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Notes to myself, possibly of interest to others.
-- Bill Northlich

Monday, October 26, 2009

Rosenberg Daily - RT @Rosenberg: "Some Yellow Flags"

  • U.K. real GDP, instead of edging up 0.2% QoQ in Q3 as everyone expected, contracted 0.4% instead.
  • Global trade flows, as per the just-released Netherlands Bureau for Economic Policy Analysis, fell 2.0% in August from July — an indication the recovery that has everyone so excited may be a tad more fragile (didn’t Mark Carney use that word?) than generally expected.
  • The Dow Transports are sending off a troubling signal — down 3.5% on Friday in the fourth decline in a row as well as the worst showing in two months. In fact, the index has not made a new high since September 15 and have put in a classic double-top.
  • In another sign of a possible investor move to lighten up on risk, the Russell 2000 also closed the week down 2.5%.
  • The market, last Friday, continued to post declines on higher volume; and, a majority of the up days in market were on lower volume. We realize that some will guffaw at the technicals, but in a technical as opposed to fundamental market rally, the technicals need watching. As the Investor’s Business Daily correctly points out, “six distribution days on the Nasdaq and eight on the S&P 500 would in most circumstances be enough to kill an uptrend.”
  • Did you see the VIX index (a measure of volatility in the equity market) jump 7.0% last Friday, to 22.3 — a bit of the complacency (but not nearly all) may be coming out of the marketplace.
  • The financials sagged 1.6% on Friday and have done squat now for 5½ weeks.
  • Just as the economists are taking their housing numbers higher, in classic “sell the fact” mode, the S&P Homebuilding index just closed down 18% from the mid-September high. That almost classifies, dare we say, as a … bear market!
  • Oh yes — this is surely a sign that the credit crunch is behind us. Regulators closed seven more regional banks last Friday, bringing the tally for the year to 106. There have been more bank failures this year than in the past 15 years combined, and the only reason why the big boys never followed suit was because the government guaranteed all their debt and then allowed them to hide their losses by switching to mark-to-model accounting from mark-to-market. Believe us when we tell you that even the most renowned experts could not tell you what is really sitting on the balance sheets of these large U.S. banks — but there is limited downside risk because Uncle Sam has deemed them all to be ‘too big to fail’. Those who were investors in American United Bank, well, we are sorry to have to tell you that you were involved in an institution that was small enough to close down.
  • We realize that this did not make it anywhere in the weekend press (outside of a microscopic piece in the IBD) but the ECRI leading economic indicator actually fell (by 0.2 of a point) for the second week in a row (and the smoothed annualized growth rate declined 1.6% —- now what is that all about?).

--- Rosenberg, 10.26

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