Double-Dip Watch: Uptick in Industrial Production

In this Summer of Disillusionment, where the plethora of bad news is driving a bond bubble, we had some rare good news: an increase in industrial production of 1% that beat expectations of 0.6%. Production is up almost 8% above year-ago levels, and if this pace continues, we should be back to a full recovery by next summer. This is the first positive surprise after a series of disappointing reports on retail sales, housing and building permits. Is this a harbinger of a change of trend back towards an economic recovery?

 

The report stands out against other negative news. This raises the concern that it is based on a statistical anomaly. A major component of the increase is the auto sector, and if that is carved out of the report a strange spike emerges in the data:

 

The spike comes from seasonal adjustments that may be skewed because normally July is a down month - so a lesser decline in July causes a positive blip up after adjustment. You can see in this comparison of non-seasonal numbers (red) vs adjusted numbers (blue) how a steep drop in actual production was turned into a steep increase in adjusted production:

The statistical blip is not showing up in other reports. The Empire State Manufacturing Index came out weaker than expected. The index is still positive at 7, and rose a bit from its July level at 5, but has fallen from a 32 level in April and a 20 level in June. When compared with the new orders component of the Empire State index, industrial production looks like it is rolling over towards a decline, not accelerating into a rise:

Comments

[Whitebear]

Deflation the heck. Ask Pretcher to explain to us why someone is bidding $130 for Potash now and the stock is now trading at $148, expecting more entering the bidding.

Ask him why those Farming equipment stocks are up.

Even those prime real estate in cities like San Francisco, Palo Alto, D.C, downtown Seattle is only off 20% from its high!! Who cares if real estate is in a dumpster in Florida or LV. Location location. Nobody forced you to buy the rural areas.

Deflation the heck. His brain the size of the pea fails to realize that inflation or deflation is not a force exerting on all sectors at once. Those preaching deflation because M3 is falling or debt is falling have their eyes closed on the continuous inflation of the Central Bank's balance sheet. M0 or Money base is exploding and is leaking out to sectors like precious metals, farmlands, and fertilizers.

There are lots of money to be made in those sectors and Pretcher and the likes are asking people to sit on worthless piece of paper currencies???

[Bird]

I like your convincing tone Whitebear. You've influenced the debate.

[Hockthefarm]

Test

[Daniel - Taz]

Watch the Euro Swiss cross. Any further downside here will underwrite the next down leg in equity markets. We should know within the next 2 days or so.

[KRG]

Daniel: What is the logic of co-relation between Euro-Swissy and equities?

[Daniel - Taz]

Hi KRG

This cross got hit hard before the sharp move in the yen which proceeded the flash crash.

Obviously such correlations break down when you need them the most but the 5 day slide in this cross retraced the prior 14 day rally completely. This is quite bearish.

Taz

[Bird]

Based on price/time methods, I'm pretty sure that the current move up from 1170 on the SPX 60 min is corrective and that the 1129 high will not be exceeded before new lows break 1170.

[vipul garg]

Bird,
not specific to current move, but there is no reason why a corrective move not exceed the high point from where it started.

[Bird]

VG, from an EWT perspective, I would not disagree with you. I am basing this on the fact that the move up to 1129 was harmonic in price and time in such a way that only specific time junctures would mark the end of the subsequent move down. Since the 1170 low is not at one of those time junctures, the move "must" continue down until it does.

[Bird]

I would add that unless a new low hits in the first hour of so today (which seems unlikely), the earlies time juncture for the current downmove to end is late in the day on Monday/23rd.

[Account Deleted]

Dow Jones Futures before opening bell
http://niftychartsandpatterns.blogspot.com/2010/08/dow-jones-futures-before-opening-bell_19.html

[vipul garg]

bird,
i am just assuming that you mean 1070 and not 1170.
even if the market has time at hand to finish a down move, the break of lows is not a requisite,it can simply waste time and be sideways.( triangular structures)

similarly break of highs is not dependent on whether the move is corrective or impulsive but is more of structural requirement and is largely dependent, in a shorter time,on the news flow/funds flow.

from EWT point of view, ideally the current move should end between 1060-1040 band in some time soon.( and if doesnot the move may just continue till 950.remote but a still not ruled out).
the higher this move ends, the larger and faster the upwards move be.

[Bird]

Yes 1070. Sorry.

I am applying a different technology, with different implications. By the way, because the move down this morning has been so strong, it looks like we cannot rule out the first possible time juncture as of the 1st hour or 2 today (if new lows are made).

[Mamma Boom Boom]

>to all readers who trade for a living, are you long the indices for this short term trade (7-10 days)?

imo, you should be. you'll hate yourself if you aren't. the speed will rise quickly.

Posted by: Wave Rust | Wednesday, August 18, 2010 at 09:12 AM<

Better chech your chart! You can't beat me!

[trendlines]

Shanghai Composite: Heck of a Ride!

Since my post on Jul-5, "Why I am BULLISH medium-term" calling for a rebound, it's been one heck of a ride. From a low around 2350 to the current 2680 - a sweet 330 points (14%) gain! Hope some of you cowboys took the ride like i did. In the past couple of sessions, price broke an important trendline too. Although due for a correction in the next week or so, i maintain that there is high probability of more upside into this year-end (based on the EW count).

http://trendlines618.blogspot.com/2010/08/shanghai-composite-heck-of-ride.html

[nspolar]

Mamma, you called em again!

Are you still looking for a bottom and rise into early fall? What will change your mind on this?

Watch da Vix Mamma. As you probably know a lot of charts been diddling fiddling with 50 dma/200 dma cross overs, in particular da Vix.

EW wise and TA wise da Vix looks like it is in near position to explode upward.

Time will show.

ns

[Mamma Boom Boom]

>Mamma, you called em again!
Are you still looking for a bottom and rise into early fall?<

YES

--------------------

>What will change your mind on this?<

PRICE

[Mamma Boom Boom]

I really want to see that 1068 gap filled. Then we can be off to the races!

[Trader 123]

"the higher this move ends, the larger and faster the upwards move be." - Vipul

Agreed 100%

[JT]

"To all readers who trade for a living, are you long "the indices for this short term trade (7-10 days)?

imo, you should be. you'll hate yourself if you aren't. the speed will rise quickly. don't try to be cute if you aren't any good at scalping. spx could be near 1175 by Friday or Monday." - Wave Rust

Looks like Wave is in the House of Pain with that call yesterday.
Guess he didn't see the S&P's getting crushed for 7 handles on MOC.

Just a horrible call.
Period.

[nspolar]

Bird, I like to read your 'time' related posts.

Do you see anything significant in your 'timing' with mid to latter Feb. 2011?

Like down, down, down with a turn in that general period?

TIA.

ns

[Bird]

NS, about a year and a half ago I did a long term study which showed roughly Oct 2010-ish and beginning of 2012 as the nearest possible long term low time junctures. But my approach has since changed a bit. So I will look again later today and see if I see anything around your Feb '11 date. I'll get back to you.

[ROLF]

Throw MOMMA off the train!

[Bird]

Why do you see Feb 2011?

[Mamma Boom Boom]

My brother used to come home at 3:00 in the morning, lean over the toilet, and go ROLF.

[ROLF]

Momma, one question. What do you do when your gap fills? ROLF!!!

[Bird]

Mamma, once and for all, are you a boy or a girl?

[Mamma Boom Boom]

ROLF, I understand now. I didn't realize you were a 'Blithering Idiot'. Please accept my apology.

[ROLF]

Once again, another actionable trade courtesy of MAMMA!

[Mamma Boom Boom]

Bird, I assume you're joking.

Actually, I'm thinking of changing my name to Neo-Mamma!

[Bird]

It's just that the picture throws me off is all.

[ROLF]

Bird, Momma is trans. He's really a bulldozer operator working for CAT. Know what I mean.

[nspolar]

Bird, based on something as simplistic as trading day cycles, in conjunction with what/where I think the waves are at,yes I see a potential low in Feb and a very good 'trade' point.

A final low however comes later in 2011 perhaps even very near end of 2011 or early 2012 (similar to your thoughts).

Not locked into it ... we will just have to map it as it goes.

Note Bird I am not a daytrader.

Thanks.

ns