Spin: Slang. to cause to have a particular bias; influence in a certain direction

The picture shown here is that of a record player. For those of you that are in your 20’s or even low 30’s you would look at this device and say "what on earth is that?"… But for us older folks we remember what these devices are and they were used to play records which was accomplished by spinning the record with a needle on it to reproduce the recorded sound.

Well, now days the term ’spin’ has taken on a new meaning and that is to take facts and turn them into something else, to find a ‘different’ possible outcome.

Well, the ’spinning’ going on in the media is at a rate to which I find disgusting. For close to two months Lisa and I have described what the data was showing to us with regard to the consumer spending situation. And with each bit of evidence such as the down ward revisions by the retail companies themselves, the consumer sentiment indices, the charts of the discretionary spending, or of the rising cost of living;  there has been someone to ’spin’ it to make it out to be better.

At some point I will go back and collect all of the facts that we have covered with regard to the consumer spending situation and present them again, but this time with the spin that was applied afterwards by the media. And each time the spin ended up being incorrect. But spin they do and spin they will keep doing. Now that we have had our first real look at totals for the holiday shopping period and they confirmed that the consumer has indeed been cutting back and growth is slowing we now have a new spin. Today the spin is that the gift cards will rescue the holiday shopping season… For every bit of economic data released the talking heads crank up the handle on the victrola and give it another spin. (for those who don’t know what a victrola is click here). Yes, there were a lot of gift cards sold this year, so if the people who received those cards go out and shop with them in the period between Christmas and New Years when the retailers are desperately trying to sell inventory at vast discounts then all that is happening is the retailers will be able to clear some of the inventory that is still sitting at greatly reduced margins. So where is the profit? It is less. So gift cards will help the retailers move inventory, but at the cost of profit margins. So let the talking heads spin away, we will stick with the facts. Another outcome that is looking very likely to happen is after the holidays are done with the retailers will likely be forced to cut back on their employment levels, and this just adds to our increasing unemployment situation.

Another great spin is the housing market, today I heard a commentator on CBNC say that because the housing decline has now been going on for 10 months it must mean a bottom is approaching. On what basis? On what facts? On what anything? How can someone make a claim like that? It is purely spin at its best. Don’t acknowledge the bad, only find the possible good and spin it for all its worth. Recall the article I wrote on the human psychology that is embedded in our very core to find good in anything. That is fine for some aspects of life, but with regard to finances, reality must prevail and not "perceived goodness". The final housing data for October was released this morning and the decline in home prices is actually accelerating. The average decline for 2007 is now 6.7% from the same period last year. And this is the largest year over year decline since this type of data was started in 1988. The housing market is declining in the United States, mortgage lenders are tightening their lending standards making it more and more difficult to obtain a mortgage now, low rate loans for people with lower incomes are a thing of the past now, and now the average cost of a new home is less than the average cost of an existing home which is very significant in that the home builders are dropping prices to get out from the backlog of homes that are not selling and forcing people with existing homes to lower their prices even further to compete with the new home price declines. A situation that shows no end in sight yet. These are facts, no spin.

The markets today traded on very light volume with the largest movers being in the energy sector today as oil has been making another run on new highs. Had it not been for the energy sector today we would have ended the day in the red. In the final days of 2007 we continue to watch situations unfold and the sector charts for the best positioning in 2008. At the start of 2008 we will have, based on the sector analysis, new individual stocks for swing trades. They will each have their own unique entry rules and price target points. But one thing that never changes is the protection of capital and that is paramount to everything else.

When the new RebelTraders web site goes on the air it will have sections to monitor the major sectors, the swing trade setups, and even longer term stocks that Lisa and I both agree are worthy of a longer holding period. Much to come with the new site, it is painfully slow working the software side of the new site with the markets being in the shape they are. But rest assured, you will enjoy our new site when it becomes active in the very near future.

Good night fellow Rebels..

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.

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.

Lisa and I want to wish all of our readers a wonderful, healthy, and happy Christmas and Holiday. Lisa is on her way to New York and I am taking to the road shortly myself. As we will both be away from our trading desks for the holiday there will be no posts tonight or tomorrow.

I will return in time to do a pre market analysis on Wednesday 12/26 at which time I will recap the events of today’s short trading day.

Best Wishes to All

 

A low volume, quiet market day expected today as the short trading day before Christmas is typically non eventful.

After the Christmas holiday we will have some events of note that we will be watching.

Wednesday, 12/26

• 7:45 am - ICSC chain store sales
• 8:55 am - Redbook Retail sales
• 9:00 am - S&P / Case Shiller home price index
• 10:00 am - December Richmond Fed Manufacturing index

Thursday, 12/27

• 7:00 am - MBA mortgage applications
• 8:30 am - Initial jobless claims
• 10:00 am - December consumer confidence

Friday, 12/28

• 10:00 am - November New and Existing home sales
• 10:00 am - November Help wanted index

‘Twas the night before Christmas Eve trading day, when all through the pits

Not a creature was stirring, no up and down ticks;

The stockings were hung by the chimney with care,

In hopes that Ben Bernanke soon would be there;

The traders were nestled all snug in their beds,

While visions of huge gains on the DOW danced in their heads;

And Lisa in her ‘kerchief, and I in my cap,

Had just settled down for a long winter’s nap,

When out on the lawn there arose such a clatter,

I sprang from the trading desk to see what was the matter.

Away to the window I flew like a flash,

Tore open the shutters and threw up the sash.

The moon on the breast of the new-fallen snow

Gave the luster of mid-day to objects below,

When, what to my wondering eyes should appear,

But an SIV bailout, and eight tiny Fed Governors,

With the little old driver, so clueless and dopey,

I knew in a moment it must be Ben Bernanke.

More rapid than eagles his coursers they came,

And he whistled, and shouted, and called them by name;

"Now, Kroszner! now, Kohn!, now, Mishkin and Hoenig!

On, Rosengren on Evans! on, Warsh and Poole!

To the top of the NYSE! to the top of the street named Wall!

Now dash away! dash away! dash away all!"

As worthless commercial paper that before the wild hurricane fly,

When they meet with the credit crisis, mount to the sky,

So up to the market-top the coursers they flew,

With the bail out full of money, and Henry Paulson too.

 

And then, in a twinkling, I heard on the roof

The prancing and pawing of each little hoof.

As I drew in my hand, and was turning around,

Down the chimney Ben Bernanke came with a bound.

He was dressed all in green, from his head to his foot,

And his clothes were all tarnished with margin calls and puts;

A bundle of money he had flung on his back,

And he looked like a peddler just opening his pack.

His eyes — how they twinkled! his dimples how merry!

His cheeks were like roses, his nose like a cherry!

His droll little mouth was drawn up like a bow,

And the beard of his chin was as white as the snow;

A dollar bill he held tight in his teeth,

And dollar signs encircled his head like a wreath;

He had a broad face and a little round belly,

That shook, when he laughed like a financial analyst full of jelly.

He was chubby and plump, a right jolly old fart,

And I laughed when I saw him, in spite of my heart;

A wink of his eye and a twist of his head,

Soon gave me to know I much to dread;

He spoke not a word, but went straight to his work,

And filled the stockings with promissary notes; then turned with a jerk,

And laying his finger aside of his nose,

And giving a nod, up the chimney he rose;

He sprang to his SIV, to his team gave a command,

And away they all flew from the consumers they dammed…

But I heard him exclaim as he drove out of sight.

"Happy Christmas to all, we’re just thieves in the night"

(by Chuck Young, Rebeltraders)

I want to thank Clement Clark Moore, original author of The Night Before Christmas, for the inspiration to create a more "current" economic version. Hope some of you were able to have a good chuckle… The classic "Night Before Christmas" is a masterpiece, our version is a parody with an economic twist.

Tomorrow we have a short trading day. And the trading volume is typically light between Christmas and New Years so will be hard to gauge where we will be going this week. From where we sit nothing substantial has changed with the economic picture other than some optimism on Wall Street , the question is how long will it last. As I stated in a previous commentary the more I see the market advance the more I am afraid of a substantial fall in the making.

We will not be taking on any new swing trades this week so that our portfolio can be re-balanced on January 2nd and started new for 2008. Not much has happed over the weekend other than the usual news stories of shoppers making the last minute shopping dash to the malls. A British newspaper over the weekend polled top British economists and the results were published today, in it they expect that the Bank of England will need to cut rates four times in 2008 as their economy continues to slow. Also reported tonight in the German financial newspaper Boersen-Zeitung, is that the IMF (International Monetary Fund) chief economist was quoted as saying "We will not be able to stick to the estimate of growth of 1.9 percent for the United States nor the 2.1 percent for Europe"

One of our readers has requested a chart analysis of the Russell 2000 index. Shown below is that chart with the current technical analysis.

I was going to post more information on what the new Rebeltraders site will offer, but time became limited over the weekend. This week I will post much information on our plans for 2008 and what the new site is going to offer you! You will definitely want to be with us in 2008 as we continue to grow.

To all a goodnight… see you in the morning.

Recession or no Recession… the battle rages on…

The debate over the health of the economy rages on each and every day. Some financial analysts say the economy is strong and vibrant, while others say that the signs are already present of a declining economy. The debate between those who believe there will be (or already is) a recession and those who say the opposite is true has ramped up in intensity over the past month.

‘Headlines’ continue to impact investors and traders who only take the headline at face value and don’t dig for the facts. Many investors and traders over the span of the existence of the stock market have been trapped by someone’s headline. Emotions are easily manipulated by a headline or a rumor and basing ones stock investments on emotions have caused the most losses in the stock market over time.

This morning we awoke to the headline "Consumer Spending has Soared 1.1%", "Consumer Alive and Well", and "Consumers Say no to recession". Where ever one looked this morning it was one headline after another and unfortunately the press does not do proper justice to economic data, they just want the headline to catch attention and usually leave the details or facts buried far down in an article, if at all. So let’s take apart this morning’s headlines…

The top line consumer spending for November was 1.1%. But in the details of the report it said that much of that growth was due to energy prices, if we remove the energy component then we are left with a real growth of 0.5%, over 50% less than the headline. It should be noted that this data is for November and we posted our thoughts on the retail spending data for November on December 13th. And this week retailers such as Best Buy and others warned of a slump in purchases in December. We still believe that when the data is all added up in the end it will show weaker holiday spending this year. And the Governments data on personal consumption (spending) is very erratic so this needs to be taken into account as well. The Excel chart below I created from Government data going all the way back to the 1960’s shows just how erratic the data is, which is difficult to gauge the real of sense of consumer spending. If I apply a moving average to this data the trend has been declining in 2007.

Another headline this morning was that personal income rose 0.4% in November. But again, snapshot numbers mean nothing to us. We want to see the trend and the trend is shown below. The trend is still down for 2007 and the 1/10th tick upward for November is hardly anything to write home about, but the media made a ‘headline’ out of it.

Do you know what was the largest influence on the increase in personal income? It was an increase in rental income, as more and more people can’t buy homes and are becoming renters along with the cost of apartment and house rentals increasing it is skewing the data on personal income. After you examine the details it no longer looks as good with regard to the overall economy.

The next headline that came out in this mornings data was that wages and salaries had increased 0.6%. Again, to us this is rather insignificant and when you examine the wage and salary increases year over year it looks a bit more ‘uneventful’, see chart below of wage and salary increase percentages on a year over year basis. Show me a number that approaches 9 or 10 % increase y/y then I will be impressed, until then the 0.6% increase in November is meaningless.

The last chart I want to show you tonight is the most striking and reveals just how tight money continues to get for the average American. This chart shows the personal savings rate, in other words, how much of their income are they able to save.

Rather shocking…

Today’s advance in the markets was all due to options expiration, end of year short covering, and bulls buying on the ‘hope’ that the worst of the credit crisis is over with. So although the DOW gained 1.5% and the S&P gained 1.6% we still have a very long way to go before the market returns to health, if at all. The debate on the economy and where our markets are going continues. We could be the type of people who never have any opinion or change our opinion as often as people change their socks, but that is not our style. We don’t give in to emotions and hope, we stick with the data and the facts. And the data still tells us that trouble lies ahead!

Over the weekend we will post some items on what is coming up next week as well as what our plans are for 2008. Even with all of this market turmoil Lisa and I have been working on the final RebelTraders Web site. And this weekend I will give you a peak into what you will be able to do on our new web site.

Have a great weekend and if you are using this weekend to travel for the holidays Lisa and I wish you a wonderful, happy, healthy, and prosperous holiday and New Year.

Indices closed near highs of the day.  Not a great daytrading day when things gap up and just drift the rest of the day.  It’s one of the reasons I don’t tend to trade the third Friday of the month.  You can always place a bet and buy something the night before, but I’m not the gambling type.  These are easily manipulated days and I just let the big boys do their thing.  No gain, but no pain. 

The markets are open for a half day on Monday, for those interested, then only 3 trading days left until the end of the year.  I don’t know about you all, but the last 6 months have worn me out!  So many changes happening and analysis to be done, wild swings up and down on the indices. 

I’m looking forward to some rest and relaxation (R&R) and get ready to take on the new trading year!  Chuck will have a wrap-up tonight as usual and I’ll see Monday morning!  Have a great weekend.

The day has been a more typical op.ex. Friday.  Gap up, drift a little higher, then go flat.  No telling what the afternoon brings, as I would guess little to no real movement.  But, these days, who knows.  To me, these ex. Friday’s have little to no bearing on even short term trends.  They are almost “days unto themselves”.  Which is why I rarely trade them.

The news on the financial front doesn’t get any better.  Not that too many seem to care right now.  Moody’s reports credit card performance weakened in October.  The TAF (auction) of $20B  drew 73 bids and over $57B was submitted.  The Fed’s and foreign central banks wil bontinue biweekly auctions as long as needed to aid institutional liquidity.

Will post more later, but I’m thinking it will be a slow news day.

Good morning, everyone.  The futures are up and I’m not surprised.  Options expiration Friday is usually a day to suspend reality and run against the preceding short term trend.  The economic numbers out this morning are as follows: 

Personal Spending +1.1% vs +0.7% consensus

Personal Income +0.4% vs +0.5% consensus

Personal saving was a negative $48.4 bln in November

Inflation was up a little.

Merrill Lynch got a capital infusion from a firm in Singapore after announcing bigger than expected write-downs.

Spending up, savings down, income down. Hmm…. interesting.  More later.