Still Uncertain
Steve Cook on Disciplined Investing

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Economics

   This Week’s Data

    July personal income came in flat with June versus expectations of a 0.1% increase;  July personal spending was up 0.2% versus estimates of up 0.3%.  So the consumer continues to suffer.

    The July core personal consumption expenditure index (inflation) was flat versus forecasts of a rise of 1.5%.

   Other

    There has been a lot of talk in the press about bank failures since the FDIC annual report came out earlier this week.  Here is a series of charts that puts 2008/2009 in historical perspective:
    http://mjperry.blogspot.com/2009/08/bank-failures-its-all-relative.html

    Truck tonnage up in July (short):
    http://www.truckline.com/pages/article.aspx?id=579%2F{8E1C7279-ED27-4C03-B189-CEEEE26BBB12}

    Roubini’s latest (long):
    http://www.forbes.com/2009/08/26/stimulus-recession-fiscal-monetary-liquidity-taxes-opinions-columnists-nouriel-roubini.html

    Commercial paper outstanding increases (short):
    http://www.ritholtz.com/blog/2009/08/commercial-paper-outstanding-jumps/

    Peak water (must read but long):
    http://theburningplatform.com/economy/peak-water-1

    A contrary view of the recent rise in ‘savings’:
    http://econompicdata.blogspot.com/2009/08/wheres-investment.html

Politics

  Domestic

Obama’s excessive optimism on the deficit (medium):
http://www.realclearmarkets.com/articles/2009/08/27/obamas_excessively_optimistic_deficit_projections_97378.html

This article is long but it is a great explanation on why we need to get rid on state run health insurance, open the market to selling across state lines and why a ‘public option’ is not the answer:
http://www.american.com/archive/2009/august/here2019s-why-the-public-plan-won2019t-work

    Another long article; this one covers the legal issues involved in the new investigation of CIA interrogation measures:
    http://article.nationalreview.com/?q=NWRhNzAwYmYzMWExYTBlMTM2MjI2MjA4Y2JlODIwMTg=

“If you like your health insurance plan, you can keep it.  Period’  Liar, liar, pants on fire (medium):
http://www.cato.org/pub_display.php?pub_id=10484

  International War Against Radical Islam

The Market
    
    Technical

    The indices (DJIA 9580, S&P 1030) are trading within their up trend off the March lows (8822-10580, 972-1190).  The VIX remains below the down trend line off its October 2008 high; volume is low. 
   
************************************
   
    A review of ‘flash trading’ (medium):
    http://online.wsj.com/article/SB10001424052970203706604574374431720968204.html

    The four stages of a bear market (short and must read):
    http://www.ritholtz.com/blog/2009/08/aftermath-of-secular-bear-markets/

    Individual investors are not as bullish as the pros.  (Typically, individual sentiment is viewed as a contrary indicator.) (short):
    http://bespokeinvest.typepad.com/bespoke/2009/08/individual-investors-not-as-bullish-as-the-pros.html

   Fundamental
   
    Well the ink was barely dry on my piece yesterday speculating that stock prices may have at least temporarily topped out, when the Market reversed an early morning sell off and traded up the remainder of the day.  To be sure, the Averages were a little distorted by the performance of Boeing which carries a big weighting and was up 8% on the day.  Contributing to the intraday reversal was the dollar--it traded up in initially (a strong dollar = weak oil, commodities, gold) then sold off (= higher oil, commodities, gold).  Finally, the volume was almost nonexistent; and to me, thrashing around on low volume has little information value. Bottom line, I don’t think that yesterday’s positive performance settles the issue as to whether or not the Market is finally rolling over.

    Indeed, I didn’t feel much different at the end of trading yesterday than I did the day before--which means that my uncertainty level was a tad more elevated than normal.  Not that I am overly worried about a correction that would push stock prices below the lower boundary of the current up trend.  As I hope I made clear in yesterday’s Morning Call, I think that a low probability scenario.  Rather it is because our internal indicators last week had pointed to a higher Market and then the pin action this week created some cognitive dissonance.  Sure prices are up, but fractionally in the face of some pretty incredibly positive economic data.  So my uncertainty quotient remains high.

For the moment ‘I intend to be a bit less aggressive chasing prices up and a bit more aggressive in using our trading Stop Losses but will use any weakness to add to stocks whose prices are trading in their Buy Value Ranges.’

   





Posted 08-28-2009 8:30 AM by Steve Cook