Fri Aug 6 2010 – Weekly Recap & The Week Ahead
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…”