Market Observations 08/17/06
The NAZ +4.7% this week with its best 4 day advance since Aug 04. The broader market attempted a 4th straight day of gains, but seemed to be taking a breather or sputtering.
Oil fell to under $71 intraday, 10% off the July 14 record at over $78 per barrel. The energy sector has been consolidating for 4 days on a potential economically induced reduction of demand .
Yesterday, "a breakthrough 716 may signal 740 to the upside, cavaet emptor as 665 still awaits below.... watch Google's overhead resistance at 400... NDX a potential waterloo at 1574."
The RUT touched 713, Google hit 390, the NDX broke 1574, touched 1584 and then all of them stalled. Watch the RUT breeching 716, this could also signal a downturn. Heres why....
With options expiration and short covering, weak hands have been shaken out and short sellers have been running for cover. Since May 10 SP500 30 days up, 39 down.
We suspect this tech led rally will expire with options on Friday, leaving Mon & Tue for profit taking by the brown shoed Boyz on the Street, as always at the herd's expense. Lets see.
Random thoughts.... an evaporating automotive sector, softening housing sector, seemingly impending economic downturn, dwindling inflation fears, oil pulling back and energy equities falling.
If the economy slows, consumer spending slows, demand, profits and equities should fall, gold rises and the dollar weakens, thus raising inflation and risk premiums, at which point bonds should sell off and yields rise.
Yet, bonds have rallied, yields have fallen; the dollar has remained surprisingly strong and "safe haven" utilities and gold have fallen.
This is a mixed message coming from the bond and dollar market which seems to signal stable risk premiums or a potential goldilocks scenario ahead.
Falling demand, energy, commodities, input costs and prices all signal deflation and would take the edge off of some of the previous energy pass through stagflation in the supply chain.
Under this scenario, risk premiums could stay the same or go lower, making todays bond yields seem high. The $64K question is what will the dollar do vs a basket of other currencies?
We are starting to believe that the dollar will hold its own between 1.25 and 1.30 Euro as all currencies will be devalued and deflation may be the order of the day.
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!!!
Oil fell to under $71 intraday, 10% off the July 14 record at over $78 per barrel. The energy sector has been consolidating for 4 days on a potential economically induced reduction of demand .
Yesterday, "a breakthrough 716 may signal 740 to the upside, cavaet emptor as 665 still awaits below.... watch Google's overhead resistance at 400... NDX a potential waterloo at 1574."
The RUT touched 713, Google hit 390, the NDX broke 1574, touched 1584 and then all of them stalled. Watch the RUT breeching 716, this could also signal a downturn. Heres why....
With options expiration and short covering, weak hands have been shaken out and short sellers have been running for cover. Since May 10 SP500 30 days up, 39 down.
We suspect this tech led rally will expire with options on Friday, leaving Mon & Tue for profit taking by the brown shoed Boyz on the Street, as always at the herd's expense. Lets see.
Random thoughts.... an evaporating automotive sector, softening housing sector, seemingly impending economic downturn, dwindling inflation fears, oil pulling back and energy equities falling.
If the economy slows, consumer spending slows, demand, profits and equities should fall, gold rises and the dollar weakens, thus raising inflation and risk premiums, at which point bonds should sell off and yields rise.
Yet, bonds have rallied, yields have fallen; the dollar has remained surprisingly strong and "safe haven" utilities and gold have fallen.
This is a mixed message coming from the bond and dollar market which seems to signal stable risk premiums or a potential goldilocks scenario ahead.
Falling demand, energy, commodities, input costs and prices all signal deflation and would take the edge off of some of the previous energy pass through stagflation in the supply chain.
Under this scenario, risk premiums could stay the same or go lower, making todays bond yields seem high. The $64K question is what will the dollar do vs a basket of other currencies?
We are starting to believe that the dollar will hold its own between 1.25 and 1.30 Euro as all currencies will be devalued and deflation may be the order of the day.
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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