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There are no other words to describe the symmetry between these two chart patterns than simply beautiful.
I purposely left the scale and dates off the charts as to not distract your eyes. It is simply too powerful to ignore yet that is what many have done, self included over the past two weeks as the 200MA blurred our vision. A somewhat meaningless number took our eyes off the pattern playing out before us.
Again as to not distract your eyes I color coded three distinct phases (phase 1 in orange, phase 2 in purple and phase 3 in blue). Notice the symmetry once again. But to me what is most powerful at this very moment is the position of the last few candles and the moving averages.
The first look at GDP for Q1 2011 came in at 1.77% in real (inflation adjusted) terms, a decline from 3.11% in Q4 2010 and 3.72% in Q1 2010.
Below are the highlights.
A big drag was government that actually contributed a negative 1.09% to growth driven mainly by state government and national defense.
Inventory bounced back slightly and contributed 0.93% from a prior quarter contraction of 3.42% but clearly the inventory build cycle is declining. Should retailers grow concerned about business conditions it is probable inventory will contract in Q2.
Trade was flat at negative 0.08% from the prior quarter where it actually contributed to growth by 3.27%. The trade deficit contracted in Q4 2010 but the first two months of data in 2011 showed this trend reversing and thus highly probable to be a larger drag on GDP in Q2.
Looking forward to Q2 2011 GDP contraction is very possible and at risk due to government, inventory or trade. This assumes consumers stay relatively strong as in this current report although a big portion of consumer income growth was from the government. As government austerity becomes reality the Federal government will be a big drag on future GDP and very likely a cause of the next recession.
The next recession is the scary one when you consider labor is already in a difficult position and the government will be even harder pressed to stimulate or face the risk of rising bond yields. This is when things get scary and I am of the opinion that Q2 could in fact be the next negative GDP print.
Charts below for your viewing pleasure.
Submitted by MacroStory.com – to read more please visit - MacroStory.com
The commitment of traders report for the week ending March 8, 2011 is a rather interesting one and shows the value in using the report. Copper, followed by many has been signaling a move down in equities for a few weeks now. It is off its highs by 10% while SPX has held in for the most part (down about 3%). The question many would like to know is where is copper headed? What about oil? Oil pulled back a few times (after Egypt and again on Friday after the failed "day of rage"). The answer to both of these will give insight to future equity price action. Let's look at the charts below from this week's COT Report.
Copper: Commercial continues to lighten up their net short position (they short strength and buy weakness). Since copper hit its high in February commercial positions have not stopped in lightening up their short position as shown below, a negative for equities.
Oil (WTI): After Egypt oil pulled back but commercial positions indicated this was not the future price action of oil as they continued moving net short. They have continued this week as well and are more net short than any other time since January 2010. Further oil strength looks to be at hand, a negative for equities.
SPX Consolidated: Note the divergence between the SPX consolidated commercial and the SPX. I don't read a lot into this chart but the large and sustained divergence would imply SPX weakness.
USD: If anyone can figure out the direction of the USD please write a book. Case in point on Thursday the USD had a big move up and recaptured a three year trend line only to reverse the entire move (and the trend line) on Friday. Per the chart below it does look like commercial net and non reporting (retail) are positioned similarly for USD weakness. From a technical standpoint this seems to be the probable path but group think is usually wrong so that would at least raise some doubt.
Thirty Year Treasury: Another tough one to read. Commercial net did increase their net short position which means 30 year rates may fall back this coming week but it certainly does not signal a trend change and any drop in rates may simply be a technical bounce before another move down (down in price, up in yield).
Submitted by MacroStory.com – To read more please visit - MacroStory.com
For a country trying to export itself to prosperity, we seem to have the trend wrong. The trade deficit for January 2011 increased by $6 billion as imports outpaced the growth of export at a faster rate than in prior months. This will have a negative impact on Q1 2011 GDP forecasts. Although well off its 2005-07 highs, the trade deficit is nearly 50% greater than it was just a year ago. Additionally China reported their first trade deficit in seven years which begs the question who will be the source of increased US export growth?
Submitted by Macro Story. To read more, please visit - MacroStory.com
AAII Investor Sentiment for the week ending March 9, 2011 showed little change over the prior report. Those with a bullish outlook over the next six months fell to 36.0% versus 36.8% the prior week and below the historic level of 39.0%. Those with a bearish outlook fell to 32.3% versus 33.1% in the prior week and above the historic level of 30.0%. This report has correlated very well with the SPX and implies a move down in equities in the near term. The question now becomes though is this yet another correlation that has broken down?
Submitted by Macro Story. If you wish to read more, please visit - MacroStory.com