Market Action Bodes Poorly for Consumers

Looking over all my watch lists... both today and Friday, it's almost a carbon copy - if it's a commodity stock it's almost universally up, especially energy related. If it's anything else you pretty much are down. It's a scary pattern in terms of what it reflects in the real economy globally, especially for consumers worldwide.

This just looks like a market to me where we can lose 2% in the blink of an eye.

As stated in last week's review

Technically, we broke out of narrow range with the action Friday - obviously to the downside. This sets us the market up for a mindset of "sell the rallies" instead of "buy the dips". A quick glance at the charts shows us with potential to head down to April 2008 lows as a first stop, and that would be the 1325-1330 area (currently 1360) so that is only 2.2% down from here (ah, we can do that in a day if we really tried). But generally one would think some pathetic attempt at 'bargain hunting' would happen first so maybe we get some bounce - if we do, I'll use that to re-establish some short exposure I let go into the abyss today.

Amazingly this almost worked out to perfection - we drifted to S&P 1370... 1375 was the old support, now turned resistance. So as stated, on that sort of bounce I'd re-establish short exposure, which I did throughout the morning. (much of what I bought back was sold off into the Friday damage) I was hoping for a little bit of a stronger bounce so I'd get cheaper prices on the Ultrashort buys, but that appears to be all she's got Captain....

The commodities are holding up, but we still want to look for the old pattern - everything falls but commodities, and then last to fall will be the generals. Just from a gut call, this market has a worrisome tone to it. This appears to be another period to distrust the rallies as suckers bets, as those who were buying this AM quickly found out.

The Consumer Price Index is out this Friday so we'll see what that piece of fiction says this month; with the focus moving from the credit worries (which still abound) to inflation (which does not exist in the US of course), this report, if like the employment report, begins to reflect a hint of reality - could be yet another "wake up" call for market participants. We shall see; 40% of this report is rental rates (housing costs) which might show decreases (deflation) so it might offset all the increases to consumer and remain subdued. Unfortunately I cannot put rental rates into my car gas tank, or heat/air condition my house with it, or eat it.

It remains time to continue down a cautious path; twiddling thumbs and making buying lists with price targets is the best course of action for now.