Not much to report this evening due to the dull day we had again today. One item of note is that FNM (Fannie Mae) made a multiyear low in trading today. FNM is an important mortgage component in the housing arena. The weak trading this past year in FNM portends some trouble in housing, just one more item to keep an eye on as we watch the credit expansion start to slow.
One of the items we mentioned yesterday was that the market seems to have put Katrina behind it, at least as far as the negative side goes. The market seemed to have the notion that the Fed was going to slow the increases in interest rates, so therefore, let’s buy ‘em. This is happening even as bond prices are going down (increasing interest rates).
Today, Chicago’s Fed President Michael Moscow hinted that the Fed probably needs to continue to increase rates to combat inflation. He seemed to think that there is not as much slack in the economy as there was last year and inflation pressures are mounting. I guess they don’t really think housing inflation counts. The news is affecting the futures in overnight trading with the futures down but just by a little.
On a technical note, our favorite topping indicator, the 5 day upside volume, has pushed to an overbought high today. This could represent a high in the market all by itself. We have been looking for a high to short into this week, one that falls short of the early August highs. I would say today fits that bill.
Dow Industrials: 10,633.50 +44.26 (don’t look for this over 10,500 to continue)
BGEIX: 11.80
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