Markets Economic News

Treasuries advanced after government reports showed the economy grew at a slower pace in the second quarter than forecast, fueling speculation the Federal Reserve won't raise interest rates this year.

The gains pushed two-year notes to their biggest monthly rally since February after the growth report, which contained revisions that showed the economy may have slipped into recession during the last three months of 2007. Initial claims for unemployment benefits reached the highest level in more than five years. Initial jobless claims increased by 44,000 to 448,000 in the week ended July 26, from a revised 404,000 the prior week, the Labor Department said. Economists had forecast a drop in claims. The total number of people on benefit rolls rose to the most since December 2003.

The bond market still isn't providing investors with enough income to cover the rate of inflation, which rose 5 percent in the year ended June 30, Labor Department data show. The Standard & Poor's 500 Index has dropped 13 percent this year and the dollar declined 4.7 percent against the currencies of six trading partners as U.S. financial institutions posted losses and writedowns totaling $250 billion in the deepest housing recession since the Great Depression.

According to the Kiplinger Letter released yesterday, "California will fare well in the increasingly competitive global economy. Current job and housing troubles are only a pause in a wave of growth that will carry the state in a rising tide of expansion over the next 10 years."

July 31 SP 500 Daily large

No big news lots of Volatility

President Bush signed The Housing and Economic Recovery Act of 2008 this morning, despite a plea from the CEO of Nehemiah, Scott Syphax, asking the President to save the seller funded DAP program. Seller funded DAPs will be eliminated under the new law.

Without any significant or substantially reliable economic news this week, financial markets have been wildly volatile. The Dow lost 240 points on Monday, then rose 260 points yesterday. This morning the ADP Employment Report was released and showed an increase of 9,000 private sector jobs from June to July, which was a big surprise when compared to expectations that ADP would report a loss of 60,000 jobs. Stock futures pointed to a lower open prior to the ADP report, but reversed course in a huge way upon the report's release and The Dow opened up by more than 150 points this morning.

Two reports are scheduled for tomorrow. The quarterly Gross Domestic Product, which is a key indicator and measure of the countries growth, and the Q2 Employment Cost Index, which measures the cost of wages and benefits (wage inflation).

Budget deficit, Merrill and housing

Treasuries fell on speculation Merrill Lynch & Co.'s sale of securities linked to mortgages may signal that losses at banks and brokers are reaching a peak, reducing the haven appeal of government debt.

U.S. debt rallied yesterday as stocks slid and the International Monetary Fund said there's no end in sight to the U.S. housing slump. Two-year note yields fell 14 basis points, the most since July 14, to 2.57 percent. Treasuries underperformed European bonds and emerging market bonds as investors demanded higher yields on U.S. notes to compensate for the prospect of increased debt issuance.

The U.S. budget deficit will grow to a record $482 billion next year, the Bush administration said yesterday. Government borrowing needs will rise to $171 billion in the three months to Sept. 30, $59 billion more than predicted in April, the Treasury said in a statement in Washington yesterday. The budget shortfall reflects dwindling tax receipts because of the economic slowdown, the cost of a $168 billion stimulus package and spending on the wars in Iraq and Afghanistan.

July 24 S&P 500 hits bottom target

Here we are running back on our wonderful rally. We have a 34 point range today. Needless to say it was a very heavy trend.

Selllers were committed most of the afternoon. Dependant on the gap in the morning lets see how we can play it. if we gap down and shoot through 1240 then to the 20's we go.

I don't see where the support is going to come in as hedgies have loosed their positions in the financials again. Remember our memorandum from to days ago no shorting the banks unless you have an agreement borrowing those stocks.

Shall be exciting because it will be setting the pace for the following week.

July 24 at the close financials and banks down

Look at the Red. Yesterday it was green and today they gave it back. We don't have much news tomorrow. I bet the summer holidays won't be starting early with this much movement going on.

July 23 daily after hours SP 500 emini

Looks like we testd up again today. Volume kept us up there. Looking for 1305 for major resistance and 1320 on a large volume spike. If oil keeps going down this will be an excellent opportunity to put in a longer term swing trade.

On the down side look for a reversal back to the lower tl, and dependant on what type of Gap we have open we could see it turn tomorrow afternoon.

Treasuries fall and Freddie and Fannie are saved

Treasuries fell for a second day before a record sale of two-year notes as concern dropped that financial companies' losses will widen, easing the haven appeal of government debt. What seems to be overhanging the market is the perception that the Fed wants to increase the rates. In fact, Philadelphia Fed President Charles Plosser said yesterday the central bank should raise interest rates ``sooner rather than later'' to prevent price expectations from getting out of control.
Futures contracts on the Chicago Board of Trade showed a 61 percent chance the central bank will increase the target rate for overnight bank lending by at least a quarter-percentage point, up from 25 percent odds a week ago.

Inflation expectations have fallen in the past two-and-a- half weeks as the cost of a barrel of oil has dropped about 15 percent from a record $147.27 a barrel on July 11, Treasuries indicated.
The House of Representatives is set to vote today on the rescue plan for mortgage-finance companies Fannie and Freddie. The central bank's Board of Governors on July 13 authorized the New York Fed to lend directly to Fannie Mae and Freddie Mac to meet their liquidity needs if necessary.

July 22 SP 500 Emini Daily

It was the 3.5 million volume spike that changed our direction. I mentioned this about two weeks ago that the turnaround would come after a volume sell off. The market makers are luring in a fresh batch of investors that will supposedly be buying the bargains. Watch out, don't fall in love with this rally, another investor spike will turn this around and the market makers will wipe this rally out.

Financials have had a little rally because things aren't as bad as they seem. It is bad......we will see in the next few weeks.

With all the support the financials are getting naked shorts out of the market on Banking stocks I expect a rally to previous swing high (1278) and then we will see who will be taking profits.

Will be a big day for xlf, rkh, bac, c, wfc, and wb.

After that who knows, we might see some consolidation or profit taking.

This is an example of a letter I recieved about shorting the big guys:

IMMEDIATE CHANGES TO CERTAIN US BANKING SECTOR CFDsOn 15 July 2008, the U.S. Securities and Exchange Commission (“SEC”) issued an emergency order (“ SEC Order”) that was created to protect investors against the “naked” short selling of 19 US traded financial companies. The SEC Order will be effective from today Monday, 21 July 2008.The SEC Order means that no person may short sell any of the 19 listed CFDs or Stocks, unless they have borrowed, or arranged to borrow, the security prior to affecting the sale, and deliver the security on the settlement date. This means that that a client must have borrowed the security, or arranged to borrow it, prior to executing a short sale. As it is now, the SEC Order will be effective from Monday, 21 July 2008 through to 11:59 p.m. EDT on 29 July 2

Bank of America (BACnys) • Citigroup Inc. (Cnys) • Credit Suisse Group (CSnys) • Allianz SE (AZnys) • Goldman Sachs (GSnys) • JP Morgan Chase & Co. (JPMnys) • Lehman Brothers (LEHnys) • Merrill Lynch (MERnys) • Morgan Stanley (MSnys)

INSTRUMENTS ALREADY SET AS NON-SHORTABLE (PRIOR TO THE SEC ORDER)• Barclays Plc (BCSnys) • Deutsche Bank AG (DBnys) • Royal Bank of Scotland Group Plc (RBSnys) • UBS AG (UBSnys) • Freddie Mac (FREnys) • Fannie Mae (FNMnys)

ADDITIONAL SECURITIES AFFECTED BY THE SEC ORDER BUT NOT OFFERED BY SAXO BANK• BNP Paribas • Daiwa Securities Group Inc. • HSBC Holdings Plc • Mizuho Financial
Best regards,Saxo Bank

Rally away boys.

Treasuries, Bonds and bail out.

Treasuries fell as Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank should raise interest rates ``sooner rather than later'' and traders prepared for the sale of $58 billion in government debt this week.
Treasury Secretary Henry Paulson's plan to revive U.S. mortgage financing depends on investors buying the same kind of bonds they're shunning in Europe. Paulson wants to create a version of Europe's market for covered bonds in the U.S. just as sales of the debt have fallen to a six-month low and prices have dropped 2.5 percent this year. While the securities are backed by loans and bank assets to get AAA ratings, most are valued, on average, as if they were three levels lower. As I have mentioned before the insurers for these bonds are ll going under. This could be our next crisis.

Developing a U.S. market for the securities is the latest of Paulson's initiatives to revive lending among banks crippled by $452 billion of credit losses and writedowns. His plan for a ``SuperSIV'' to bail out the $400 billion market for structured investment vehicles(What planet is our government from?) failed last year after Wall Street firms rescued the credit funds independently. Both Democratic and Republican senators are looking for changes in the Treasury secretary's proposal this month to shore up home lending by allowing the government to buy stakes in Fannie Mae and Freddie Mac.

Not as bad as thought sparks a small rally

Bank of America, now the biggest U.S. consumer bank and home lender, said second-quarter profit fell less than analysts estimated. BofA said net income declined 41% to $3.41 billion from $5.76 billion a year earlier. That beat estimates.

We still have Wachovia and WaMu earnings ahead of us this week, but four of the nation's five biggest banks have now reported better-than-estimated results, sparking a rally in financial shares.
These are some at risk institutions: Downey Financial, Corus Bankshares, Doral Financial, FirstFed of Santa Monica, Oriental Financial, BankUnited Financial, BFC Financial, First BanCorp, Flagstar Bancorp of Troy, Mich., Santander BanCorp of Puerto Rico, and Washington Mutual Inc. (WM) of Seattle. Read more at http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20080721/REG/278316415

The 10-yr bond is up to 4.09%. We have $56 billion in Treasury supply this week (2-yr, 5-yr, and 20-yr Treasury Inflation Protected Securities), but the only data today is Leading Economic Indicators at 7AM PST, expected to show a decrease of 0.1%.

Tomorrow brings the July Richmond manufacturing index, the May house price index, and on Wednesday we'll see the Fed's beige book follow on Wednesday. Thursday brings both weekly initial unemployment claims and June existing home sales. Lastly, Friday brings June durable goods orders, the final-July US consumer confidence report, and June new home sales.

Ready for Next Week, News and the S&P 500

July 16 DJIA hourly bounce off of support

Up 279.74 2.52%
high 11,244.17 Low 10,918.33 Close 11,239.28

We had a little respite on the blood letting in the market. Don't fall in love with this rally as the blood letting will continue this week.

We stopped right on previous resistance before we hit the bottom and dependant on news we could settle around 11,100 and maybe retest the 10,820 area again. If we break through this support it doesn't look good for the markets.

Thursday, July 17, 2008
Before: AOS, AMFI, APH, BK, BAX, BBT, BLK, CHB, CIT, KO, CCE, CMA, CAL, COT (?), CY, DHR, FCS, FCF, FHN, F (?), GPC, HOG, HNI, HBAN, ITW, IIIN, IGT, IONA (?), JCI, JPM, KNL, MMR (?), MEG, MEI, MTG, NAFC, EDU, NXY, NOK, NVS, NUE, ORB, PNC, PPG, RS, SWY (?), SCHL (?), SON, SPWR, AMTD, TXT, UMPQ, UTX, USAK (?), WSO
During: HTLD (?)
After: ACTS (?), AMD, ATR, ARNA, AVCT, BRO, CLMS, COF, CIM (?), CBST, CYT, ESLR, EXAR (?), FBC, GILD, GOOG, IBM, ICUI, INFA, IUSA (?), LCRD (?), LEG, MER, MSFT, NVEC (?), PNFP (?), PMCS, RUSHA, SPP (?), SWKS, SYK, SRDX (?), SYMM (?), TPX, CHIP (?), WERN, WIT, ZION

July 16 S&P 500 daily

Market news for this week

Wednesday, July 16, 20088:30a.m. Jun Consumer Price Index: Previous: +0.6%. 8:30a.m. Jun CPI, Ex-Food & Energy: Previous: +0.2%. 9:00a.m. May Treasury International Capital Flows: Previous: $60.6B. 9:15a.m. Jun Industrial Production: Previous: -0.2%. 9:15a.m. Jun Capacity Utilization: Previous: 79.4%.10:20a.m. Crude Inventories 1:00p.m.Jul NAHB Housing Market Index: Previous: 18. 2:00p.m.

FOMC MinutesThursday, July 17, 20088:30a.m. Initial Jobless Claims For Jul 12 Week: 8:30a.m. Jun Housing Starts: Previous: -3.3%. 10:00a.m. Jul Philadelphia Fed Business Index: Previous: -17.6. 10:00a.m. DJ-BTMU Business Barometer For Jun 28:

Friday, July 18, 2008There are no economic indicators scheduled for today.

Treasury could buy Fanniew Mae and Freddie Mac

Treasuries gained as stocks fell, led by financial companies, highlighting rising concern that problems for the U.S. banking system may be worsening. U.S. stocks fell, sending financial shares to their lowest level since October 1998, on heightened concern that bank failures will spread. Washington Mutual Inc. posted its biggest drop ever and National City Corp. tumbled to a 24-year low after last week's collapse of IndyMac Bancorp Inc. spurred speculation that more regional banks may be short of capital.

Treasuries initially declined, pushing the yield on the 10- year note to the highest in almost two weeks, after Treasury Secretary Henry Paulson put a plan before Congress to provide support to Fannie and Freddie, the government-sponsored enterprises that purchase or finance almost half of the $12 trillion of U.S. mortgages.

There are some that feel that the U.S. Treasury Department's plan to shore up Fannie Mae and Freddie Mac is an unmitigated disaster and the largest U.S. mortgage lenders are basically insolvent. Some bet that Fannie Mae shares will keep tumbling. Fannie Mae's market value is now about $10 billion, down from $38.9 billion at the end of 2007. Freddie Mac's market value has shrunk to about $5 billion from $22 billion at the end of last year.

July 11, Dow tumbles S&P Bounces Hard

Fannie Mae, and Freddie Mac are kicking the market when it is down. Fortunately Big Brother Ben stepped in, gave them both a life saving IV (opened the lending window) before they entered the suicide list.

The dow took it the hardest as it dipped down below 11,000 for the first time in two years which traded down more than 250 points in the session, briefly moved into positive territory in the afternoon before ending down more than 125 points. Now that it has been tested, next week we will probably thrash it.

The Dow is down 21.6% from the record closing high of 14,164.53 it reached in October. The S&P 500 is down 20.8 % and the Nasdaq is off 21.7 %.

The fiery convergence of the Housing crisis, subprime crisis, capital availability, lending requirements got another dose of gasoline, literally as oil, continued its ascent, rising to a trading record of $147.27 amid tensions between the West and Iran. Light, sweet crude for August delivery settled up $3.43 at $145.08, slightly below a record close of $145.29 a barrel set more than a week earlier.

Have a great weekend.

Market news for this week

Treasury 10-year note yields held near a one-month low amid a rise in crude oil and concern that mortgage-related losses at financial firms will widen. Oil advanced after a U.S. government report showed a bigger-than-forecast decline in inventories. Freddie Mac and Fannie Mae fell after Fannie sold $3 billion in notes at higher yields than in past offerings. Many strategists believe that rising oil is going to affect consumption, it's going to affect earnings, so it's going to affect financial institutions' ability to recover.

Mortgage Bonds had a great day on Tuesday which allowed most lenders, to issue improved mid-day pricing. The rally has continued this morning, at least mildly, as the Fannie Mae 6.00% coupon is improved by 12 basis points. The 10 Year Treasury Note is currently yielding 3.88% ( this is good for 30 year Mortgages, because most are tied to this rate) while stocks are in the red by 30 points in early trading. Tomorrow we'll hear from the Labor Department with their weekly report on initial unemployment claims and that's about it for this week's economic calendar. I suspect now that Q2 is behind us, most traders will be taking their cues from corporate earnings reports during the next several days... GE will report on Friday and their numbers are generally considered a strong indicator for the economy.

July 9 S&P 500 daily

A little change in direction. As long as oil retraces we will see our market go up.

July 7 SP 500 emini daily

The daily looks like we have some more room down. If we open with a gap down, I would expect to see a brief rally and then continuation to the downside with 1233 as first target.

Looking for a 3.5 million volume day, it looks like it is on the horizon as volume is picking up. Lots of volatility and news is sending is in all directions. Oil is adding alot of volatility to the mix also.

You would think with a $4.00 a barrel drop we might have closed positive but the market just gave up its rally before the close.

If we open gap up or neutral we can test 1260 then 1269

S&P 500 Emini Weekly chart

This is the weekly chart for the S&P 500 Emini. As you can see we have a trendline just under 1233 with another area of support at 1213. I expect us to test it this week as the Dow approaches 11,000.

Watch for some major support and buyers to come in in the the 1213 area, from here we have a nother 30 points to go for the next major support. We are also watching to see if we get new lows on the RSI for a continuation on this move.

July 3 SP 500 up 2.75 before the three day weekend

Treasury two-year notes gained after reports showed payrolls fell for a sixth straight month and U.S. service industries unexpectedly contracted in June, reducing speculation the Federal Reserve will raise interest rates. Which by the way puts us behind the Euro again. We will see a pull back on the euro but am expecting to hit new highs.

The 62,000 drop in payrolls was more than forecast, and followed a revised 62,000 decline in May that was greater than initially reported, the Labor Department said in Washington. The jobless rate remained at 5.5 percent after jumping in May by the most in two decades. The drop in payrolls in each month of the year is the longest streak since 2001-2002. The economy shed jobs for 14 months beginning March 2001, the same month it entered a recession.
Some analysts and investors are reversing predictions that the worst of the credit-market contraction is over after more than $400 billion of writedowns and losses by the world's largest financial institutions. Lehman Brothers Holdings Inc. last month increased its quarterly loss estimate for Merrill Lynch & Co. and more than doubled its prediction for Merrill's subprime writedown, to $5.4 billion.

Citigroup Inc. and Merrill had their second-quarter earnings estimates cut yesterday by Oppenheimer & Co.'s Meredith Whitney on expectations of writedowns related to the subprime market and bond-insurer downgrades. Crude oil futures touched a record above $145 a barrel in New York on concern conflict with Iran would cut oil supplies.

Oil pullback and then off we go.

The question, what does it look like for the price of oil?
Lets see, war with Iran, hurricane season on way, Refinery utilization down, global demand sky rocketing, cantrell oil field production down causing mexicos overall exports to drop 12.5% this month, I am bullish oil.

But I am bullish after we see a bit of a pull back. We didn't push through the 150 price by the fourth of July so it looks like we will see a bit of a pullback and then take off. World is still in consumer price shock to these surging prices and demand will fall off a bit as discretionary traveling will go down. Remember this is summer and the biggest time for families to take vacations. Give them a few weeks bottled up in their homes with the kids and the toys will be broken out and we will see families hitting the road for shorter trips in the RVs with boats and ATVs.

Unemployment rate

The unemployment rate in May jumped more than it has in over two decades, reaching its highest level since October 2004 and emphasizing the recessionary risk the U.S. economy is currently facing. The civilian unemployment rate spiked to 5.5 percent from 5.0 percent in April, coming in much worse than the expectation of 5.1 percent. The last time the unemployment rate jumped half a percentage point was February 1985. With nearly 49,000 jobs cut from payrolls following decreases of 28,000 in April and 88,000 in March, May marked the fifth consecutive month of job losses. Overall, the economy has shed 324,000 jobs this year.
The latest decrease was led by declines in construction, professional & business services, retail trade, and manufacturing. Revisions to March and April resulted in a net revision downward of 15,000. On the inflation front, average hourly earnings advanced 0.3 percent in May, coming in above the market projection for a 0.2 percent boost.

With widespread payroll losses, the May non-farm report clearly portrayed further deterioration in the labor sector, lessening the ability of the consumer to support economic growth. The jump in unemployment may very well have been exaggerated for technical reasons such as graduating college students attempting to enter the labor market, but nevertheless points to weakening in employment. May's report has also put the Fed in a tough situation by lowering the odds of a healthy rebound in economic growth later this year. Treasury yields fell on the news and equities fell under downward pressure.

For week ending June 21, the Labor Department reported that the advance figure for seasonally adjusted initial claims was 384,000, unchanged from the previous week's revised figure of 384,000. They also reported a four-week moving average of 378,250, an increase of 2,250 from the previous week's revised average of 376,000.

SP 500 daily could crack support soon

We are making attempt at the support. This move has a bit more strength behind it compared to March's push down.

Normally, I would not expect it to push through before a 3 day weekend. But the news is not good and sentiment says short. Sentiment is behind and they are just starting to short the market so there is some room to go down. How much, we shall see.

Lots of different warning signs popping up. If anything happens with Iran I expect to see our currency take a beating and gold to go through the roof.

The next target on oil is $160, once we break the psychological $150 it is poised to take off.

Careful out there.