What is the state of the economy?

[Beet]

Something huge just happened in financials. Then again, 'huge' things have been happening in financials (the other direction) all month, none of which have any apparent sanity behind them.

- Shanghai decline is accelerating. An attempted technical bounce overnight failed.
- We have now had a double top in the bond market, failed to blow past 3.99 for 10s set in June.

Overall, we are probably going to get a declining trend for the next couple of months. Good news is already priced in. What to watch:

- Consumer spending. Evidence is that consumers are moving towards paying down debt.
- The job market.

Finally, there is the uncertain results of the Fed 'winding down' their programs, as well as the potential end of the $8k tax credit for housing.

[Sam Spade]

I will be nice and leave with some helpful advice for anyone who own stock.  I expect the ISM manufacturing index to beat expectations and to probably go above 50.  Please use any bounce that occurs based on this number to either start getting out of your stock market positions or finish getting out, whichever.  The parabolic blowoff I thought might occur Friday before last has not occurred and time has pretty much run out on that scenario, I suspect (or may have already run out - you know, they don't ring bells at the top).

You and others on this forum have been whining in the face of the best 6 months of the stock market in over 70 years!  Barring external factors, this market is not going to implode, but it does need a correction.  I for one would love to see a 10% pullback in the S&P with financials off 20% from these levels.  It would be a GREAT buying opportunity.

The vast majority of last week’s and today’s economic reports blew away the estimates.  The fact that the market eased off in the face of all these good reports simply means the market needs a breather.

Barring a geopolitical blowup, we are going to have at least 3% GDP growth the last 2 quarters of this year.  There is literally a wall of money, that is still frozen and illiquid, waiting to enter the economy.  This growth will help free up a good portion of that money.

Whiner?  Really?  You know that I don't trade except for the long-term and my views on the fundamentals of the economy are not to be used as trading vehicles (if I haven't made that clear, I'll make it clear again, now).  Since I don't play day-trader, I avoid bear markets because they have a tendency to eat bears and bulls alike, something we should have learned over the past year or maybe even today (but will have the opportunity to learn again).

But when I give trading advice, you should listen (and this is all documented in the record).  At the March lows, I said we either crash or bounce severely here.  After the first couple of days of bounce, I either said that I suspected was the big move up that I was expecting (I had actually expected it earlier in the year).  I gave an expected target of SP @ 875, a quite possible target of SP @950-1000 and an extreme target of SP @1050.  I think I also called for a pullback at SP @780 in the bounce up which never occurred and I think I also said that SP@955 was a probable top (to prove we're not all perfect).  In short, if only I had listened to myself...

Anyway, I see you listened to me today (smart).  I rarely give such excellent info (almost insider info), but I had it last evening.  Maybe if I had actually traded on it, the SEC would try to catch me (they couldn't catch a cold, but whatever).  Here's my advice right now - lay low on the stock market except for quick day-trades unless we significantly break SP@1015 on volume.  That means there is actually another slight leg up and things didn't just start blowing up today.  My long-term view is that targets for this move over the next few months range from SP@875 to SP@800 and a possible extreme of SP@750.  Don't think we break the lows in this move.  That will be saved for later.

My fundamentals advice right now is to watch China.  Not necessarily the stock market, but everything.  They are in the process of cutting short any possible nascent recovery you might dream of, not to mention laying the groundwork for screwing any institution or person who invested over there.  It will be fun to watch.

EDIT:  Meant to include in the overall analysis, we can bounce at SP@965.  But it must hold there for there to be another up-leg that I'm not presently thinking will occur.
 

You must be logged in to read this quote.

Labeling opebo and me as one and in the same is like comparing a drug addict with someone who takes medication only during times of illness.

[/quote]

But when you've both overdosed on the drug, what's the difference?

[Sam Spade]

Something huge just happened in financials. Then again, 'huge' things have been happening in financials (the other direction) all month, none of which have any apparent sanity behind them.

- Shanghai decline is accelerating. An attempted technical bounce overnight failed.
- We have now had a double top in the bond market, failed to blow past 3.99 for 10s set in June.

Overall, we are probably going to get a declining trend for the next couple of months. Good news is already priced in. What to watch:

- Consumer spending. Evidence is that consumers are moving towards paying down debt.
- The job market.

Finally, there is the uncertain results of the Fed 'winding down' their programs, as well as the potential end of the $8k tax credit for housing.

I heard a rumor of a "large bank default". (ninth-hand)

[Beet]

Sam, I'll give you the bear market rally call, but the problem is your predictions tend to be extremely vague and you tend to hedge a lot-- I don't blame you for it; I never make definite "numbers" predictions myself and when I do I am usually wrong. But you do phrase your predictions so that you can say you were right in different scenarios.  For example, if we had gone into a 'parabolic blow-off' in the past couple of weeks, you'd also be able to say you were right.

[Swing low, sweet chariot. Comin' for to carry me home.]

Anyway, I see you listened to me today (smart). 

LOL!  Next you'll claim you're the real father of my children.

(careful on your next retort, Sam)

[Sam Spade]

Sam, I'll give you the bear market rally call, but the problem is your predictions tend to be extremely vague and you tend to hedge a lot-- I don't blame you for it; I never make definite "numbers" predictions myself and when I do I am usually wrong. But you do phrase your predictions so that you can say you were right in different scenarios.  For example, if we had gone into a 'parabolic blow-off' in the past couple of weeks, you'd also be able to say you were right.

Nah, I understand Beet.  I'm just beating my chest a little today.  Have to do it ever so often, feels kinda good. 

And yes I know I can be vague and hedge a lot, but short-term you get yourself screwed quickly if you don't, which is the reason why I speak about the long-term more often.

About the "parabolic blowoff", what I failed to include (mainly because the actually move that day was rather silly and pissed me off) is that it needed to happen quick, otherwise the odds for it went down significantly.  We are in that same situation right now, either SP@1015 is regained fairly quickly (couple of weeks or so) or no last leg up.

[opebo]

Whether or not Obama can liberate himself from the "cult of neoliberalism", I don't know - but there won't be any going back to pre-Reagan tax rates; a welfare system that rewarded idleness over work

Well, you just answered your own question then.

The way I see it is this:

Left: WELFARE ('Great Society')..... Center: WORKFARE ('New Deal')....

Absolutely nonsensical distinction there that doesn't recognize the real problem at all, and is merely a case of kicking people while they're down.  But I understand your kneejerk christian morality.

There you have it. Classical liberalism produced a catastrophe (the seeds of the 'Great Depression', precipitated by the 'Wall Street Crash' were sown while Coolidge snored - and farted) and neoliberalism produced a near catastrophe.

Well done, negative freedom . It's frustrating to think just how many still subscribe to it

As for the Republican Party, it's rightwing dogmatoid to the point of encapsulating Einstein's definition of insanity. If there were any standards of good governance whatsoever that party would have hit 1932 levels by now

I agree with you, mostly.  How would you feel about a generous dole with out a work requirement and/or a 30 hour work week?

[opebo]

The danger is that I'm a bit too early and that the jmfcst/opebo's of this world will continue to crow ...

Labeling opebo and me as one and the same is like comparing a drug addict with someone who takes medication only during times of illness.

Um, in this context which of us is the addict?  Because you're far, far more enthusiastic about this 'the economy is on the mend' idea than I.