Whenever a well-known bearish analyst is interviewed in the financial press, it usually coincides with an important near-term market bottom — Clif Droke

1. 2Q GDP — U.S. economic growth slowed to 1.6% in the second quarter.
2. Magazine Cover — on Aug 22, the New York Times published what may as well have been entitled “The Death of Equities II.”
3. Bullish Sentiment at Lowest Level Since March 2009 — according to AAII, Bullish sentiment fell 9.4 percentage points to 20.7% in the latest AAII Sentiment Survey. This is the lowest that expectations for stock prices to rise over the next six months have been since March 5, 2009. The historical average is 39%.

4. FOMC Chairman Bernanke stated the Fed Ready With Stimulus — economic recovery has weakened more than expected and the Fed is ready to take further steps if needed to spur slowing growth.
5. Is the Bond Market a Bubble ? — an interesting chart from the Bespoke Investment Group depicting the historical yield on the 10-year US Treasury going back over 50 years;

6. Yen rises to multi-year highs — the yen reached its highest level against the dollar in fifteen years, and the highest level against the euro in nearly nine years this week;

The week ahead — Economic data:
1. 8/31 — Consumer Confidence
2. 9/1 — Construction Spending
3. 9/2 — Export Sales; Factory Orders
4. 9/3 — Unemployment;

Get inside information from the president and you will probably lose half your money. If you get it from the chairman of the board, you will lose all your money — Jim Roger

The major indexes (S&P500, Dow Jones & Nasdaq) closed below the 50-SMA and 200-SMA.

1. New Jobless Claims Hit 9-Month High; Factory Activity Falls — New claims for jobless benefits rose by 12,000 in the week ending Aug. 14 to 500,000, the fourth gain in the last five weeks and the highest since last November; Mid-Atlantic manufacturing activity shrank in August;
2. Germany lifts forecast — Germany raised the growth outlook for its economy to +3% for the year, up from a previous estimate of +1.9%.
3. Consumer and wholesale prices rose in July, their first gains since March, the Labor Department said over the past week.

4. Rep. Barney Frank says bankrupt government mortgage giants Fannie Mae and Freddie Mac “should be abolished.”
5. Congressional Budget Office estimated The federal budget deficit will surpass $1.3 trillion in 2010 and is expected to be the second largest shortfall in the past 65 years.
6. ECB mulls exit timing — The ECB will likely consider in Q1 2011 the timing for withdrawing its emergency lending measures.

The week ahead — economic data:
1. 8/24 — Existing Home Sales
2. 8/25 — Adv Durable Goods; New Home Sales
3. 8/26 — Initial Jobless Claims;
4. 8/27 — Q2 GDP;

1. Consumer confidence fell in early August to the lowest level since October 2008, a month after the collapse of Lehman Bros. sent the economy tumbling into a severe recession and financial crisis, according to the IBD/TIPP Economic Optimism Index out Tuesday

2. The Federal Open Market Committee announced that it would reinvest principal payments from mortgage assets into longer-term Treasurys.
3. States get $26B in aid — Obama signed into law a $26B plan that Democrats said will help cash-strapped state governments preserve the jobs of thousands of teachers, police and firefighters.
4. U.K. growth moderating — The U.K.’s economic recovery is likely to continue at a slower pace than previously expected, said the Bank of England in its quarterly Inflation Report, peaking at a 3% annual pace instead of at 3.6%.
5. China ‘s domestic growth slows — July Industrial production rose to 13.4% in July vs. 13.7 last year; Retail sales also slowed and consumer inflation rose.
6. Retail sales weak — data is yet another indication that the economy has slowed significantly and the recovery could fail if job growth doesn’t pick up. Sales at clothing stores were one of the weakest areas, falling 0.7%.
7. German economy posts stellar growth — Germany’s GDP grew an adjusted 2.2% in the second quarter vs. Q1, marking the strongest growth in 20 years on the back of healthy contributions from exports and investment;

Here is an interesting video from CNBC regarding the manic state of the market.

The week ahead — 2Q earnings season continue & economic data:
1. 8/16 — LOW 2Q;
2. 8/17 — Housing Starts; PPI; HD 2Q; ANF 2Q; TJX 2Q;
3. 8/18 — DE 2Q;
4. 8/19 — Export Sales; HPQ 2Q; CRM 2Q;

The whole problem of the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts — Bertrand Russell

As noted on Aug 3 ‘s missive, the major indexes (S&P500, Dow Jones & Nasdaq) break above the 200-sma on lower volume.

1. Wheat hits new 23-month high — Russia bans wheat export due to draught;
2. Lack of job growth — Nonfarm payrolls drop 131,000 in July; Estimate 100,000;

3. Retailers’ July Sales miss forecasts for the 4th straight month — 53% of retailers missed targets;

4. Economic reports shift from gloom to improving trend — private hiring and service-sector activity picked up in July. Recent shift toward more upbeat economic news.

5. BP pumps cement down well — permanently plug the blown-out well.
6. ECB kept rate at 1% and BOE kept rates at 0.5%

The week ahead — 2Q earnings season continue & economic data:
1. 8/9 — crop progress;
2. 8/10 — FOMC mtg; CREE 2Q;
3. 8/11 — US Trade Balance; CSCO 2Q; NVDA 2Q; SLW 2Q;
4. 8/12 — Export Sales; USDA Supply/Demand;
5. 8/13 — CPI; Retail Sales;

One statistical trend that is positive for the rest of 2010 is the Presidential Election Year Cycle (PEYC). Based on the historical record going back to the late 1800’s to present, the average dow return for year-3 of the PEYC is 15.5% versus year-1 return is 8.8%; year-2 is 0.4% and year-4 is 4.1%; A noted investment advisor, Jeremy Grantham, stated “Do not think for a second that a very stimulated market will go down in Year-3 just because it’s overpriced…So far, it has had 19 tries to do down since 1932 and has never pulled it off…”

To succeed in the markets, it is essential to make your own decisions. Numerous traders cited listening to others as their worst blunder. — Jack Schwager

As noted in the previous week, the major indexes encountered resistance at the 200-SMA (S&P500 between 1,060 and 1,100).

1. California faced a $19.1 billion state deficit and with no budget in place — Gov. Arnold Schwarzenegger reinstated furloughs for state workers in an executive order declaring a fiscal emergency Wednesday
2. Moody’s warns U.S. needs debt plan to maintain its triple-A credit rating — The U.S. government needs to lay out a credible plan to address its rising debt.
3. Beige Book shows economic fragility — U.S. economic activity continued to be “weak” in June and into July, the Federal Reserve said in its Beige Book report.
4. GDP 2Q slows to 2.4% — below the average 4.4% increase over the last six months.
5. U.S. consumer sentiment fell to 67.8 in late July from 76 in late June.
6. European Banks Stress Test — only 7 out of 91 banks needed to raise a total of €3.5 billion in additional capital; As a sign of easing risk concerns, the Markit iTraxx Senior Financials Index, which measures the cost of insuring debt issued by 25 European financial firms against default, has narrowed. The index was at 118 basis points Friday, according to Markit, down from 131 basis points at the end of last week

AAII and Investor’s Intelligence — Bullish sentiment is slowly making a comeback

The week ahead — earnings season continue:
1. 8/2 — Construction Spending; ISM Manuf Index
2. 8/3 — Factory Orders
3. 8/5 — Export Sales
4. 8/6 — Consumer Installment Credit

Buy when others are despondently selling and sell when others are greedily buying. — Mark Mobius

The major indexes remained trapped between the trading range (S&P500 between 1,060 and 1,100).
1. Europe Banks Stress Test — results will be disclosed after market close 7/23/2010
2. President Obama signed Financial Overhaul Regulations into law
3. Germany Business Sentiment rose sharply in July — improving outlook for Europe ‘s largest economy
4. Ratings agencies S&P, Moody’s and Fitch are refusing to let bond issuers use their ratings — new financial reform laws create too much risk for them; SEC will allow a six-month exemption
5. Obama signed a six-month extension of emergency jobless benefits — restores aid to nearly 3M people whose checks had been cut off since the program expired in early June
6. Hungary shuns IMF, ratings agencies poise to downgrade — Hungary’s prime minister Viktor Orban indicated he won’t renew a safety net with the IMF and will back out of a commitment to cut the budget deficit to EU-prescribed levels next year

Below are the daily charts of the major indexes.

Nasdaq — Daily Chart

Dow Jones — Daily Chart

S&P500 — Daily Chart

The week ahead — earnings season continue:
1. 7/26 — New Home Sales
2. 7/27 — Consumer Confidence; Adv Durable Goods
3. 7/29 — Export Sales
4. 7/20 — GDP Q2; Emp. Cost Index;

The major indices dropped sharply on Option Expiration Week and encountered resistance at the 200-SMA. Below are the major events which occurred this week.
1. BP temporarily sealed oil leak –BP reported a pay out of nearly $4 bil in claims.
2. Moody downgraded Ireland — noted Ireland ‘s government’s ongoing loss of financial strength and the country’s weakened growth prospects
3. IMF and EU withdrew $21bil from Hungary — Hungary must cut their budget
4. Citi Bank (C), Bank of America (BAC) — beat profit views on lower credit losses — shares fell on the banks inability to expand revenue.
5. GE recorded profit — revenue fell 4.3% to $37.4 bil, missing est of $38.4 bil
6. China cuts Treasury holdings by $32.5 bil in May to $867.7 bil; Japan also cuts 1.1% to $786.7 bil.
7. Elizabeth Warren (law professor) is candidate to lead the consumer watch-dog position — position created by the Financial overhaul legislation.

The week ahead — 2Q earnings season continue:
1. Farnborough Internation Airshow — Europe collects to see the latest in airline production, including the Boeing 787.
2. IMF seeks another $250 bil to boost its lending capacity from $750 bil
3. 7/20 — Building permits; Housing Starts;
4. 7/22 — Existing home sales; Leading indicators;
5. 7/20 — EU Stress Test; Greece 1.5Bil Euro aunction

“A good trader has to accept three things: a chronic inability to accept things at face value, to feel continuously unsettled, and to have humility” Michael Steinhardt

The major indices bounced from 2010 lows after a 2-week sell-off. Below are the major events which occurred this week.
1. Central banks swap gold to IBS (Intl Bank Settlement) — 349 metric tons of gold and hope to buy back at a later date.
2. Europe’s bank stress test — schedule for this coming week.
3. Spain sold 8bil Euro in 10-year debt at the rate of 4.874% — 140 bps higher than Jan 2010.
4. China looks to tax resource companies (Coal, Oil and Gas) in Western China area.
5. Retail Sales so-so in June
6. Consumer credit fell sharply in May — 4th straight decline in borrowing
7. AAII shows the lowest decline in Bulls since march 9th, 2009 bottom in stocks. Below is the chart from AAII percent in Bulls.

The week ahead — official 2Q earnings season start:
1. Mon – 7/12 –> Alcoa (AA)
2. Tues – 7/13 –> Intel (INTC), Yum
3. Wed — 7/14 –> Retail Sales; Texas Inst (TXN)
4. Thurs — 7/15 –> PPI; Export Sales; Capacity Utilization; JP Morgan (JPM); Google (GOOG)
5. Fri — 7/16 –> CPI; Ford (F); Bank of America (BAC); CitiBank (C); GE

Try to surround yourself with people who can give you a little happiness. Because you can only pass through this life once, Jack. You don’t come back for an encore”. Elvis Presley

The major indices continued to sell-off. Below are the major events which occurred this week.
1. European banks lobbied the ECB to cushion the impact of expiration of the 442 bil Euro ($543 bil) in 1-year loan. This represents approximately 50% of ECB’s liquidity operation. On June 29, the ECB allotted 131.9 bil EUR ($160.9 bil) in funds for a 90-day at a fix rate of 1% to 171 banks.
2. VIX (6/29) hits 34. Below the high of 48 (May 20).
3. China Conference Board cuts its forecast to 0.3% from 1.7%; Fear of China growth rate slowing.
4. China ‘s Manufacturing down in June to 52.1 from May 53.9; China’s factories reduced output prices the first time in 2010;
5. Automakers sales for June slipped from May; Ford down 13%; Toyota down 14%; General Motors down 13% and Chrysler down 12%;
6. Unemployment rate down to 9.5%; 600,000 unemployed workers gave up looking for work;
7. The SPX, DOW & NASDAQ slipped further from the 50-SMA AND 200-SMA;

Below are the charts of the major indices (S&P500, Dow Jones & Nasdaq)

NASDAQ — slipped furthur under the 200-SMA

S&P500 — slipped furthur under the 200-SMA

Dow Jones 30 — slipped furthur under the 200-SMA

“As for it being different this time, it is different every time. The question is in what way, and to what extend ” — Tom McClellan

The major indices encountered resistance at the 50SMA and closed down about 3% for the week. Below are the major events which occurred this week.
1. UK adminstration announced $59 billion in spending cuts and raised taxes by 20%.
2. Financial Legislation Overhaul passed the House & Senate — Fannie Mae & Freddie Mac were left out of the overhaul.
3. 1Q GDP 2.7% versus estimate 3%
4. New Home Sales dropped sharply after home-stimulus expired
5. President Obama fired Gen. McChrystal after a negative article in the RollingStone magazine — replaced by Gen. Patraeus.
6. G-20 Meeting in Canada — no major results were accomplished. Global recovery is “Uneven & Fragile”.
7. FOMC meeting — rate to remain “low for an extended period”

The week ahead:
1. Greece looks to financial market to raise $4.9 billion in July.
2. Tues 6/29 — Consumer Confidence; 2Q earnings -> GIS