My read on the economic news and market reaction

jsl

Personal spending increased nominally, but decreased after being adjusted for inflation.

 

Inflation in quite high and people are concerned that it will put the policy makers in a very tough spot.

 

Factory orders, not bad.

 

From Bloomberg headline news,WCI is to file for bankruptcy. A couple minor bad news from Citi.

 

What happened to the market?

Oil and gold dropped and bounced. Dollar retreats. TLT dropped initially and bounced all the way back. Stocks are sliding and not finding a bottom of the day yet.

 

So,

people seemed to be more worried about the economic slowdown than inflation.

 

If this how the market looks at the economy, I don't see short term catalysts for the market to go up. Really unfortunate.

 

 

 

[ 本帖最后由 jsl 于 2008-8-4 10:47 编辑 ]

revolver

Generally, they are predicting a middle-term bear market rally, which will last between 2-4 months with S&P rebouncing at least 8% from the previous low. The basic idea is that the growth of inflation rate will slow down and peak out in the 2nd half of this year, therefore causes a repricing of market P/E ratio.

gardener2000

Turning to the second quarter, the GDP report shows that we appear to have reached the rebound in the middle of the “W”.  Economic activity accelerated to a 1.9% pace, more than double that of the first quarter.  In addition to the modest rebound in consumer spending, steady government outlays and massive improvement in the trade balance helped second-quarter growth.  Net exports contributed 2.4 percentage points to real GDP growth in the quarter, the largest contribution in nearly three decades.  Exhibit 3 shows the growing contribution of trade improvement to US economic growth in recent years (here we average over several quarters to get at the underlying trend).

 

Compared to our expectations at the beginning of the year, the mid-“W” rebound occurred slightly earlier than expected because of more rapid distribution of rebate checks by the Treasury and what appears to be some “pre-spending” of stimulus.  Exhibit 4 shows our estimates of spending out of two major stimulus programs in the past; it looks to us as if roughly 20% of the stimulus was spent before it arrived in each case.  

 

Unfortunately, the flipside of the sooner-than-anticipated ramp-up of stimulus spending will probably be a sooner-than-anticipated ramp-down as the funds are exhausted.  Exhibit 4 also suggests that the extra cash flow from fiscal stimulus should continue to support spending for a few months, propping up third-quarter growth.  However, we think the payback will come in the fourth quarter, and now expect a 1.5% annualized decline in real consumption, holding real GDP flat (vs. our prior expectation of 1% growth).  The economy is likely to remain stagnant in the first quarter of 2009.

jsl

原帖由 revolver 于 2008-8-4 11:18 发表 Generally, they are predicting a middle-term bear market rally, which will last between 2-4 months with S&P rebouncing at least 8% from the previous low. The basic idea is that the growth of inflation ...

 

I partially agree with this. The risk is that the discount on the stock market may not be deep enough for a 4 month rebound.

jsl

原帖由 gardener2000 于 2008-8-4 11:20 发表 Turning to the second quarter, the GDP report shows that we appear to have reached the rebound in the middle of the “W”.  Economic activity accelerated to a 1.9% pace, more than double that of ...

 

That's the problem. I would rathe to have a hope hanging around Thanksgiving or Xmas. Now it seems that there is a danger looming. That's why the marekt is weak in the last two trading days.

revolver

原帖由 jsl 于 2008-8-4 11:28 发表   I partially agree with this. The risk is that the discount on the stock market may not be deep enough for a 4 month rebound.

 

It may be a slow and very volatile one. From the previous low 15 July till now it's already more than half a month.

jsl

原帖由 revolver 于 2008-8-4 11:37 发表   It may be a slow and very volatile one. From the previous low 15 July till now it's already more than half a month.

I truly hope he and maybe you are right. I wrote my puts with the expectation of 3 month uptrend and one month pull back or drop. BTW, the sharp rise, though not big, that is happening now is quite important

revolver

佩服。Only艺高人胆大的才write put。

爱逛胡同

原帖由 jsl 于 2008-8-4 11:45 发表 I truly hope he and maybe you are right. I wrote my puts with the expectation of 3 month uptrend and one month pull back or drop. BTW, the sharp rise, though not big, that is happening now is q ...

Can you elaborate more as to why that big sharp rise is important? positive or negative for bull/bear ?




Thanks.
[ 本帖最后由 爱逛胡同 于 2008-8-4 12:10 编辑 ]

jsl

As you know, I am a bull (maybe a reluctant one now), and I took that as a positve for me. If there were a sharp drop when TA is on the lower edge of the triangle line, stop loss triggered, in which case the chart will look ugly and whoever cut the loss will wait until after the FOMC. Bad TA and bad FA together do the most harm. With a sharp rise, however, we know this is at least a first entry point and bears agreed with that too by covering with no hesitation. So it reinforced the line for now and gain sometime for the market to digest the bad news. Hopefully, this forgiving market will give the bulls a better chance, especially for me as a put writter.

爱逛胡同

原帖由 jsl 于 2008-8-4 12:36 发表 As you know, I am a bull (maybe a reluctant one now), and I took that as a positve for me. If there were a sharp drop when TA is on the lower edge of the triangle line, stop loss triggered, in which c ...

I see. Thanks .  Hope those bears who just covered don't change their mind again !!!, at least for today.......

jsl

原帖由 爱逛胡同 于 2008-8-4 12:42 发表 I see. Thanks .  Hope those bears who just covered don't change their mind again !!!, at least for today.......

 

They will short back, either today or within two to three days. But it doesn't matter as much, since the bulls fend the line and time is gained. As long as the forces are balanced, I can sit and watch.

Ponzi

原帖由 gardener2000 于 2008-8-4 11:20 发表 Turning to the second quarter, the GDP report shows that we appear to have reached the rebound in the middle of the “W”.  Economic activity accelerated to a 1.9% pace, more than double that of ...

"W"? 现在恐怕还在半山腰吧.

jsl

Maybe the fact thurns out to be 1 more month down and 2-3 month up from here.