UP EIGHT DAYS IN A ROW TOUCHING 1689.97 ON THURSDAY. ARE WE STALLING OR ABOUT TO BREAKOUT TO NEW HIGHS? MUCH DEPENDS ON WEDNESDAY’S FOMC REPORT. OVERALL, WE’RE OVERBOUGHT, AT RESISTANCE MAY HAVE ONLY RUN UP TO TEST HIGHS. THE EXCEPTION IS STRENGTH IN THE NASDAQ WHICH IS SITTING AT NEW BULL MARKET HIGHS. WE KNOW THE FED HAS ENGINEERED AND CONTIUES TO ENGINEER A HIGH STOCK MARKET – THE INFAMOUS BERNANKE PUT SO WE’RE MORE THAN LIKELY TO SEE NEW HIGHS ANYWAY. I WOULD HAVE CERTAINLY PREFERRED TO SEE MORE OF A CORRECTION, PARTICULARY SINCE THE CALENDAR STILL SAYS WE’RE IN A TRACHEROUS TIME FRAME. FORGETTING THE MAJOR INDEXES, STOCK SELECTION HAS BEEN THE KEY WITH NOTABLE ‘NAME’ STOCKS PUSHING HIGHER AND HIGHER.
MEANWHILE, I HAVE MY TRIGGER FINGER ON A BUY SIGNAL. NEXT STOP COULD BE 1730, 1750 OR EVEN 1800 IN THE SPX ONCE WE CLEAR 1709.
COME NEXT YEAR, PROBABLY IN LATE SPRING, CYCLES INDICATE THE POTENTIAL OF THE BEGINNING OF A MULTI-MONTH IF NOT TWO-YEAR BEAR MARKET BUT THE SPX COULD BE 1800 BY THEN. MY ORIGINAL FORECAST CALLED FOR A STRONG 2013 FOLLOWED BY A NEGATIVE 2014-2015. WORST CASE COULD BE A 50% CORRECTION – THAT’S 500 POINTS OR 1200 IN THE SPX- MEASURING FROM THE 667 BEAR MARKET LOW IN 2009 TO THE 1710 PEAK.
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On Friday, excluding a brief dip during the opening hour, the major averages were confined to narrow ranges. The early weakness took place after it was reported that the University of Michigan Consumer Sentiment Index dropped to its lowest reading since April (76.8) in the preliminary September reading. That was down from 82.1 in August and well below the consensus expectation of a drop to only 82.0. Typically, consumer sentiment follows trends in employment, equity prices, oil prices, and media reports.
Tuesday and Wednesday of next week will bring the FOMC policy meeting where many expect the Fed to announce a reduction in the size of its asset purchases. The taper talk began after Fed Chairman Ben Bernanke mentioned, during his June 19 press conference, that barring a downturn in the economy, the Fed could scale back the size of its purchases later in the year. Following the press conference, participants began looking to the September meeting as a possible start date for tapering.
In economic data, the retail sales and PPI reports conveyed a familiar message of modest growth and low inflation. August retail sales came in below expectations (0.2% v. 0.4% Briefing.com consensus), but the July reading was revised higher to reflect an increase of 0.4% (0.2% prior).
Separately, total PPI jumped 0.3% (Briefing.com consensus 0.2%) while core PPI, which excludes food and energy, was flat (Briefing.com consensus 0.1%).
Total business inventories rose 0.4% in July after increasing an upwardly revised 0.1% (from 0.0%) in June. The Briefing.com consensus expected business inventories to increase 0.3%. Manufacturer (0.2%) and merchant wholesaler (0.1%) inventories were known prior to the release. The only new information was that retailer inventories increased 0.8% in July after increasing 0.1% in June.
On Monday, the September Empire Manufacturing survey will be released at 8:30 ET while August industrial production and capacity utilization will be reported at 9:15 ET.
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