Market Close

Very low volume today with the three major indices ending essentially flat for the day.

Of note however is the XLF, RTH, and XHB (Financial, Retail, Housing) ended in the red with the poor retail data and the ever declining housing sector as reflected in the S&P Case Schiller October numbers today. The housing sector declines are quickly becoming an even greater concern to the overall economy.

With the low volume today it is difficult to put much value on any of the movements in the markets today, up or down. So we have to wait and see how this news plays into the markets as the volume returns. I will say this, the retail data and the S&P October housing data is not a ‘warm and fuzzy’ for the economy, and the broader markets. I stand firm in my view that the markets are setting up for a large fall, when it is going to tumble is difficult to guess. But a down ward trend will resume at some point in the near future I expect.

More tonight in the full wrap up.

Pre Market - December 26th 2007

Good morning to all and we hope everybody had an enjoyable Christmas and holiday.

On Monday, trading was up on the ’snapshot’ headlines that consumer spending was actually better than feared. Now this morning we learn that the retail sector has not done as well this holiday season. The fears that the consumer was pulling back and slowing their spending has now been confirmed.

For those that have been with us for a long time know that we have been predicting that the consumer spending would be soft this holiday season. We based that on trends, and not snapshot headlines.  So while over the past few weeks there have been a few headlines that retail spending was doing well we were not swayed with the trend that has been evident to us.

Target (TGT) has lowered their sales forecast yet again. Target has lowered the sales forecast now 3 times in the past five weeks. They have warned that sales expectations will be somewhere between +1 and -1 percent for December.

The holiday spending totals, up to midnight Christmas Eve, have come in at a core 2.4% growth when compared to the same measuring period year over year and is the lowest growth since 2002. Some may say that even some growth is a positive event but that would only be finding the spot of blue sky in the middle of a storm. Slowing growth is a sign of a trend and it is the trend which is more important than a snapshot in time. We are more concerned with the trend of the slowing economy and it’s impact on the direction of the markets.

We are expecting to see a reaction in the markets today on the weak retail data today. I have included the Retail Holders (RTH) chart below, of importance here is the trend line and should the RTH fall below $90.00 at any time the long term trend will have shifted negative. And if that happens we will see further declines in the retail stocks.