Interest Rate/Currency Update
By Donna Heidkamp
Deflation or Inflation???
Many reports came out this week that show the economy to be very
strong which has continued to fuel the stock market and contain the
momentum of the bond market. Besides a strong economy, the reports
indicate that their may be some signs of potential deflation
occurring in the market. Producer prices came out -1.6% versus -.5%
as expected. PPI excluding food and energy are down .9% versus +.1%
as expected. On the flipside, the Consumer Price Index was down .5%
versus .3% as expected. The CPI excluding food and energy increased
slightly. PPI has fallen more than the CPI. Is this a sign that
companies are becoming more profitable and supporting the stock
market? The Philadelphia Fed Index was up 5.1 this month versus -.7
last month showing the manufacturing business expanding last month
as well.
Retail sales are down slightly, but higher than the market
expected. While business inventories are in deed +.4%, they are
lower than expected. The health of the housing market is always on
everyone's mind these days as well. A higher number of mortgage
applications appear to show strength in the housing sector.
The market will also keep an eye on tomorrow Housing
Starts number for October coming out at 7:30 am
CST.
On Wednesday, the FOMC minutes were released from the October
25th meeting. The minutes continue to indicate that the
core inflation is too high and still a concern. On that note, it is
difficult for me to think that the FED will not lean towards
raising interest rates to continue to stay ahead of potential
inflationary risks with such a strong economy. With that in mind, I
recommend selling the Dec Ten Year note between 108-14 and 108-22
with a stop loss above 105-25.
On another note, I recommend looking at the Dollar Index chart. If
the FED raises rates, the dollar would rally. The market recently
hit major support on the downside and is working higher. The Dollar
index chart and the Eurocurrency charts have been considered
sideways markets for quite a while. If you look closely, the dollar
chart is slightly biased up and the Eurocurrency has a downward
bias.
December Ten Year Note Technical Levels:
Trend Direction: Long term Trend Sideways, Short Term Trend is lower.
Resistance: 107-30.0; 108-17.0
Support: 107-20.0, 106-22.5
Financial Reports for the week of November 20th - November 24th:
Monday: Leading Indicators - 9:00 am CST
Wednesday: Jobless Claims - 7:30 am CST
API/EIA Energy Stocks - 9:30 am CST
EIA Gas Storage - 9:30 am CST
Some Early Market Closes
Thursday: Markets Closed for Thanksgiving
Industrial Production - 8:15 am CST
EIA Gas Storage - 9:30 am CST
Friday: Everything is closed by 12:15 on Friday-Call for a specific schedule
