Tuesday, July 1, 2014

Good Morning America, How Are You?

I spent 4 hours yesterday whacking weeds with hand-held weed whacker.  I am sore today.  If I can get the energy, I will spend as many hours as my body lets me whacking weeds at the store.

Small Business Outlook

Summary: 

·         Monday, I suggested the market would be choppy.  For 25 minutes at the opening, the markets moved up.  Then they chopped.  Overall, yesterday was an up close on the S&P 500 over Friday, but it was a choppy day characterized by indecision.  The dollar sold off.  This morning before the opening of the equity markets in NY, the dollar is stable.  I would look for more selling today. 

·         Pound Sterling reached a 5 year high overnight.  UK manufacturing reported very good results.  The Bank of England will be under pressure to raise rates soon, one would think. 

·         Consumer Credit skyrocketed last week (according to reports).  Consumers are optimistic.  Personal spending, is down.  Why is that?  Is it because Healthcare costs have shot to the moon and headed out?  Is it because inflation for food and fuel have escalated knocking a hole in middle-class and lower class disposable income?  The data just does not compute. 

·         I am cautiously bullish this week.  If the really bad news last week did not knock the markets and the Democrats down, I don't perceive the news this week will be bad enough to take a toll on the market.  The wild card is geo-political pressures from the Ukraine, Syria and Iraq (with Iraq being the most volatile as they have to depend on an very undependable USA to help them).  In this day and age, countries in trouble would seem to find a better ally in Russia than in the USA.

·         Yesterday, the Ukraine called off the cease fire on the rebels, claiming Russia never complied anyway.  Gold should rise on this news, although so far investors are not going wild purchasing gold. 

·         ICS-Goldman Store Sales are reporting surging retail sales at major chains across all retail categories.  That bodes well for stock market prices.  However, Redbook is going in the opposite direction.  That kind of confusing data will not help provide direction on consumer spending.

·         Construction Spending is due to be released at 7:00 AM PDT.  The consensus range is too large to be of help. 

·         China manufacturing came in very well indeed.  So much for all the calls for an imminent economic downturn in China.  PMI readings in China, Japan, UK and the Eurozone are all showing expansion.   These readings are providing an upward trend in price for the S&P 500. 

·         Today, the market will open up.  Day traders need to be very alert today as the manufacturing reports get released early in the trading day.  However, no one is expecting any surprises.  However, the government has been manipulating the report through "seasonal adjustment" (read that as they did not like the numbers, and adjusted them).  They made these adjustments in the same day. ISM is a survey of 300 manufacturing firms using purchasing managers.  The report can be a market mover, but like surveys often are, the respondents replies are best guess. 

o   On a short-term basis, the S&P 500 is over-extended.  ISM number will be important.  If ISM number is not beyond expectations, then the stock market is vulnerable to profit taking.