The market got some pretty good data Thursday. But I still see some serious red flags for the U.S. economy.
The S&P has now crossed the 1,700 level, but the e-mini futures have been lagging. The market has enjoyed a nice run in the last month, and I am looking for some profit-taking. For that reason, I am selling the S&P e-mini.
So what levels am I watching?
Resistance is 1,702 to 1,705; after that, it’s 1,720 to 1,725. Support comes in at 1,670, and then 1,650.
Car Sales Miss Expectations Across The Board
While much is being made of the ISM smash this morning and China’s ‘official’ PMI overnight, it seems cognitive dissonance is on the rise as China’s ‘other’ PMI collapsed and US Construction Spending dropped precipitously. It was only a month ago that ISM was sub-50 and that housing (and construction spending) was set to lift us out of the growth-scare. Apparently not. But there is another pillar of this recovery that has been stalwart during the equity market rally – that of US auto sales… until now…
- *FORD U.S. VEHICLE SALES UP 11%, EST. UP 17%
- *GM JULY U.S. VEHICLE SALES RISE 16%, EST. UP 20%
- *CHRYSLER JULY U.S. VEHICLE SALES UP 11%, EST. UP 16%
It seems that all that channel-stuffing, subprime-lending, term-extending has hit its peak as, despite smiles and being ‘pleased’, US auto companies are underperforming expectations (as Ferrari exceeds).
Here’s Some Fodder For The Chinese Economic Data Truthers
Strong PMIs out globally today, but is the party over? $ES_F 1700 x 1666
We sit far apart on our top and bottom calls, 1697 x 1666, 30 points! Looking at our ATR you can see that volatility is expanding and that is not the way that new highs and follow-through rallies are made. The market is expending energy just to hold here.
We have been looking for this last push to move up and exhaust. We think this might actually be it after some more upside first, though.
Increasing Probability for Cyclical Recession
Mitchell Clark writes: This is a big week for capital markets, with the Federal Reserve meeting and July’s unemployment numbers to be released on Friday.
One thing that’s been clear with the stock market is that it has been staying lofty, mostly due to the expectation that the Fed will continue quantitative easing. But under this continued monetary stimulus, financial results are showing mediocrity.
China Stocks World’s Worst Losing $748 Billion on Slump
Four years after China’s growth helped lead the global economy out of a recession and won the admiration of luminaries from billionaire George Soros to Nobel laureate Joseph Stiglitz, the nation’s stock market has lost more money for investors than any other in the world.