erappin' - daily morning update 8-13-01
erap at eminidaytrading.com
Mon Aug 13 15:18:54 CEST 2001
erappin' - daily morning update
BLEAK ECONOMIC PICTURE
We got a mixed bag of reports by retailers at the end of last week. As
you know, retail sales are a key element to this economy's growth as
continued consumer spending is necessary to remain out of a recession.
Market analysts are hoping consumers will be spending part of their $40
billion tax refund in the coming months. Consumer spending is the only part
of this economy that is still stagnating without reflecting signs of this
slowing economy...for now. This week, we get several clues on the latest
economic condition, on top of the consumer spending reports that will give
the market a further indication how they are coping with the weakening job
market. Analysts are expecting today's Retail Sales report to come in -0.2%.
Earlier last week, the Fed Beige Book, even though limited in its
number of anecdotes, showed a slowing factory sector, flat to falling bank
loan demand, and most importantly, retail sales below plan. Pretty much all
U.S. regions are presenting a picture of "slow growth or lateral movement in
economic activity" over the past few months. The economy keeps touching that
bottom without showing any improvements. On August 7, we had Chicago Fed
President Moskow citing that, "an underperforming economy may be rare, but
it is nothing new. What is different today are the mixed signals we see in
the marketplace. The combination of weaknesses and strengths and risks is
both unusual and challenging."
Symbol Close High Low Gain/Loss
SPU01 1191.20 1197.50 1171.50 3.40
ESU01 1191.25 1197.50 1172.00 3.50
NDU01 1624.00 1652.50 1581.00 15.50
NQU01 1624.00 1652.50 1582.50 15.50
DOW 10416.25 10433.46 10197.32 117.69
NASDAQ 1956.47 1967.03 1915.99 6.85
SPX 1190.16 1193.33 1169.55 6.73
SOX 593.05 595.63 572.29 7.16
VIX 22.81 24.91 22.68 0.83
We have seen this market trade in quite the range these past few
months (Nasdaq 2000-2300). Unless we are getting something different than
the clouded visibility companies are reporting, some economic data showing
signs of a bottom, we will not be trading outside that range. Going into the
weekend, we saw a technical rather than a fundamental-based rally. Traders
want more than just reports telling them there is no worry about inflation.
It is time for some reports saying there is no worry about this economy
slowing any further! For now, economic news is not showing signs of
stabilization so traders will remain anxious about the timing of the
economic turnaround hoping that the next data reports are giving them reason
to believe it is sooner rather than later.
Curious to see how this week's earnings come in for Hewlett-Packard,
Applied Materials and Dell and of course how they see next quarter's
numbers. HWP is expecting a 91% drop in earnings per share, Applied
Materials a 97% drop while Dell sees a 27% step back in EPS.
EUROPE'S SLOWING ECONOMY
The European Central Bank (ECB) indicated in its August report that it
might need to cut interest rates again. So far, the ECB has been reluctant
to do so as they were experiencing troubles with rising inflation. Latest
economic reports are indicating a pause in inflationary pressures, which
introduces the possibility now of another 25 basis point rate cut as soon as
August 31st. Especially given Europe's largest economy, Germany, is
reporting weak industrial production, factory orders, and factory orders
besides its seventh consecutive rise in unemployment.
It seems that central banks around the world are now in the race to
reverse direction on their slowing economies. Greenspan and company have cut
interest rates six times so far this year, with possibly another two coming
up later this quarter, the Bank of England has reduced them four times while
the Bank of Japan.... well they are still stuck with their zero interest
rate situation. Based on the economic data we have seen these past few
months, it does not look like Europe's economic bottom is in sight any time
soon either. Last week, the ECB released a statement saying, "there is an
increased uncertainty surrounding economic growth in the euro area in the
second half of 2001," and they might feel the effects of, "deteriorating
growth performances in several other regions of the world."
On Friday, back on U.S. soil, the Chicago Board of Trade's Fed Fund
Futures are indicating a 100% chance of a 25 basis point rate cut to 3.50%
at the next FOMC meeting on August 21st and even a slight 18% probability of
a 50 bp cut at that time. Given a cut to 3.50% end of August, traders are
expecting with an 88% probability another 25 bp cut to 3.25% by year end.
Have a great trading day -- and honor those stops !!
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Futures - The Basics
Futures, the Basics - Are you a stock / option trader and have
considered trading futures but are constantly reminded how terribly risky
they are? If you are new to futures trading, then this session is a must as
emaster and emagine will cover the basics. What you need to know about
futures, how it differs from stocks & options trading and how to add them to
your trading arsenal.
August 23rd and August 27th.
Both ES/NQ continue their downtrend. ES had a double bottom in the
1174-78 area which was briefly taken out, low 1172, before it bounced back.
However, until we make a clean break and close above 1235 level, we aren't
getting bullish. That area has been tested twice and failed. We have been
trading within this 1174-1233 range for over a month now. NQ has same story.
Even though it penetrated the upper trendline, it has resumed trend making a
new low of 1582.50. A break of this level could leave us testing 1550 and
1500 levels. We need a close above 1800 to get bullish.
Intraday Epit Targets Hit
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