Stock Market - Pre Open Report for February 20th 2008

Posted: February 20, 2008 at 10:03 am by Chuck

Consumer Price Index (CPI) data for January has been released and it confirms what we here at RebelTraders have been discussing for many months, the consumer is continuing to be pressured by rising costs. The combination of a receding economy, consumer spending contracting, the credit crisis, and the housing market implosion all add up to a sick economy overall. It still makes me laugh every time I hear people say that "the fundamentals are strong".

CPI Data:

JANUARY CPI TABLE
                                       DEC.     Jan. 08    Year/Year
CPI All Items               0.4%      0.4%        4.3%
CPI, Ex Food,
Energy                          0.2%      0.3%        2.5%
Food & Beverages     0.1%      0.7%        4.8%
Housing                       0.3%      0.2%        3.0%
Apparel                        0.1%      0.4%       -0.2%
Transportation            1.0%      0.5%        9.4%
Medical                         0.3%      0.5%        4.9%
Recreation                   0.0%      0.2%        1.0%
Education &
Communication         0.3%      0.4%        3.4%
Energy                         1.7%      0.7%        19.6%

Federal Reserve Chairman Ben Bernanke has been saying for most of 2007 that inflation is "contained". From our vantage point we can not agree with that. As we reported as far back as September of last year we were expecting to see inflation continue to worsen. The futures are down significantly this morning on this news in that it will continue to limit the Federal Reserve and their ability to cut interest rates further. This is all leading to an outright possibility of a credit seizure for the United States.

The S&P Futures have broken below a trend line, this tells us we are looking at a new leg down in the coming days.

(S&P futures)

Sharper Image (SHRP) has filed for Chapter 11 bankruptcy protection this morning.

Some in the media have been claiming that the housing market may be near a bottom… but today we learned that the ‘MBA Mortgage Applications Survey’ data has indicated that the amount of applications (both refinance and new purchases) has dropped yet again. The REFI index fell -27.9 compared to a drop of -3.0 in the first part of the month. And new purchases fell to -11.5 from -0.3 at the beginning of the month. There is NO bottom in housing and anyone who claims a bottom is in is a speculator, not a follower of facts.