Courtesy of Phil over at Phil’s Stock World
No change from yesterday.
We’re going to be watching the same bounce levels as we were yesterday and that was 8,370 on the Dow, which was the level I predicted we’d test in the morning post and was the day’s high on the morning “rally” at 10:06, after which the Dow quickly dropped 80 points. Now, with the Dow finishing the day 16 points lower, we’re going to need an even bigger boost just to hit our test zone (50 points). Pre-markets are up about half of that but that’s a pretty poor response to the OECD raising China’s GDP forecast to 7.7% from 6.3% and also raised it’s global outlook for members to -4.1% from -4.3% and they expect a 0.7% increase in GDP in 2010.
Aside from the fact that -4.1% still sucks, keep in mind that the OECD is like the global Chamber of Commerce whose charter is: “To achieve the highest sustainable economic growth and employment and a rising standard of living in Member countries, while maintaining financial stability, and thus to contribute to the development of the world economy and to contribute to sound economic expansion in Member as well as nonmember countries in the process of economic development.” In other words, this is like your local business council telling you it’s a great time to come downtown and enjoy the fine holiday shopping – not exactly a leading economic indicator. Is the OECD fiddling while the World burns or are they really onto something? We’ll get a better picture from the IMF, who give their mid-year forecast on July 7th as they actually wait for the half to end, rather than rushing out a statement to forestall a decaying trendline.
Even while I’m writing this (7:15) the futures are being jammed up like crazy and it looks like “THEY” don’t want to risk a real test and are going to try to get a gap open above our resistance points. Aside from Dow 8,370, we’ll be looking for S&P 900, Nasdaq 1,780, NYSE 5,800 and Russell 500. Failing those keeps us in a very serious downtrend and we still have to get past Durable Goods at 8:30, which are sure to be a bad number, probably down more than 1% from up 1.9% in April. Redbook Retal Sales for June are off 4.4% in the first 3 weeks, which doesn’t include Wal-Mart but WMT doesn’t sell many durable goods (as anyone buying their stuff can attest).
At 10 am we have New Home Sales but, at 352,000 last month (for the year) – what’s the point? Can they go lower? Can less than 19 homes a day be built in each state? Think about it – how many people can possibly be employed in construction when we’re only building an average of 19 new homes a day in each state? There are 100M existing homes in this country and, even if they lasted an average of 300 years, you’d still need to replace 330,000 a year! The way they build homes these days, that’s hardly a worry – so keep in mind this number is dead, dead, dead. We’ll hear the spin from LEN tomorrow and KBH on Friday but figure there are 10 major builders and hundreds of local builders all fighting to sell those 19 homes a day in each state – hard to imagine a good report there, not to mention the price declines:
Oh yeah! Things are sure looking like we’re right in the middle of a rebound aren’t they? I’m sure tomorrow’s 600,000 newly unemployed people will agree that it’s got to be time to BUYBUYBUY (end sarcasm font). We also have Crude Inventories at 10:30 today and expectations are for a 1.3Mb draw in crude and a 1Mb build in gasoline and an 800Kb build in distilates but, if last week’s big miss was any indication, this is a pipe dream by the oil bulls and we may have a lot less gas demand than they expected. Distilates may prove a problem too judging by the constantly downgraded airline outlooks. Planes that don’t fly tend to use less fuel – logic that seems too complex for energy speculators to grasp.