With the increase in
jobless claims this morning (a bounce to 475,000), it is probably a good time
to note a big change in the markets and economy – the change in consumer
spending. Here are some charts
documenting what the markets are beginning to reflect about this topic.
(A snapshot of Cyclicals)
(Cyclicals from a consumer measure)
(Consumers are getting less discretionary and more defensive)
I am not specifically
entering any specific trades based on these charts however but they certainly
suggest that the markets are getting more broken and vulnerable after a long
multi-month run up. This economic
weakness is not necessarily something to celebrate, but it does provide
critical information for making better trades in the markets (which is why most
of us are here).
On My Radar
One trade I am
watching is real estate. The IYR is
approaching an area where it has bounced above three times (going all the way
back to fat finger day), and that is the 45.50 area. I currently own some SRS, and I would like to
see it really launch from its current levels.
A move below 45.50 would ensure that.
However, real estate
has continued to show relative strength to the $SPX. A price violation at 45.50 would suggest that
strength is in jeopardy.