Mixed News Yields A Mixed Up Market

by Larry Levin


More weak economic data today led to an early drop across all the major indices, but a surprising fall in oil futures really mixed up investors. The oil drop led equities to rally, which was followed by weakness, then another rally, then major weakness again. In the end, the market was as mixed up as a can of mixed nuts.

The Buy & Hold faithful among us are probably wishing they never bought & held WCI Communities Inc. WCI is a homebuilder that once traded north of $36.00-share, but closed today at .02-cents per share today with its bankruptcy filing. The cash-strapped company is the latest casualty of the severe pullback in Florida 's condo and housing markets.

The financial sector was hit with more bad news this morning. HSBC Holdings reported a 29% drop in first-half net income as bad-debt charges surged to more than $10 billion and write-downs continued to mount.

Personal income and spending data for June was released this morning. Although the income data was better than expected at .1%, spending was six times higher at 6%. Apparently we just can't stop using credit to keep up with the Jones's. If you were thinking the higher spending is good for the economy, it doesn't really matter because these data points are a mirage. Inflation in June (.8%) was responsible for all the increased spending.

Adjusted for inflation, June's real spending fell 0.2%, which was the first decline since February. Real consumer spending is up just 1.2% from a year ago, the weakest performance during this business cycle. Moreover, real incomes fell .7% due to inflation.

This latest salvo of bad news was temporarily muted when the oil market fell out of bed. At one point, oil had dropped more than $5.00-barrel as it plummeted through layers of sell-stops. Rumors of a large fund blowing up and liquidating long oil and natural gas positions was said to be the culprit.

In the end, the market closed where it was just 90-minutes after the open. The mixed data led to nothing much today. That lack of direction and volume was probably also due to tomorrow's FOMC meeting: traders didn't want to put new positions before this announcement.

Real Time Trading Signals*for

Trade Date: 8/4/08

E-Mini S&P Trades*
(before fees and commissions):

1) VA buy @ 8:35am at 1257.50 = -1.75 (1 lot)

2) Engf buy @ 11:15am at 1254.00 = +2.25 (1 lot)

3) OTF buy @ 11:50am at 1252.50 = -1.75 (1 lot)

4) TP buy @ 12:05pm at 1251.50 = b/e (1 lot)

5) VA sell @ 1:30pm at 1257.75 = -.25 (1 lot)

6) 80% buy @ 2:00pm at 1257.25 = -1.5*2

7) Algorithm trades (2)...combined total...-1.50


E-Mini Russell Trades*
(before fees and commissions):

1) No ER trades today.


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