The confidence index--fagetaboutit
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The Market
    
    Technical

    The indices (DJIA 10282, S&P 1094) closed within their trading ranges (9645-10725, 1009-1150), although they finished the day below both the down trend off the October 2007 high (10396, 11050) and the recent resistance turned support level (10320, 1104).  That is a little disappointing for the bulls but both Averages are also still above the last trading low (9829, 1004)--the violation of which would re-set that January to present down trend.   At this point, I think the level on the downside to watch is the former support turned resistance now turned support level of 10238, 1084 and the very short term up trend off the recent early February low (10183, 1084--note that 1084 is a conjunction of two S&P support levels).  The two resistance level mentioned above (10396, 10320; 1105,1104) are the areas to watch on the upside.

    Other factors in yesterday’s trading: volume low; breadth weak; the dollar up (scoreboard: stocks down, gold down, oil down) and the inverse dollar/stock relationship returns; the VIX was up more than I would have expected.

    Bottom line: there is no hint that stock prices are doing anything other than trading within a range.  At the moment, they are still in the upper half of that range, so buyers need to be patient.

    Thoughts from TraderFeed:
    http://traderfeed.blogspot.com/2010/02/price-rarely-tells-whole-story.html

    And Trader Mike:
    http://tradermike.net/2010/02/february_23_2010_stock_market_recap

    Another look at various markets following the beginning of a Fed tightening cycle (charts):
    http://tickersense.typepad.com/ticker_sense/2010/02/the-beginning-of-a-tightening-cycle.html
       
   Fundamental
       
    Is a secular shift towards bonds occurring? (medium)
    http://www.tradersnarrative.com/explaining-the-secular-shift-towards-bonds-3657.html
 

     Headlines

    Two items seem to have driven prices yesterday.  First, the Conference Board reported a disappointing reading of its consumer confidence index (see below).  I have no idea how many studies that I have seen regarding the correlation of the sentiment indicators with future economic and equity market performance; but the bottom line is that there is very little.  I include them in our Economics section because the talking heads always yak them up.  This is much ado about nothing.
    http://scottgrannis.blogspot.com/2010/02/confidence-is-weak-but-so-what.html (medium)

    And (chart):
    http://www.bespokeinvest.com/thinkbig/2010/2/23/weak-consumer-confidence-hurts-market.html

    The other factor was the strength in the dollar which investors who were already negative as a result of the confidence index quickly latched on to deepen their gloom.  That kept the tone downbeat for the rest of the day.  I noted yesterday that there was a possible sign that the dollar/stock tie may be coming undone--clearly not so yesterday.  As long as this inverse correlation remains, the pressure is likely to remain on stock prices because I think the dollar will stay strong.

    Bottom line: there was nothing in yesterday’s events that, in my opinion, warrant investor concern.  Nevertheless, I recognize that I am in the minority on the dollar/stock relationship.
   
Economics

   This Week’s Data

    The International Council of Shopping Centers reported weekly sales of major retailers rose 2.3% versus the prior week and up 0.9% on a year over year basis; Redbook Research reported month to date retail chains store sales up 1.8% versus the prior month and up 1.9% versus the similar timeframe in 2009.

    The Conference Board reported its February index of consumer confidence came in at 46.0 versus expectations of 55.0 and 55.9 recorded in January.

    Weekly mortgage applications fell 8.5%.
    http://www.calculatedriskblog.com/2010/02/mba-mortgage-purchase-applications-at.html

   Other

    Not making loans appears to be a pretty profitable business model (chart):
    http://www.businessinsider.com/chart-of-the-day-wall-street-bonuses-vs-bank-lending-2010-2?utm_source=Triggermail&utm_medium=email&utm_campaign=CS_COTD_022310

    Another opinion on the impact of a Greek default on the EU (medium):
    http://www.american.com/archive/2010/february/maybe-milton-was-right-about-the-euro

    Update on the NY Fed’s recession forecasting model (chart):
    http://mjperry.blogspot.com/2010/02/ny-fed-treasury-spread-model-recession.html

    What the price of gold has been telling us (medium):
    http://scottgrannis.blogspot.com/2010/02/gold-and-commodities.html

Politics

  Domestic

More on the latest version of healthcare (medium):
http://online.wsj.com/article/SB10001424052748704454304575081391789004352.html

John Fund at the WSJ looks at the healthcare bill (medium):
http://online.wsj.com/article/john_fund_on_the_trail.html











Posted 02-24-2010 8:34 AM by Steve Cook
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