Thrilling Thursday Wrap-Up

That was fun!

While it sure was a lot of work just to get back to Monday's open today, it sure beat the alternative.  We didn't hold it though but we were totally on top of the situation as I warned members at 11:26: "While I think this rally is great, I also think it’s a bit much off all that terrible data so be careful!" and by 1:13 I said: " I’m starting to add Sept covers into this rally as I am concerned that tomorrows big data day (very unusual for a Friday) will give THEM and excuse to beat the crap out of the markets into expiration."  We got a little more bullish into the close as oil barely retook $115 on a totally BS pump and gold simply fell apart all day, indicating snowballing dollar strength.

Globbal economic uncertainty is sending investor money flying back into the dollar and US equities are simply flying off a V bottom when priced in Euros or Yen (see weekly chart).  We are pushing up against some short-term resistance and I'm very concerned that tomorrow morning's data is going to be used as an excuse to tank the market on expiration day, which would thrill us as we look to take out some callers. 

At 8:30 we get the Empire State Index for August, which is very likely to come in at a recessionary looking -5.  Couple that with recessionary panic that is already gripping Asia and Europe and the bears can make a good case for a global recession.  At 9 am we have Net Foreign Purchases for June – while money has been flying back to the US since mid-July, June was the dollar's worst month so this is a number that should be ignored but could be spun negative.  At 9:15 we get Industrial Production and Capacity Utilization for July, both are likely to be flat to June's uninspiring numbers.  At 10 am we get the Michigan Consumer Sentiment numbers for August and, as we discussed in member chat – you can buy a house there for $1,000 an there are no takers, so I can't imagine consumer sentiment is going to be much higher than the anemic 61.2 of Friday, July 11th – the beginning of a 3 day market drop that finally gave us a bottom on the 15th.

So that's my concern for tomorrow and you'll forgive me for being a little cautious, if we get past tomorrow, I'm fine with next week's data other than next Thursday's Philly Fed but if NY is up today, then Philly should be improving too.  While any week above 11,500 may feel like a good week, we have made very little progress against last week's Big Chart but it is progress, nonetheless:

The Transports added two green boxes, getting back over the 20% line and crossing their pathetic 50 dma at 2,462 and holding it well this week.  Next stop is the 200 dma at 2,600 and that should prove a little tough to break through so we'll be watching them closely but a big breakout when they get over there so watch the IYT callers.  The Nasdaq did what it had to do for us and not only blew through our feeling better zone and the 50 dma but took out the 200 dma yesterday for good measure.  If the Nas can hold that line today, we could be in very good shape!

The SOX are still pathetic and the Russell is still great and Asia is still pathetic and Germany lost a green at 20% so we'll keep an eye on France's CAC and London's FTSE at the 50 dma as they are both right on the line.  So all is well with our global rotation theory but we don't want to see other markets fall into an abyss as we are all more or less attached at the hip.

Let's be very careful tomorrow, if commodities continue to fall they will drag the markets down as commodities led us up on Wednesday off the bottom and they only gave half of it back today.  KSS and JWN both beat but were not thrilling with guidance and RICK missed – a very serious sign of economic troubles if people can't spare a dollar to stuff into a stripper's G-string!