With the US markets closed today, my usual ‘Sunday Thoughts’ for this week will be "Monday Thoughts"..
Have you noticed anything unusual this weekend? I have, the number of vehicles on the road was "noticeably" lower than what we would consider the ‘norm’. Tonight I went to McDonald for some coffee and spoke briefly with the night time manager. I asked how his sales were this weekend and he told me that the expected ‘drive home’ crowd from the long holiday weekend was not there. Usually Memorial day weekend peaks for the fast food places with the amount of people on the road driving home from the 3 day weekend getaways. Also of note was the lack of cars in general in my local area (Philadelphia - South Jersey).
A report issued this weekend by the Department of Transportation:
THE NUMBER OF MILES TRAVELED ON U.S. ROADS FELL 4.3% IN MARCH FROM A YEAR EARLIER, SHARPEST YEARLY DROP ON RECORD AND THE FIRST DECLINE IN THE MONTH OF MARCH SINCE 1979, WHEN THE LAST MAJOR OIL SHOCK HIT DRIVERS - U.S. DEPARTMENT OF TRANSPORTATION
Now keep in mind that data was from March. Two months have now passed since that report, and inflation has worsened much more since then. It becomes easy to extrapolate the data forward in time to this month, and it will show a much further decline in people on the road.
What happens with less and less people out driving? Less spending at retail establishments, less spending at restaurants, less vacations, and so on. In recent commentaries I wrote that the retail sales figures for the up coming quarter are very likely to be much worse than what has been seen so far. And retail stocks have been trading recently on the premise that conditions will improve. I still forecast the retail sector (RTH) will break below the rising wedge pattern on the chart shown below.
(Retail Sector - RTH)
And a stock that is setting up for another good short opportunity is Target (TGT)
(Target - TGT - Daily Chart)
Regarding the employment situation, this news article will run in tomorrows New York Times:
U.S. JOB MARKET: TEEN SUMMER JOB MARKET WEAKEST IN MORE THAN 50 YEARS - CENTER FOR LABOR MARKET STUDIES AT NORTHEASTERN UNIVERSITY IN BOSTON
- According to The New York Times: "Little more than one-third of the 16- to 19-year-olds in the United States are likely to be employed this summer, the smallest share since the government began tracking teenage work in 1948, according to a research paper published by the Center for Labor Market Studies at Northeastern University in Boston. That is a sharp drop from the 45 percent level of teenage employment reached in 2000."
What does this imply? Two things, the first is that employers are hiring less, the second is that the part time positions that are open are being filled by more older workers who are in need of extra income and/or taking part time jobs as full time employment is hard to find. Either way, it is a sign of a worsening economy.
The broad markets are still poised for further declines. One index that has been resistant to rolling over has been the Russell 2000 (RUT). But, that index appears to be near a topping point and I anticipate that the Russell 2K will begin some large declines in the near future. The charts below, the Russell 2K top holdings, are shown for short position entries.
(CF Industries Holding - CF - Daily Chart)
(Hologic Inc. - HOLX - Daily Chart)
(Priceline - PCLN - Daily Chart)
(Bucyrus Intl - BUCY - Daily Chart)
(PetroHawk Energy - HK - Daily Chart)
PetroHawk Energy will be a short play on profit taking on this stock that has gone parabolic and will likely retest support at $19.00. Especially if there is any short term oil price declines.
(Exterran Holding - EXH - Daily Chart)
Tomorrow morning we will post the economic calendar for the week. We do have some big economic bits of data being released this week.
I still laugh every time I see this video… It is President Bush being confronted with the question about $4.00 gasoline.
Have a great evening and see you all tomorrow morning..
