Economics

   This Week’s Data

    Weekly mortgage applications rose 1.1%.

    The June US trade deficit came in at $27 billion versus expectations of $28.5 billion and $26 billion recorded in May.  The rise from May was mainly the result of higher oil prices.
    http://econompicdata.blogspot.com/2009/08/trade-stabilizing.html

    The July federal budget deficit was reported at $181 billion, bringing the fiscal year to date deficit to $1.27 trillion versus a $388 billion deficit for the similar period last fiscal year.
    http://econompicdata.blogspot.com/2009/08/spending-soars-receipts-cliff-dive.html

    July retail sales were reported at a disappointing -0.1% versus expectations of a 0.8% rise; ex auto’s sales were down 0.6% versus estimates of a 0.1% increase.
    http://www.calculatedriskblog.com/2009/08/retail-sales-decline-slightly-in-july.html

    Weekly jobless claims were up 8,000 versus a forecast of a drop of 2,000.

   Other

    Barry Ridholtz continues to remind us of the downside to good news:
    http://www.ritholtz.com/blog/2009/08/positive-gdp-often-occurs-mid-recession/

    Good news from Europe:
    http://econompicdata.blogspot.com/2009/08/eurozone-gdp-upside-surprise.html

Politics

  Domestic

If you missed this excellent article in the WSJ yesterday on healthcare reform:
http://online.wsj.com/article/SB10001424052970204251404574342170072865070.html

A look at the ‘record profits’ in the healthcare insurance industry:
http://mjperry.blogspot.com/2009/08/health-insurance-industry-ranks-86-by.html

The rationale for ‘pre-existing conditions’:
http://mjperry.blogspot.com/2009/08/why-should-insurance-cover-pre-existing.html

    Cap and trade war:
    http://online.wsj.com/article/SB10001424052970204908604574336844278574578.html

  International War Against Radical Islam

The Market
    
    Technical

    The Averages (DJIA 9361, S&P 1005) rallied yesterday but stayed well within the up trend off the March lows (8597-10272, 931-1149).  The S&P continued its see saw action around 1004, closing slightly above that level.  And again, as yesterday, the late day action was on the sell side.

The overall pin action of the last week is one of a Market struggling with a resistance level.  There are plenty of arguments for both a sell off and decided spike through 1004.  My preference is to just wait and let the Market point the direction. 

That said, I raise this point:  the longer the S&P stays at this resistance level (1) the more of our stocks that are busting over their 1004 equivalent and (2) the higher the lower boundary of the March to present up trend [in other words, at 1005, the S&P has 74 points down {1005 minus 931}and 144 points up {1149 minus 1005}--assuming the March to present up trend boundaries hold; but each day the downside to the lower boundary grows smaller and the upside to the upper boundary grows larger].  At some point, the risk/reward will argue for committing funds at current levels.

   Fundamental
   
Here’s some good news—IPO’s are increasing:
    http://mjperry.blogspot.com/2009/08/ipos-surge-in-first-half-of-q3-2009.html

     Headlines

    The major focus of investors yesterday was the release of the Fed’s statement following the FOMC meeting. By and large the text was unchanged: (1) no change in the Fed Funds rate, (2) no change in the language regarding inflation, (3) very little change in language concerning consumers, though there was a new reference to the lack of income growth, (4) very little change on business conditions although the Fed acknowledged some overall improvement, (5) not much different with respect to its balance sheet, i.e. its plan for buying additional Treasury, Agency and other debt instruments.

    On the last item--which was the only real point of contention among the talking heads--there was much debate later in the day regarding (1) whether or not the Fed left open the possibility that it would expand this program [the language was vague], and (2) if it did, what the inflationary implications of that would be.  My bottom line is that the Fed’s lack of clarity of its intent to insure that inflationary pressure don’t re-accelerate is the more of the same easy money, gutless pandering to the politicians that we have seen from the Fed for the last 20+ years.  It has higher inflation and falling dollar written all over it.  Speaking of which, with the dollar under intense international scrutiny, there was nary a peep on that subject.

    Of somewhat lesser significance:

(1)    the Treasury had a second good day in the auction market,

(2)    in a filing after the Market closed, John Paulson, a hedge fund manager who made a fortune shorting financial stocks prior to the crash, reported that his fund had taken a $2.7 billion position in Bank of America.  That gave the stock a boost after hours and could very well set the tone for today’s opening.