Top Line: The Fed is going to deliver their non-news on Wednesday. Getting past that, we should be able to get back to the business of going own. Yes, there is this end of the month period which can give us some strength so we will have to review this After the Fed's news.
Monday's market looked much like a roller coaster with the Dow dropping about a 120 points in the first half hour. That's when the consumer confidence numbers were released. These were very bad and should have caused further damage to prices but...from that point, the Dow rallied 180 points such that the Dow was up about 60 points in the early afternoon. Then we saw a back and forth move for about two hours before the Dow dropped again about 100 points to close down about 35 points.
The big news before the market opened was from UPS and the news was not very good at all. UPS said that the economy was"anemic" and that their profitable air shipments were suffering from damping demand. They also blamed higher fuel costs, can you believe it?!?
Then there was the Case Shiller report on housing said that the average home price in the country fell 15.3% year over year. We are not surprised and you shouldn't be either but then there was an article in Fortune (associated with CNN Money). The article says that this drop is "an almost certain sign that the path to a housing recovery is finally in sight." This pronouncement seems a bit premature.
While the housing market will "recover", it will not be like it was in the last five years in our lifetime. That sounds like a major overstatement but it really is not worth trying to defend. The point is that there continues to be a level of optimism about the future course of housing and as long as that exists the recovery is not here. Housing may not "recover" until five years from now and then it may not be noticeable.
We do not think our statements would ever be considered right now but the outlook has very little probability of turning out very well. Since this is the main tenet of this blog, we will find reasons to support this theory. When the outlook improves, we certainly will bring it up here.
Then, of course, there were the consumer confidence numbers. They had been expected to drop a little but they fell out of bed. From a CNN Money article: "The New York-based research group Conference Board said Tuesday that its Consumer Confidence Index dropped to 50.4 from a revised 58.1 in May. The reading was the lowest since February 1992, when it was 47.3. Economists had expected the index to decline to 56, according to Briefing.com."
The economy depends on the consumer and the consumer has recently depended on their home for credit. With that drying up, the government decided to step in and provide the masses with $600 apiece. What will happen next does not feel too good from this side. Going through it and hopefully coming out the other side will be difficult for all of us.
We heard from CM who had a technical article about the Dow and other indexes. We thought we should share it with you. It's the kind of article that just fits too well with the landscape of a declining market. The head and shoulders top formation is pretty bearish once the neckline is broken. Oh we could go on and on. Suffice it to say that the patterns we have been watching combined with the head and shoulders top give even more reason to believe that the market will continue to head South.
FSI: 90.86 (down a bit from yesterday)