The Financials Pit Review

For the week of September 28th, 2009

By PitGuru Frank LaMantia

S&P & Currencies

For the most part I have seen what I feel is a strong market, but still have to be careful about buying into a market that has question marks. The past few weeks have seen both the Dow and the S&P reach highs. The Dow is up 47% from the March lows. Both materials and financials had a lower trading week, off 4.8% and 3.6%. The sell off could have continued further but the Iran situation created excitement. Traders are likely worried about the oil situation and how this might affect stocks. For those that do not know about the situation, the Iranian president is supposedly hiding nuclear facilities. The fear of another war, supply of black gold, and nerves put Wall Street in a stagnant mentality. I prefer traders that sit on the sidelines than those that panic. Traders did what I feel is respectable and did not emotionally trade. Another topic that is hot this week is social security. Baby boomers are showing that they would rather retire than start over at a low paying job. This will probably cause huge problems for those that put into the system. You and I may be paying these people to retire!

This week has a loaded calendar with enough data to keep the street very busy. Tuesday, September 29th, the consumer confidence number (which is expected to 57) will be announced. Analysts believe that 59.5 is more likely. Remember, these forecasts are best estimates and not factual numbers. This number is collected by surveying 5,000 families and using present data. Wednesday, September 30th, the GDP is forecasted to be around -1.2%. Also, Chicago PMI and crude inventories: Chicago PMI is forecasted to be 53.5, which would lead us to believe that the market is stabilizing. This is usually the case when we see this number in the mid 50's. The Iran situation could affect crude inventories so we must be alert in this statistic. I would have to say that Thursday and Friday is filled with announcements. Thursday, October 1st, has personal income, spending, initial jobless claims, ISM, pending home sales, and auto and truck sales. Let's break this down real quick: Personal income is expected to be flat, personal spending is expected to be up to 1.2% from 0.2%, initial jobless claims is expected to be around 535k, ISM is forecasted to be 55.7, and pending homes sales are expected to be 1.0%. Friday, October 2nd, the market will see nonfarm payrolls, the unemployment rate, and factory orders. Nonfarm payrolls are forecasted to be down -225k from -216k, the unemployment rate is expected to grow to 9.8%, and factory orders are expected to be 0.5%. Now what can traders expect from this data? Well, one thing is pretty obvious: the unemployment rate is showing high numbers and personal income is not predicted to grow anytime in the near future. Low growth or stabilization may be gathered from this data. There may be light at the end of the tunnel, but it may take months to get there.^{1, 2, 3}

The dollar still looks attractive to me and is up 0.13 to 76.94 on the index. Conversely, the Euro is down 0.0055 to 1.4634 and is holding some ground. In the pas, whenever the U.S. has conflict the dollar showed resilience while the market trended downward. This is something that might be relevant and could help a slide that some consider overdue.

¹ http://biz.yahoo.com/c/ec/200940.html
² http://www.cnbc.com/
³ http://www2.barchart.com/forex.asp

Past performance is not indicative of future results.

***chart courtesy Gecko Software