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Nov 16, 2009 Update: S&P500 1111. Lost because of the new Retail Sales numbers released today (see below), new Money Supply figures slid under the radar, showing yet another large increase in the Monetary Base. When studying our Money Supply Chart, one notices that the Monetary Base is up 72% over October 2008, which was up 32% over October 2007. These are GIGANTIC increases in the Money Supply. The Monetary Base is up an astounding 130% in the last 14 months (just before Lehman Brothers filed for bankruptcy). This is unprecedented, and is the cause of the dramatic fall in the US Dollar and rise in the price of gold. The Federal Reserve has essentially doubled the currency in circulation via the printing press. These recent numbers show the Fed is still quite troubled with the state of the US economy. While the growth in the Money Supply has headed off a full-blown depression, one must remember that the extra liquidity must be withdrawn again in the near future, lest we have a collapse of the Dollar and unprecedented inflation. We should expect economic growth ahead, but tempered by the extraction of liquidity that follows. We trust that Ben Bernanke, a student of the Great Depression, will properly throttle the Money Supply, moderating both growth and inflation.
Nov 16, 2009 Update: S&P500 1111. Today's Retail Sales numbers contain a bit of a head fake, and it is important to dig a little deeper into the numbers. First, the headlines today proclaim that Retail Sales rose an unexpected 1.4% in October, higher than the 1.0-1.2% expected. What the headlines don't tell you is that the Commerce Department revised the September numbers downward, making the new October number look better. The revisions can be traced to revisions of the Auto Sales figures from the Cash for Clunkers fiasco*. Auto Sales were revised upwards for August (during CfC) and downward for Sept (post CfC), matching the overall revisions. Last month, we were told Retail Sales fell by 1.5% for September. Today's revisions show that Retail Sales actually fell 2.3% in September. This makes October number look better than they would have without those Auto Sales revisions. Without the revisions, October Retail Sales would have risen a less-than-expected 0.8%, instead of today's better-than-expected 1.4%. Most importantly, properly analyzing the numbers, Retail Sales excluding Autos rose by only 0.2%, half the expected 0.4% increase. Bottom line: Retail Sales are generally weak but rising, up an average of 0.5% per month since July, but still down 8.5% from their peak in November, 2007. Retail Sales are slowly recovering:
Click Here for Current Retail Sales Chart.
*As many of you know, CrystalBull.com views the Cash for Clunkers program as a blunder. Setting aside the poor implementation and execution, the CfC program essentially robbed from future sales, and pushed them forward into August 2009, at a time when dealer inventories were at a historic low. Without inventory, Auto Sales in September and October were bound to be lower than they otherwise would have been. The program was structured so that it primarily helped the foreign automakers, at the expense of the American companies. The big winners were the Korean automakers (Hyundai: up 47% in August and 27% in September, Kia up 60% in August), then the Japanese. In fact, of the big 3 American automakers, only Ford showed increased auto sales (Up 17% in August, then lost the gains in September). The CfC program actually hurt the 2 bailed-out automakers it was intended to help: GM (down 20% in Aug., at the peak of CfC, and down more than 50% in Sept.) and Chrysler (down 15% in Aug. and down 50% in Sept.)
Oct 30, 2009 Update: S&P500 1036. Further to the volatility issue: Yesterday, the GDP numbers pronounced the end of the recession, and the market staged a very strong rally. Today, the Personal Income numbers were flat (after being revised downward for the last 2 months), and the University of Michigan's Consumer Sentiment numbers were very weak. The market sold off. Those who try to trade this market based on guesses are bound to get hurt. The CrystalBull Trend Indicator remains bullish. The CrystalBull Trading Indicator has returned 64.9% YTD, which trounces the S&P 500 YTD return of 17.5%.
Oct 26, 2009 Update: S&P500 1000. The current data show a highly unstable market, with volatile price swings. The CrystalBull Trading Indicator thrives in a volatile market, but traders should be aware that trades may occur more frequently than when the market is more stable.
Aug 20, 2009 Update: S&P500 1005. Introducing the all-new CrystalBull.com Trading Indicator!
Due to popular demand, we have added more dynamic data to our Trading Indicator. Since 08/1996, this model has outperformed the S&P500 by over 600%, and with great consistency! It has averaged just one round turn trade per month.
Click here to see the Historical Performance of the CrystalBull Trading Indicator
July 31, 2009 Update: S&P500 987. Some important notes about today's GDP release. First, the BEA has made many changes to the way national income and product accounts are calculated. Thus, figures since 2002 have been revised. Also, the chained figures (real, adjusted for inflation) which were chained to 2002 dollars, now are chained to 2005 dollars. That is an interesting event, and we are studying its ramifications. This occurs about every 5 years, so there is nothing sinister here; It just moves the benchmarks slightly. Those following GDP should take the time to study the latest Real GDP Chart.
Important to note is that previous GDP figures have been adjusted downward. As we all know, the US economy has been is severe recession. Preliminary Q2 figures show that Q2 was slightly worse than Q1, but only by 1.03% annualized. That is a sign of a bottoming in the recession, thus today's stock market rally. While our current economy is not robust, don't be surprised if the Q3 GDP is higher than Q2. That would technically be the end of the recession, but employers would need to start adding jobs before we start to see real strength.
Watch our Stock Market Trend Indicator, as it just came back into positive territory. It has been a terrific leading indicator of the long term trend.
Three short-term indicators (CBRSI, MACD, Trading Indicator) all remain out of the market, while the long-term Trend Indicator has just given a buy signal. We interpret that, while the long-term outlook is positive, a short-term correction may be imminent, and we will go 100% back into the market when the next short-term buy signal occurs (correction).
