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Stock Market Summary for February 21st 2008

Today’s catalyst for the decline in the market was the Philadelphia Fed Survey, which is considered by many as a benchmark for the rest of the country. Over the span of many years the Philadelphia Fed Survey has been one of the more accurate barometers of the overall economy. Last month when the data dropped substantially and some were thinking that it might be an anomaly, that it could not be that bad. But this months data not only confirmed last months to be correct, it even dropped further. Well this was enough to take away the "rate cut euphoria" that the market felt yesterday. This time the signs of the economy getting much worse hit the market in the gut. But this was no surprise to us and is why we have been maintaining our view that we are in a bear market for a long time now. Our long time readers know that we have been writing about what the trends have been signaling to us and what the likely result was going to be. We continue to receive data that shows that the economy is deteriorating at a rate which shows no signs of stabilization yet. And it is very likely to deteriorate much further, much more than the Government will admit to.

Today’s sell off in the markets was broad based and very little was left untouched. From a technical standpoint we established a new low from the previous few sessions, all but dashing the hopes of some that the market was on it’s way to stabilizing. The closing price of the major indices today opened the door wider to the downside path.

Shown below is the Philadelphia Fed Survey data that was released this morning:

 

 

 

 

 

 

 

(Data source: Moody’s Economy.com)

The Philadelphia Fed Survey data dropped to a negative 24 which is now the lowest reading since 2001. And the rate of the decline is not showing any leveling off at this time. This data is very forward looking for the economy, it shows how business are hunkering down for the future. It reveals that inventory of goods they manufacturer is being allowed to dwindle without creating large amounts of inventory to take its place. This impacts the labor market and long term capital expenditure plans of companies.

What we are seeing in the markets is a sense of fatigue. Those who are bullish on the market are starting to signal the white flag and are giving up. The fight between the bulls and bears has been exhausting over the past 9 months now. And with each passing day the economic data just keeps getting worse and the market keeps taking the bulls money away. What strength there has been in the markets has been waning away little by little. But it appears now that the bulls are giving up at a faster pace. And it is not just our markets, this is being seen in many stock markets around the world.

We remain on course for a recession that will be much deeper than the Government has been telling people, and we remain in a bear market.

Some news items crossing the wire tonight:

WSJ REPORTS FEB RETAIL US AUTO SALES FELL 16.4% Y/Y THROUGH FEB 17; GM, CHRYSLER LEADING DECLINERS IN FEB RETAIL SALES

NY HEDGE FUND DB ZWIRN & CO TO WIND DOWN ITS PRINICIPAL FUNDS FOLLOWING REDEMPTION THREATS BY INVESTORS - FT ($5 Billion Dollars under management)

 

The current Dow Industrials chart: