnight.
Bespoke:
How Low are Bond Yields Really?
With the recent rally in US Treasuries, a growing number of investors are calling the bond market a bubble. The chart below shows the historical yield on the 10-year US Treasury going back over 50 years. Besides the period in late 2008 and early 2009, yields on the 10-year are at their lowest levels ever. While yields are at or near record levels on a nominal basis, what is the real yield that investors get after accounting for inflation? To that end, the chart below shows the 10-year yield minus the y/y change in the CPI. Using this method, the adjusted yield on the 10-year (1.62%) is still below its historical average of 2.66%, but nowhere near historical extremes. While one could make the argument that Treasuries are unattractive due to increased supply and their low yields relative to other periods in the past, it is hard to argue that their current valuation fits the criteria for a bubble.
A Final Look at Wednesday's New Home Sales Data
As we are all painfully aware, yesterday's new home sales report for July was awful. This morning, though, economist David Rosenberg tried to pour salt on the wound of the optimists by noting that "...the high end market, in particular, is under tremendous pressure. In fact, it is becoming non-existent. Guess how many homes priced above $750K managed to sell in July. Answer - zero, nada, rien; and for the second month in a row. Only 1,000 units priced above 500,000 moved last month. That's it!"
At face value these comments make it seem as though the high end real estate market is in an outright freefall and getting worse. A look at the data, however, shows that while the current levels are depressed, relative to total sales, the high end market may actually be holding up better than the overall market. The chart below shows the monthly percentage of homes priced above $500K as a percentage of total sales. While sales of high end homes are down, total sales of homes have dropped even quicker. As shown, in July, high end sales as a percentage of total sales not only remained above the 2.8% low of March 2010, but it also increased on a month over month basis from 3.5% to 4%.
Second Reading of Q2 GDP
The initial Q2 GDP reading came in at 2.4% a month ago. Tomorrow we'll get the second reading of Q2 GDP, and the average economist estimate has it dropping a full percentage point to 1.4%. Below we highlight the average economist estimate (from Bloomberg's survey) as the days have passed over the past few weeks leading up to tomorrow's number. As shown, economists have kept their estimates pretty steady near 1.4% even as other economic indicators have come in weak recently.
Below we highlight the number of economists that are estimating the various GDP growth points. As shown, the most number of economists (14) are looking for 1.5% Q2 GDP growth. Only two economists are looking for a reading under 1% (1 at 0.9% and 1 at 0.5%), and only one economist is looking for the reading to stay above 2%.
The bulk of the commentary we've heard and read recently has suggested that economists are way too rosy with their estimates right now. At this point, many investors are probably expecting a weaker than expected reading, and one would think that the market shouldn't be too surprised if it is worse than expected.
Bespoke's Commodity Snapshot
Below we highlight our trading range charts of ten major commodities. In each chart, the green shading represents between two standard deviations above and below the 50-day moving average. Moves above or below the green zone are considered overbought or oversold.
Both oil and natural gas have moved well into oversold territory recently. After trying to recover in 2010, natural gas appears right back to its old ways of consistently going down. Gold and silver have both moved higher recently as worries about the economy persist. Both are right at the top of their respective trading ranges. Platinum, which is more tied to the economy, has been trading sideways recently and is right in the middle of its range. After spiking in July and early August, wheat has pulled back in recent weeks, but it's still closer to the top of its range than the bottom. Corn remains near the top of its range, coffee has moved to neutral territory, and orange juice is now oversold.
Ritholtz:
Bulls reach lowest since Mar ‘09 according to AAII
In the always fickle AAII measurement of stock market sentiment of individual investors, today’s Bull reading at 20.7 is down from 30.1 last week and is at the lowest level since March ‘09 when it got as low as 18.9 when the S&P’s were below 700. Bears rose 7 pts on the week to 49.5 but still remain below the recent high in July at 57.1. The March ‘09 high in Bears hit 70.3.
Caldaro: Overnight the Asian markets were mostly higher. Europe opened higher and closed +0.55%. US index futures were higher overnight as well, and at 8:30 the weekly Jobless claims improved: 473K v 500K. The market opened higher to SPX 1058, and then pulled back to 1055 by 10:00 where it had closed yesterday. Another rally attempt to break through the OEW 1058 pivot followed. Around 10:30 the SPX hit 1061 and became slightly overbought on the hourly chart. A pullback followed. At 2:00 the FED made the following press release: www.federalreserve.gov/newsevents/press/other/20100826a.htm. The pullback continued until about 3:00 when the SPX hit 1045. Again, at this point, another rally attempt followed. By 3:30 the SPX hit 1053, but rolled over to end the day at SPX 1047.
For the day the SPX/DOW were -0.75%, and the NDX/NAZ were -1.15%. Bonds gained 11 ticks, Crude rose 80 cents, Gold slipped $2.00, and the USD was lower. Support for the SPX remains at 1041 and then 1032, with resistance at 1058 and then 1090. Short term momentum hit slightly overbought this morning and then declined to oversold. Tomorrow, the first revision to Q2 GDP at 8:30. Then a speech from FED chairman Bernanke, and the bi-weekly Consumer sentiment report at 10:00.
Early today the market continued its rally off of another positive setup yesterday morning at SPX 1040. Within the first hour or so of trading the SPX again failed to break through the 1058 pivot. A pullback followed into the mid 1050's for a couple of hours. But when the market did not attempt a rally off of that consolidation it headed lower again. Short term OEW charts continue to be negative. A rally through the 1058 pivot would turn them positive. Important support remains at the 1041 pivot. Yesterday's parameters remain. Best to your trading!
Cobra: No hard evidences today, but 2 speculations, for fun only.
I said yesterday, whether the 08/25 bullish reversal bar means a bottom, needs a follow-through. Too bad, there’s no follow-though today. So does this mean that 08/25 is not a bottom? The chart below shows the most recent bottom pattern: A bullish reversal bar followed by Dark Cloud Cover all had led to a huge up bar the next bar which for now is tomorrow. The question is whether the 4th time will be different? Anyway, at least whether the market has bottomed, we have to see tomorrow, agree?
Well, too bad, no follow-through as bulls couldn’t break above the overhead resistance, instead making it look a lot like a typical breakdown then go back to kiss the breakdown point goodbye pattern. So the short-term trend is still down and I hold both long and short overnight.
Bespoke:
How Low are Bond Yields Really?
With the recent rally in US Treasuries, a growing number of investors are calling the bond market a bubble. The chart below shows the historical yield on the 10-year US Treasury going back over 50 years. Besides the period in late 2008 and early 2009, yields on the 10-year are at their lowest levels ever. While yields are at or near record levels on a nominal basis, what is the real yield that investors get after accounting for inflation? To that end, the chart below shows the 10-year yield minus the y/y change in the CPI. Using this method, the adjusted yield on the 10-year (1.62%) is still below its historical average of 2.66%, but nowhere near historical extremes. While one could make the argument that Treasuries are unattractive due to increased supply and their low yields relative to other periods in the past, it is hard to argue that their current valuation fits the criteria for a bubble.
A Final Look at Wednesday's New Home Sales Data
As we are all painfully aware, yesterday's new home sales report for July was awful. This morning, though, economist David Rosenberg tried to pour salt on the wound of the optimists by noting that "...the high end market, in particular, is under tremendous pressure. In fact, it is becoming non-existent. Guess how many homes priced above $750K managed to sell in July. Answer - zero, nada, rien; and for the second month in a row. Only 1,000 units priced above 500,000 moved last month. That's it!"
At face value these comments make it seem as though the high end real estate market is in an outright freefall and getting worse. A look at the data, however, shows that while the current levels are depressed, relative to total sales, the high end market may actually be holding up better than the overall market. The chart below shows the monthly percentage of homes priced above $500K as a percentage of total sales. While sales of high end homes are down, total sales of homes have dropped even quicker. As shown, in July, high end sales as a percentage of total sales not only remained above the 2.8% low of March 2010, but it also increased on a month over month basis from 3.5% to 4%.
Second Reading of Q2 GDP
The initial Q2 GDP reading came in at 2.4% a month ago. Tomorrow we'll get the second reading of Q2 GDP, and the average economist estimate has it dropping a full percentage point to 1.4%. Below we highlight the average economist estimate (from Bloomberg's survey) as the days have passed over the past few weeks leading up to tomorrow's number. As shown, economists have kept their estimates pretty steady near 1.4% even as other economic indicators have come in weak recently.
Below we highlight the number of economists that are estimating the various GDP growth points. As shown, the most number of economists (14) are looking for 1.5% Q2 GDP growth. Only two economists are looking for a reading under 1% (1 at 0.9% and 1 at 0.5%), and only one economist is looking for the reading to stay above 2%.
The bulk of the commentary we've heard and read recently has suggested that economists are way too rosy with their estimates right now. At this point, many investors are probably expecting a weaker than expected reading, and one would think that the market shouldn't be too surprised if it is worse than expected.
Bespoke's Commodity Snapshot
Below we highlight our trading range charts of ten major commodities. In each chart, the green shading represents between two standard deviations above and below the 50-day moving average. Moves above or below the green zone are considered overbought or oversold.
Both oil and natural gas have moved well into oversold territory recently. After trying to recover in 2010, natural gas appears right back to its old ways of consistently going down. Gold and silver have both moved higher recently as worries about the economy persist. Both are right at the top of their respective trading ranges. Platinum, which is more tied to the economy, has been trading sideways recently and is right in the middle of its range. After spiking in July and early August, wheat has pulled back in recent weeks, but it's still closer to the top of its range than the bottom. Corn remains near the top of its range, coffee has moved to neutral territory, and orange juice is now oversold.
Ritholtz:
Bulls reach lowest since Mar ‘09 according to AAII
In the always fickle AAII measurement of stock market sentiment of individual investors, today’s Bull reading at 20.7 is down from 30.1 last week and is at the lowest level since March ‘09 when it got as low as 18.9 when the S&P’s were below 700. Bears rose 7 pts on the week to 49.5 but still remain below the recent high in July at 57.1. The March ‘09 high in Bears hit 70.3.
