Time to Be Thankful
Happy Thanksgiving!
The market is likely to be lightly traded and drift higher on the day. Historically this week tends to be positive and thus far it has followed suit. No big surprises with the activity yesterday as the market churned on the data points. The news out of China seemed to set the tone as they threaten to clamp down on lending restrictions. More of a 6-12 month issue for investors and one to watch over time.
The Fed lowered their outlook on unemployment to 9.3-9.7% for 2010. That is good news, but they dropped a comment in the minutes from the meeting directed at speculation building with the low interest rates. Not good when you consider the source of the low rates. I don’t know exactly what that will mean to investors near term, but the outlook would be for the Fed to hike rates to strip some of the liquidity from the system.
Gold continues to receive its share of speculation money hitting $1170. This is one area I remain very cautious about and we continue to raise out stops to protect against the downside risk of the metal.
Financial stocks remain challenged as balance sheets are not exactly pristine. The mending continues at the cost of the consumer and small business lending. Consumer credit fell again last month. Based on the latest figures it is down more than 20% from this time last year. Month over month lending continues to fall as well showing nearly a 5% decline from September to October. Without the consumer the recovery will be slow and arduous.
Treasury auctions are still popular and rates continue to fall as demand remains high. This could be a issue of fear towards other assets still driving money towards the bonds. Banks have increased the amount of Treasury bonds on balance sheets by more than 50% since this time last year. Yes, this is part of the improvement process, but they are looking for places to put money as well as the individual investor away from harms way.
Commodities have been on a nice run higher, but oil is crumbing somewhat the last week. The price of crude fell below $76 overnight. This is something to watch short term. Agriculture business and commodities have enjoyed a nice run the last couple of weeks. Watch for a short term pullback off the new highs. Base metals have done nicely as well with SLX now trading near the high.
Today there is plenty of economic data to chew on prior to turkey tomorrow. Jobless claims, durable goods, personal income, consumer sentiment and new home sales. Not bad for slow day. The futures are up on the Fed minutes with lower unemployment expectations for 2010. I would remain cautious as the rest of the story isn’t out yet. Tomorrow the markets are closed for the Thanksgiving holiday and only half a day of trading on Friday. Expect light volume and all eyes to shift to the retail reports on Monday for the biggest shopping weekend of the year. Good news and we rally, bad news and we hide for cover. Anticipation is high and that doesn’t always work out well for the markets. Be cautious about how you approach the last trading month of the year which begins next week with a barrage of data to start.
I wish each one of you a very Happy Thanksgiving - remember all of those who have helped you along the way and pay a special thanks and prayer for them all. Thank a veteran and those actively serving for the freedom we all enjoy! See you on Monday!
Have a great day investing.
