Wednesday, September 30, 2009

Trading Thoughts

I reached maximum frustration today with the markets. When that horrendous of a number comes out and the market can't break a stupid technical trendline, what is the point of having economic data? We might as well just trade and invest in a vacuum. We hit the trendline not once but twice. The first time we hit it (remember the trendline is upward sloping and so actually higher at the end of the day than the beginning) we also hit the 20 day moving average. Somehow, stupid technicals once again trump fundamentals.

Not to harp on the Chicago PMI, but in my scenario I laid out on Sunday, I could not have imagined such a bad number. Production 47.2 versus 52.9 the previous month. New Orders 46.3 versus 52.5 last month. Backlog 36.7 versus 45.8 last month. (remember anything under 50 means contraction) I mean just a jaw dropping miss and speaks poorly for the future.

So today was the last day. For my prediction the last six months that we were going to see an August or September high before our next big leg down, 1080 on the S&P from last week will have to hold. Time will tell if that actually ends up being the case. The market seems to be turning and more importantly my economic thesis the last six months seems to be slowly starting to come to fruition.

Whether we hold that top or not, tomorrow is a key day.

At 7:30 am central time we have personal income from August, personal spending from August, and jobless claims. As I see it:

Personal income - don't have a good feel, would guess bullish (more workers back to work because of cash for clunkers in August)
Personal spending - high confidence that will be bullish (it is from August and cash for clunkers and strong retail sales could make this a blow out number)
Jobless claims - would guess bullish

Than at 9:00 am central time you have construction spending (from August), pending home sales (from August), and ISM index (from September)

Construction spending - bearish
Pending home sales - high confidence that will be bearish
ISM Index - bearish

The perfect scenario for the bears (this would be regardless of what economic data was being reported but actually plays out well with what is being reported and when) is a gap up open between 1060 and 1070 before selling off after the second round of economic data and finishing down strong at the end of the day breaking the trendline.

Those are just my educated guesses on the economic data. Obviously anything different changes the setup.

Something else to be aware of is that China is closed like the next six trading sessions. Very long holiday. Not sure that will impact anything but interesting nonetheless.

The dollar still is not trading like it wants to go higher. I guess when you have Bernanke against you who can blame you but technically it sure seemed like last week marked a good intermediate (six months) bottom.

I feel like I could throw a dart at a stockboard and whatever I would hit would be a good fundamental short. As today proves though, in the short term, fundamentals still don't matter. I invest on fundamentals with the belief that sooner or later they will. Sooner or later. Sooner or later. I will keep telling myself that. Ha


The Duke said...

Perhaps the key take away here is that most of the market does in fact trade in a vacuum.

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