Quick Pre-Holiday Update

The stock market keeps on rolling; although not quite recapturing the trend line it dipped below last week. That said, I think we can make the dashed line below (see chart) the new uptrend line for now. The negative momentum divergence (panel 2), and present overboughtness (panel 3) make this a still dangerous-looking short-term setup:

click each insert to enlarge…

Making it yet more dangerous-looking is the amazing positioning of traders speculating on volatility; speculating that there’ll be none, that is (yep, this one’s a repeat from Sunday’s blog):

The net positioning among Asset Managers on S&P 500 Index futures (also a repeat), presents a dangerous look as well:

As if we needed another one, short interest on SPY (S&P 500 tracking ETF) — updated today — has now started to bottom from an extremely low level, which tends to be a precursor to a correction:

Okay, just one more, can’t help it! Investment advisors are way too bullish, per this (hugely reliable short-term indicator) from Investors Intelligence:

Bottom line: In the near-term, the market looks overly ripe for the picking. Doesn’t mean it (a steep correction soon) has to happen, mind you…

Of course, for you and me, it’s not the short-term that concerns us; we’re watching the data. And there’s been a ton of it released this week.

Here’s a rundown of the key stuff:

Chicago Fed National Activity Index: -0.71 (that’s bad)
Dallas Fed Manufacturing Survey: Production Index -2.4, General Activity Index -1.3 (both bad)

International Trade In Goods: Exports -0.7%, Imports -2.4% (both bad)
Retail Inventories: +0.3% (good if it’s in anticipation of high demand, bad if it reflects slowing sales)
Wholesale Inventories: +0.2% (good for the GDP number)
Case-Shiller Home Price Index: +0.4% (that’s good)
New Home Sales: +733k (that’s good)
Consumer Confidence: 125.5, down from 126.1 (that’s not good, but not horrible)
Richmond Fed Manufacturing Survey: -1 (that’s bad)

Mortgage Apps: Purchase -1.0%, Refis +4.0 (bad and good, but very noisy numbers week-to-week)
Durable Goods Orders: Month-over-month new orders +0.6% (that’s good), year-over-year -0.9 (that’s bad). Month-over-month capital goods orders +1.2% (that’s good), year-over-year -0.8% (that’s bad).
Q3 GDP: +2.1% (that’s good)
Weekly Jobless Claims: 213k (that’s good)
Corporate Profits Year-Over-Year: -0.4% (that’s bad)
Chicago PMI: 46.3 (that’s bad)
Personal Income: +0% (that’s bad)
Consumer Spending: +0.3% (that’s good)
Pending home sales: -1.7% (speaks to low inventory)

In a nutshell, the consumer continues to hang in there, which is good, but don’t forget — as we’ve charted herein ad nauseam — the consumer data typically holds up right till near the very end of an expansion. The generally negative industrial data, which always rolls over first, is troubling.

We’ll keep you posted…

All of us here at PWA wish you and yours a Very Happy Thanksgiving!!


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