EIA, Beige Book, Note Auction, Market Observations 07/26/06

In our top story tonight, the leader of al-Qaida in Iraq, Abu Musab al-Zarqawi, is STILL dead and someone else has taken his place.

EIA Crude Inventory flat, YOY +17.7M barrels; Gasoline -3.2M, YOY +1.8M; Distillate 800K, YOY +6.1M; Propane +2.2B, YOY -3.7M. Crude prices up on the report.
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Fed Beige Book: "numerous individual reports pointing to evidence that the pace of growth has slowed; housing: the pace of sales declined and that the inventory of available homes and time on the market rose; manufacturing activity indicated significant gains; upward pressure from the elevated prices of energy and other inputs persisted; while this pressure increased further in some cases."

A noted slowing in growth, housing cooling further, yet manufacturing increasing (gulf rebuilding and Iraqi war.) and energy passthrough pressure increasing. Resistance is futile against energy passthrough.
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Today, $22B in 2 year notes auctioned, bid to cover a weak 2.03 vs prior 2.28, high yield 5.09%, indirect bidders a tepid 32%.

Quarterly refunding Aug. 7-10, when 3 & 10 year notes and 30 year bonds will be sold. The Treasury will sell $14B of 5 year notes tomorrow.

More convictionless followthrough, look at 05/25 through 06/01 for clues to the pattern. Today, RUT fell to 686 then rebounded through 695 & 700. Watch 700 & 705 resistance closely tomorrow, then a potential fall from grace?

Keep it tween da ditches, we take it day by day and keep our eyes peeled to the sky, because it could be a name brand that pancakes us. Just my opinion, I could be wrong, this is The Nattering Naybob and your NOT!!!

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