Better Data Shrinks Q2 GDP to Under 1%

The Trade Deficit came in much worse than estimated when the GDP number of 2.4% annualized was released ten days ago: -$50B vs estimate of -$42B, an $8B drop from May's -$42B deficit. This is the worst trade deficit since Oct 2008. It is likely that JP Morgan will revise downward again, from 1.3% to 0.9%. 

The Stimulus is now becoming a drag, as it has passed peak spending and is decreasing each quarter; as is inventory rebalancing (see chart courtesy Goldman Sachs). Goldman sees the drag as peaking at -1.7% in 2011. Absent some sort of tax cuts (not increase next year, as is now baked in with the expiration of the Bush tax cuts), they are close to joining the double-dip camp. As it is, they have reduced their 2011 GDP estimates by 0.9%.

Comments

[Chabazite]

Off topic with apologies to Yelnick for what is an excellent post - I thought our highway workers in the UK were pretty thick, but this from a North Carolina road gang surely tops them all. What chance do your kids have? http://www.bbc.co.uk/news/education-10936604

[Michael]

And what does this have to do with equity prices?
Everyone assumes that there is a high correlation between earnings and the macro-economic backdrop and the stock market. Yet, many of the studies published in this area actually show a negative correlation. Most traders are aware of this. And the velocity of data in the market place due to all of the high technology in place "magnifies" this lack of correlation even more so!

It's why the David Rosenberg's of the World can look so utterly stupid for so very long and make statements like "the U.S. stock market has essentially gone nowhere for 12 years".

[adg]

go go go crashing DJIA 5000!

[Trader 123]

At the 40 day MA at 1089.50 SPX on light volume. Time for a bounce.

[Les]

The negative drag from the stimulus affects liquidity, and liquidity affects stock prices. It means that the stock market is probably not the leading indicator of the economy.

[Wave Rust]

looks ugly ,,,, thank you cisco

must be bullish

dont marry the bear. bull moose is rutting.

wave rust

[labelsfools]

A decade history developed 5 clusters of pricing for SPY. One of them below:

Cluster B : (94.62 - 112.89) 584 days out of 2655 since 2000. This cluster is the second in probability

The market was trying hard to breakout from this cluster until today it gave up and failed. The next target is its low close to 94.

if SPY 94 failes, say welcome to cluster D : (81 - 94) 393 days out of 2655 days.

[labelsfools]

Watch TLT closely. It need to break 101.82 and hold for a day. That means pricing has entered the next cluster that runs all the way to 105.23.

In the 2008 crash, When TLT broke to cluster (101.82-105.23), SPY back then broke into Cluster D (81-94)

[TeddyK]

I've been talking with a salesman who works for a top-5 coin broker. He's been in the gold/silver business thirty years and from what I gather, he does quite a bit of business.

Anyway, I called him to order 20 1-ounce gold eagles, just like I do every month (I own a coin shop) and he get's real quiet...whispery...and says he'll call me back on his cell phone from the parking lot. I'm thinking, WTF?...so I say fine, since I've done alot of business with him in the past.

I get a call 8 minutes later, and this is what he said:

[berytos]

Black Swan and Black Pesident You want change and only change you get.

[trendlines]

S&P500 Short-Term: Trendline break
Last post on the SPX500 called for at least a consolidation from the wedge formation. We got one now with the trendline break, and sharp one too! Although oversold in the very short-term, with the possibility of a weak bounce, we can expect further downside into next week.

http://trendlines618.blogspot.com/2010/08/s-short-term-trendline-break.html

[spellchecker]

a)What's a Pesident?
b)Was Teddy K knocked off by gold finger?

[spellchecker]

c)Will Roger have the last laugh?
d)Will Bob P go double,triple dog down short?

Don't touch that mouse, stay tuned!

[upstart]

Where's Mamma (Boom squared)? I wish DOW Predator still dropped by. Miss some of the characters that used to come around here.

[Daniel - Taz]

I am looking good here in OZ post the completion of my diametric.

Whether this is the kickoff of Wave-C to the downside or an X with one last phase higher to complete Wave-B, only time will tell.

The heavy sell-off today in the US could be a function of the big boys engineering a nice setup for OPEX next week.

i don't think so (with US Treasuries sporting very nice momentum) but the internals did look good before the drop so we can't write off the bulls yet.

Taz

[spellchecker]

Momma's momma caught her teasing the old men on the computer with a picture she found on the internet and chased her outside to play with the kids her own age.

[Hockthefarm]

Some interesting charts here showing how other asset classes faired when the $ rose and when it fell.

http://www.financialsense.com/sites/default/files/users/u244/images/2010/8-10-10%20Chart%205.gif

I think the STU is calling for a retest of the recent $ lows before the big launch. Might be a good way to time your shorts.

Yellow bit of custard,
Dripping from a dead dog's eye.
Hock

[Wave Rust]

taz

imo, spx from 7/27 through today, abc irreg flat, for a 2 and an overslap ,,,, making the ugly rally from 7/5 low into a 1

should turn higher here to spz 1175+ for the 3

bear trap closing tightly

i hate trading through 1's and 2's ,,,, until they are over, and, then they become fractal art

wave rust

[Daniel - Taz]

Hi Wave,

Only problem with that count is is the speed of wave-c. If the US was about to launch higher, one would expect a struggle lower during wave-c.

Big problem for you guys is US Treasuries. Equities can't go higher until bonds prices top, which based on their momentum, is some time off.
Taz

[Roger D.]

I love this chart.

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/6ca5b687-7013-4e02-97f9-c269ff5927fc

[Roger D.]

The Valueline index

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/38b9f803-4ebd-446f-93dc-f14180ce9a67

[www.google.com/accounts/o8/id?id=AItOawmv5FT0nGt2EOWVMM5O6W8Y3ktxtMZWdPM]

At least for now, this guy's count for a top at 1129 and the start of a large move down which he showed on Tuesday after the close, has worked out well. I went short S&P emini when I saw his chart and woke up Wednesday to a very tidy profit. Can't ask for more from a blog. This is his chart from Tuesday after the close:

http://gi61et.blogspot.com/2010/08/2119-bst-spx-update.html

You saw yesterday how it followed through. But he's not biased to the bear side - he has a bullish count too and is cautious about the bear case until we drop further. So, a pretty balanced approach, which makes a change from some of the biased stuff that's out there. His update last night is a good read for levels to watch out for for signs that the bear count might be failing.

On the dollar, he showed on Tuesday a possible 1st wave top in the dollar's rally off its recent low, a couple of hours before it fell, and identified the target at around the 61.8% retracement -

http://gi61et.blogspot.com/2010/08/1734-bst-dollar-update-5-wave-s-up.html

Look where it turned back up:

http://gi61et.blogspot.com/2010/08/731-bst-dollar-update.html

Nice!

Have to admit, I have always been sceptical about EW and fib stuff, but this guy has demonstrated to me that it has practical value and you can actually make money using it.

[DG]

i hate trading through 1's and 2's

Makes it easier if you just recognize them for what they are, which isn't "1's and 2's" but "A's and B's" and "C's and D's".

I don't understand why you guys make trading harder than it already is by insisting on seeing things in Impulse terms. Of course trading is going to be psychologically more difficult if you are expecting a trending, Impulsive market and you get a non-trending, Corrective market.

[Molecool]

DG - so true and inherently wishful thinking exhibited by retail traders. Seems to me that the most painful scenario is usually the norm and anything motive the exception.

[Mamma Boom Boom]

Molecool, nobody cares about your opinion, they really don't. You're not cool and your not even a mole, you're an 'ass pimple'.

[Account Deleted]

DG !!

Can u share your current wave count in S&P500.DO u think this Triangle formation by NEELY is over and now we are headed downsouth.Or u have a different count and what could be the implications of that.

Thanx in advance
Regards
Viral

[Michael]

Vipul,

Did you see Exact Sciences (EXAS) in the science section of the NY Times this week?

http://www.nytimes.com/2010/08/10/health/10cancer.html?ref=science

Better get in now before the Validation Results come out on October 29th at the American Association of Clinical Research Conference in Philadelphia.

[JT]

Roger,

Congratulations!
What does it feel like to be SHORT the strongest stock on the board (MCD)???

[Wags]

"At least for now, this guy's count for a top at 1129 and the start of a large move down which he showed on Tuesday after the close, has worked out well.

You saw yesterday how it followed through. But he's not biased to the bear side - he has a bullish count too and is cautious about the bear case until we drop further. So, a pretty balanced approach,

Have to admit, I have always been sceptical about EW and fib stuff, but this guy has demonstrated to me that it has practical value and you can actually make money using it."

Sounds an awful lot like you are PROMOTING your own blog, and using Yelnick's site to do it with. As for being "balanced" and not biased to the downside, why is it that you ("gi61et") hang out in such Bear Den's as Kenny and Daneric's Elliott Wave blogs that do nothing other than preach the "p3" fantasy for the last 12 months?

Practical value?
That's funny.

How PRACTICAL can your blog be when you show 6 different wave counts? How is someone suppose to gain actionable trading value from that?

[Cary Lloyd]

Roger D well done

thoughts on ge?

[Waver]

You can't be serious.
The chart that Roger posted of IBM and the A-B-C that he drew is completely worthless.
By the way, how many shares do you think Roger has shorted of IBM?

Answer: 0

[Hockthefarm]

Your gubmint wants to drive the bus back into this mess at full speed. As the monohelical folks in this article slowly but surely get parked by the curb, the task gets more and more difficult.

http://www.nytimes.com/2010/08/12/business/12debt.html?_r=2&ref=business

Hock

[-Anikitos]

Looking at XLF : http://i36.tinypic.com/2krc4g.jpg

[-Anikitos]

I do like AAPL, but iPad and iPhone I think are done. They need something incredible to keep this up:
http://i34.tinypic.com/6ekap5.jpg

[Michael]

Hock,

The Administration and Congress are NOT driving this bus. The only entity that has been in the driver's seat has been the Fed and the Board of Governor's at the Fed.

Period.

[DG]

DG - so true and inherently wishful thinking exhibited by retail traders. Seems to me that the most painful scenario is usually the norm and anything motive the exception.

Posted by: Molecool | Thursday, August 12, 2010 at 06:00 AM

The best thing I've ever done for my trading, bar none, is change my assumptions about what the "default" wave type is from Impulse to Corrective. In other words, I assume EVERYTHING is a Corrective pattern until it becomes impossible to work with that assumption. When I see squiggle charts with the first significant move down labeled as a "1", I know that more likely than not, anyone trading that count is screwed from the get-go.

I've charted every bar of the SPY, IWM and QQQQ in Excel manually for the past 18 months and in that time I have, literally, labeled less than half-a-dozen bars as "1"s.

Because I'm almost NEVER looking for a "3" of anything, I'm never surprised when they don't happen. Will one happen some day? Sure. The irony is that because of the logic I use to trade, I'll be short it anyway, even if I miss the "1" of that Impulse, which I highly doubt will happen, but could.

[DG]

Hey VB,

Here is a chart of my latest count.

http://yfrog.com/5aspxdailyaugust2p

The pattern I thought was completing recently may have been real, given the action the past few days. We'll see. As the chart implies, I'm not super-bearish here and in some respects my count implies the same sort of market action as Neely's, if that Expanding Triangle is real and the wave-.E doesn't get fully retraced. But, if something happens to make me reconsider that count, that's what I'll have to do.

Today is 5 months since I've had to revisit my wave count on a Daily timeframe, though, so I think I've got a pretty good grasp of what's going on.

[Michael]

Thanks DG!