Morning Journal-Goldman lowers odds of QEIII

Economics

This Week’s Data

The International Council of Shopping Centers reported weekly sales of major retailers down 0.3% versus last week but up 3.6% versus the comparable period a year ago; Redbook Research reported month to date retail chain store sales down 0.3% versus the similar timeframe in July but up 1.8% on a year over year basis.

June business inventories rose 0.1% versus expectations of an increase of 0.2%; business sales were unchanged.

Weekly mortgage applications fell 4.5% while purchase applications declined 2.0%.

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The Market
Technical

The indices (DJIA 13073, S&P 1385) were basically flat yesterday, closing within their primary trends: (1) short term trading ranges [12022-13302, 1266-1422] and (2) the intermediate term uptrends [12075-17075, 1271-1851]. By holding recent gains, the 12904/1364 interim resistance level has been negated, leaving the short term trading range upper boundaries as the nearest resistance.

Volume was anemic; breadth deteriorated. The VIX sold off 8% but remains well above the lower boundary of its intermediate term trading range and the neckline of the developing head and shoulders pattern.

GLD was down fractionally, finishing above the lower boundary of its intermediate term trading range.

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The Market

Technical

The indices (DJIA 12676, S&P 1337) turned in a mixed performance yesterday (Dow up, S&P down) but remained within their primary trends: (1) their short term trading ranges [12022-13302, 1266-1422] and (2) their intermediate term uptrends [12043-17043, 1267-1847]. Within the short term trading ranges, additional support exists at 12345/1292, resistance at 12904/1364. Both of the Averages are hovering near their 50 day moving averages (12615/1332).

Volume declined, breadth improved. The VIX fell 5%, remaining above the lower boundary of its intermediate term trading range and continuing to develop the head and shoulders pattern.

GLD was up big. It is still (1) above the lower boundary of its intermediate term trading range (2) has not broken out of the ten month string of lower highs.

The Morning Call-No QEIII is not a tragedy

The Market

Technical

The indices (DJIA 12604, S&P 1341) had volatile but mixed day, with the Dow closing down, the S&P basically flat. Both remained well within their (1) short term trading ranges [12022-13302, 1266-1422] and (2) intermediate term uptrends [11959-16959, 1257-1837]. So no major trend is even close to being challenged.

However, on a much shorter term basis (1) within the short term trading ranges, additional support exists at 12344/1292 and resistance 12903/1384, (2) the DJIA fell below its 50 day moving average [12655] while the S&P is slightly above its 50 day moving average [1336] and finally (3) a very short term uptrend off the June lows has been developing. Yesterday the DJIA broke that trend line [12649] while the S&P remains slightly above it [1334].

Volume rose; breadth improved though the flow of funds indicator continues to degenerate. The VIX fell, finishing above the lower boundary of its intermediate term trading range and continuing to develop the head and shoulders pattern.

Morning Journal-The moral case for free enterprise

Economics

This Week’s Data

The International Council of Shopping Centers reported weekly sales of major retailers up 2.0% versus the prior week and up 3.0% versus the comparable period a year ago; Redbook Research reported month to date retail chain store sales up 2.2% on a year over year basis.

Weekly mortgage applications fell 2.1% but purchase applications rose 3.0%.
http://www.calculatedriskblog.com/2012/07/mba-record-low-mortgage-rates-mortgage.html

The US May trade deficit came in at $48.7 billion, down from April (lower oil prices) and in line with estimates.
http://www.calculatedriskblog.com/2012/07/trade-deficit-declines-in-may-to-487.html

Other

The argument for QEIII (medium):
http://www.bloomberg.com/news/2012-07-09/fed-harms-itself-by-missing-goals-stevenson-and-wolfers.html

Some demoralizing thoughts on the economy (medium):
http://www.minyanville.com/special-features/random-thoughts/articles/todd-harrison-todd-harrison-minyanville-todd/7/10/2012/id/42274

Politics

Domestic

A step in the right direction? Yeah, right. (medium):
http://www.nypost.com/p/news/opinion/opedcolumnists/steps_in_the_double_talk_direction_q3SG1WHwohLs9lB3SLnRMI

More on your tax dollars at work (medium):
http://www.nationalreview.com/articles/305894/rise-food-stamp-nation-rich-lowry

And (medium):
http://www.jewishworldreview.com/cols/will070812.php3

The moral case for free enterprise (8 minute video):
http://www.powerlineblog.com/archives/2012/07/the-moral-case-for-free-enterprise.php

International

Third aircraft carrier returns to Middle East (medium):
http://www.zerohedge.com/news/third-us-aircraft-carrier-returning-unexpectedly-mideast-ahead-schedule

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.