Chucky the Consumer Remains Market Enigma: Dave's Daily

I suppose you could just suggest not much happened the morning after the large eurozone is "fixed" rally. But, there is some sober second thoughts especially including the idea it will take months to implement "the plan" even as we don't know the details. The positive is markets held gains despite being significantly short-term overbought.

We like our friend "Chucky the Consumer You Can't Kill" since there was much news today about the rascal's condition. But, it's Halloween Monday and there was a lot of consumer data Friday. Most of this was centered on Personal Income and Spending data (Income, .1% vs .3. expected; Spending .6% vs .3% expected). This leaves a hole in Chucky's balance sheet making it harder to even max out his credit cards. Savings took a hit naturally. What the heck, he's just doing what governments around the world are doing, right?

Then we had the less reliable Michigan/Reuters Consumer Sentiment data which was higher (60.9 versus 58 expected and prior at 57.5). Remember, this measure is more weighted by stock prices than Consumer Confidence data the previous week. When viewing current readings we can see another disconnect between confidence and consumption as presented below..

Meanwhile, earnings kept rolling-in with Chevron (CVX) posting good returns but consumer sector leader Whirlpool (WHR) posting a sizable disappointment including lowered guidance and layoffs. WHR attributed losses to higher materials prices (inflation) and a poor consumer environment which is at odds with Chucky's behavior.

Gold saw some modest profit-taking while silver and other metals rallied. Commodities overall were mixed. Bonds also saw small gains.

On this choppy trading day volume was light as perhaps traders did most of their work Thursday while spending Friday holding par. Breadth per the WSJ was unremarkable.

   

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The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

Continue to Concluding Remarks

We used to have a lot of fun with Chucky the Consumer you can't kill but it is Halloween coming up right?

I see the NYMO has come off a little from Thursday and some sideways action can cause overbought conditions to ease. You can see the NYSI is also rising and the source for this must come from hedge funds and other privately managed funds with some switching from bonds. The VIX is now slowly backing off as put buying eases.

The consumer situation is still troubling as home prices continue to fall, spending exceeds declining incomes and unemployment remains high. The report from Whirlpool was especially troubling since it represents more serious purchases by consumers than iGadgets.

But, it's from the depths of these situations a new bull market can arise just as it did in March 2009.

Let's see what happens.

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The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell any security.  Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period.  Chart annotations aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com .

 

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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