Consumer
prices were up 0.5% in July. That’s an
annual rate of 6% (if I am reading the data right) and that’s a very high number. If it is sustained by future data, the Fed’s
promise to keep interest rates low for the next 2-years is toast.
The Labor Department reported
that jobless claims were up by 9,000 to 408,000 in the week ended Aug. 13. That’s the highest in a month. Economists had expected jobless claims to be 400,000.
Fox Business News
reported:
(1) Morgan Stanley warned the global
economy is "dangerously close to a recession" and cut forecasts for global growth, because of "recent policy
errors" in the United States and Europe.
Goldman Sachs also cut its forecast of economic growth.
(2) “Deutsche
Bank cut its projection for
Chinese GDP growth to 8.9 percent for 2011 from 9.1 percent and to 8.3 percent
for 2012 from 8.6 percent, largely reflecting a downgrade in export outlook due
to slower growth in the United States and Europe.”
(3) Manufacturing
in the Philadelphia area showed a huge drop in August. The Philadelphia Federal
Reserve's manufacturing-activity-number came in at -30.7, far short of the
expected value of 3.7. A number below
zero indicates contraction. http://www.foxbusiness.com/markets/2011/08/18/daily-market-update/#ixzz1VOOhlQot
Taken together,
all of this makes a recession a near certainty.
If you have been reading this Blog for the past week or two, it
shouldn’t be much of a surprise. We have
been using the r-word (recession) since our SELL signal of 27 July.
The Navigate the
Stock Market computer analysis isn’t too important right now. We will need to successfully test the
previous low of (1119) and that is not likely, given that the news is getting
worse; more information is confirming that a recession is coming or already
started.
This
only reaffirms fears that we could see the S&P500 drop to the range of 1050 or as low as 825. If you really want to worry about this
stuff, we got out of the Great Depression by spending our way out. When it was finally over, after WWII, we had
a huge debt load. Because we already
have a huge debt load, it is not likely that we can spend our way out of this
mess. We seem to be faced with
unpleasant choices. Do little, and it is
hard to imagine our politicians taking that course,…or…spending even more on
infrastructure-stimulus-jobs-bills.
That may leave us with a very bleak future.
The NTSM analysis is HOLD today (based on early data, but it
might be Sell on the final numbers), but as I noted above, that isn’t too
important now,
I sold on the 27 July sell signal at S&P 500 1301 and I am defensively
positioned with only a small amount of my portfolio invested in stocks. (Zero
stocks in the 401k.) I have a 75% short
position in the trading portfolio using QID (2xshort the Nasdaq 100).
(See
the page “How to Use the NTSM System” – the link is on the right side of this
page).
