Eye On Consumer | Bulls on Wall Street

Eye On Consumer

Outside of oil, REITS, and gold, I don’t see a big reason to be excited this week to the bull side.  Of course, I may be wrong and we all know that news changes everything. We play what they give us, right?

 

Why am I leaning towards being a little bearish and less optimistic?

 

The consumer.  Everyone is yacking about needing jobs.  Hell, yeah, we need jobs!  There are way too many unemployed and families are hurting.  But, everyone keeps asking Obama, “where are the damn jobs?” Unfortunately for Obama and the currently unemployed, he and his staff took the Keynesian approach by creating more money.  The thought was that creating more money would stimulate lending, which would ultimately put money in the consumer’s hands, who in turn would go out and buy products.  And, lastly… as the demand for products goes up, so does the need for corporations to hire.

 

The big variable left out of this equation was confidence.  There isn’t any. We’re all sitting on our hands and saving our money.  We’re more worried about the future than we’ve been all year.  We don’t have a jobs problem, we have a confidence problem.  You nor I can go out and make corporations hire – they need the demand.  Hell, they need the confidence, as well.  We don’t have it.  We live in fear that maybe China or India might be the next super powers of the world and then what’s left of America?  We don’t see strategic economic advantages in our country that were apparently so obvious over the last however many years.

 

As Americans, we know our education system is a wreck… health care is costing us way too much money… there are billions of poeple around the world that will manufacture what we manufacture at a fraction of the price, etc.

 

We’re flat out worried about our future.  Is it Obama’s fault?  I’m not here to say.  Do I have confidence solutions to toss out to everyone?  Nope, or I would be in a much higher position in law or politics.  So, let’s not ask Obama to give us jobs, let’s ask for pep rallies and free beer for everyone… anything to boost confidence. Then, you’ll see hiring.
So, what’s my point?

 

This week I’m starting a new month slightly bearish.  Data released last weed was so, so.  We get excited when things aren’t as bad as we thought they might be. Lol.  “Your leg is only broken in one spot, not two.”  I’m bearish because ultimately, I think the consumer drives the market and until we feel better, I can’t be that excited.  I can’t explain the run in names like AAPL, NFLX, AMZN  etc. over the last 2 months.  My guess is that it is artificial propping by the man behind the curtains in an attempt to create confidence in the consumer through the news media – “Market is up again!”   What the FED has neglected to realize is that we’ve become synical and we’re more divided than any time since his presidency.

 

Can we not get confident before jobs?  If not, we’re possibly screwed.  Until I see the following charts look a little healthier, I’ll remain a short term day trader moving with the day to day tide.  I’ve also adjust my retirement accounts to reflect my leaning-bearish tone until further notice.

 

Prove me wrong markets and come on, people, go spend your money – it’s the American way!

 

First Chart – Simple SPX..  Obviously, you’re all aware of the last bull move making September create ‘confidence’ in the market.

 
Second Chart:  Gallup Economic Confidence Index.  Trending down.  Needs to breakout of top of resistance trendline to boost my confidence.
 
Third Chart: Gallup Consumer Spending – Ugly.  There isn’t a better way to assess confidence that spending… check it out.  Remember, the market has been going up since August (divergence).
 
 

Forth Chart: (my favorite).  This one puts it all together.  Red Line – Michigan Consumer Sentiment.  Green line – DOW.  Orange line – 6 month Consumer Expectations.

 

Blue arrows indicating when the trends are basically moving together.  Red indicates divergence. The grey boxes are areas of wide spreads between the market and the Consumer numbers.  Notice what happened at the end of the previous two spreads – very fast fall in the market (correction).  Notice the spread and divergence we’re currently experience.  In my opinion, the consumer always wins out.  THAT’S why I lean bearish.

 

 
 

Why is it possible that I’m wrong about October and we’ll continue to see overall security strength?  Because the market does what the market does.  I’m not betting on this outcome, but I’m prepared for it and will be ready to trade it.  With elections only a month away, there is no telling what could happen.

 

Happy trading.

 

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