Weakness in the US continued this week as economic reports continued to show that the slowdown in the United States continued into July. US markets rebounded off of oversold levels earlier in the week to stage a nice rally into the weekend. The 10,000 level on the Dow is providing significant support to the market along with 2100 on the NASDAQ.

AAII released very negative Investor Sentiment numbers which portend a contrarian rally.

Existing home sales plummeted to record lows and inventories surged to new highs. The second wave of defaults are now starting. It is going to be interesting to see if the additional houses coming to market are from banks, the gray market, or new foreclosures.

If the bulk of the new supply is coming from banks it is a good sign as bad loans are being dealt with in a constructive manner. The gray market would be bad for the economy in the short term but good in the long term. As gray market properties come to market it would be a signal that investors who were attempting to ride out the cycle have become exasperated and thrown in the towel. Investors

2nd Quarter GDP was revised lower to 1.6% but still came in above estimates. The primary cause was a jump in imports as Chinese firms took advantage of an export subsidy that expired in July by pushing product out the door to the United States and elsewhere around the world.

German 2nd Quarter GDP showed that Europe’s largest economy is beginning to pick up steam as exports, housing, and consumption all showed solid growth despite the weak conditions across Europe.

I mentioned a week or so ago that the inclusion of the statement by Hoenig at the end of the FOMC meeting would make the minutes of the August 10th meeting an interesting read. The Wall Street Journal reported that 7 of the 17 top Federal Reserve officials had reservations about purchasing US Treasuries making the upcoming minutes a must read.

Next week:

Monday – European Economic, Business, and Consumer confidence for August
Tuesday – Canadian 2nd Quarter GDP, Chicago PMI, and minutes from FOMC meeting
Wednesday – China manufacturing PMI, US ISM
Thursday – Europe 2nd Quarter GDP, US Factory Orders
Friday – US August Unemployment rate

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Advertisements