The market is treading water this morning, for while the economic data was not what you might call 'encouraging', we have our first installment of the next round of POMO tomorrow. Thus anyone thinking of shorting or taking a profit has come to the conclusion that today is not the day. Volume is extremely light and gold continues to climb higher. The VIX is higher this morning in the mid 19's. I have postulated since last Spring that if the VIX goes sub-17 then one should look to buy long dated calls (22's, 23's, etc) and prepare for a market pullback. Complacency is definitely on the rise. 'The market will go up forever, because the economic data will improve or Ben Bernanke will drop a trillion dollars out of a helicopter...' While it may be wishful thinking on my part, something tells me that such arrogance almost always gets punished by the market. Stay tuned.
On to the day's economic data.
Initial claims rose for the first time in 3 weeks to 462K vs. 450K expected and 449K prior (revised up from 445K). Continuing claims fell to 4399K from 4511K prior (up from 4462K) and 4450K expected. As the figures are still hovering around the 450K mark, this doesn't come as too much of a surprise. Its obviously still bad, but not outrageously so versus the running average.
PPI came in at 0.4% vs. 0.2% exp'd and 0.4% prior. Core PPI was in-line at 0.1% vs. 0.1% prior and expected. The non-core PPI was higher due to increased prices for food and fuel. It would appear that Bernanke's inflationary regime is working...to at least drive up prices on consumer non-discretionaries. It doesn't take a genius to understand that this is a strong negative for the health of the American consumer.
The trade deficit widened to $46.3B in August, with the deficit with China at an all-time high. The deficit is running at an annual rate of $502.B, up 34% from last year's $374.9B, which of course was much lower than usual due to the ongoing recession. The higher than expected trade deficit suggests an even lower 3Q GDP and more rhetoric surrounding a revaluation of the remnimbi.
Nothing in the above comments should be taken as a recommendation to buy or sell any security.
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