Giant PPI

Today didn’t look much like an up day.  In fact, it looked like a down day with the Dow down about 60 on the day going out at the low of the day.  A day like today is certainly not bullish.  We have talked about the oversold nature of the market and how it should bounce out of this past week’s low.  Well, after about three days of trying, it seems to have run out of gas.  With the market dropping today, our only thought is that if the lows of last week get violated we might be heading down in a hurry.  

We have mentioned several times in the past that crashes, or as they say in the politically correct world, nonlinear events, happen when markets can’t pull themselves out of oversold positions.  This is the time when investors get a little scared or Fear takes over.  We can’t say for sure that is what will happen but today’s market is definitely cause for concern.  Fortunately, we have moved into short positions and can enjoy a simple decline.  We did think there would be more opportunity this week to add to those positions or to lighten up on long positions.

After last week’s report for September CPI of a 1.2% increase, the most in 25 years, today we saw the PPI increase at a giant 1.9%, the most in 15 years.  The market doesn’t seem to be too worried about it but the numbers are big.  You would think the bond market would object to these big numbers too but it was up slightly today, too.  When these markets want to go up, they don’t go down anymore.  That doesn’t mean bonds can’t go down, just that they didn’t go down today.

Tonight INTC reported and the market was not overjoyed by the news as INTC dropped almost 80 cents after the news.  The news was that INTC sees some weakness in chip demand in the usually strong fourth quarter.  Yes, the quarter was good but the market doesn’t trade on yesterday’s news, it is forward looking and tonight, at least, the vision was not taken as bullish.

Overnight the NASDAQ 100 futures are trading lower, not significantly, but tomorrow morning is a long ways off.  Traders may like what they see in the morning light.  We will be anxious to see what develops tomorrow.  We have thought that the market would find a little footing here but today bodes badly for tomorrow and beyond.  If the market can finally get some traction tomorrow, we will not be surprised but it will mean that the bounce we have going may carry a little longer.  

I think that when most players think a rally is coming, including bears, there is a distinct possibility that one might not come.  This is a very bearish outcome, especially if the players have positioned themselves for a rally.  We wait to see what happens, with our short positions in place.  We put most of our short positions in place on October 3rd.

Dow Industrials:  10,285.26   -62.84
RYVNX:  22.42
TLT:  90.31