Breakfast with Brodsky
As the few of us who are fortunate enough to be working today shuffle into our offices, we see the futures slightly bid up ahead of the immense number of economic data points that are to be released today. That certainly is the theme of the day because shortly after 10:00, in my opinion, trading floors will start to empty out as people get a jump on the holiday. At 8:30 we will receive economic numbers in Personal Income, Personal Spending, Durable Goods Orders, Initial Jobless Claims, and Continuing Claims. The U of Michigan Confidence number is released at 9:50. Then as if that isn't enough information to digest, at 10:00 we can expect New Home Sales, Chicago Purchasing Manager Number, and the Help Wanted Index. To wrap things up, if anyone is still on the desk, at 12:00 we get the Fed's Beige Book.
Something that I have never been able to fully grasp is what all these numbers mean and what their significance is. I am a trader and am certainly not an economist, as I am sure a lot of you reading this are not either, and I wanted to give you a trader's perspective on what each number means and its importance in the simplest terms (remember MOST people trading the market day in and day out don't have the best idea about this stuff either!!) So let's run down the numbers we get at 8:30. First off we get Personal Income and Personal Spending. These numbers are significant in the sense that we can see #1) if people are making MORE or LESS money which can be spent on goods and services and #2) if in fact we are spending our money on goods and services. People have been arguing for months that the consumer needs to keep a heady pace of spending to keep the economy humming, so one can infer that these numbers hold a bit of importance. Next on the list is Durable Goods Orders. Simply put this is a measurement of business health. If businesses are ordering a lot of goods then we can expect demand to be good since companies are ordering a lot of supplies. That's all it tells us.
Next we will receive the highly scrutinized Initial Jobless Claims. This has been all over TV, newspapers and the Internet as the ULTIMATE measure of economic health. Their argument is that without an up tick in jobs we cannot have a sustainable recovery. Once again, I am the farthest thing from an economist but let's think about this for a minute. This thinking may have made sense about ten, even five years ago. But today we now walk into grocery stores and check ourselves out, factories run 24-hour shifts where everything is automated and there is one supervisor. This is the wave of the future! Less jobs and higher profitability! So while people get jumpy over whether ten thousand people filed jobless claims, I do not look at this number as an accurate interpretation of economic health. Take it for what it is. At 9:50 we get the U of Michigan confidence number. Again this is a favorite among television types and causes about 45 seconds of flurry in the marketplace. I have no clue who they interview for this number, their backgrounds, their political views or anything about them, so how can I or anyone judge if they are an accurate interpretation of confidence. I don't place much stock in this number either.
At 10:00 we have New Home Sales, which is a highly watched number for good reason. The housing market is a key driver of this current picture of economic health and people enjoy seeing that it is still chugging along. I imagine anyone that is leveraged against their house would like to see this number improve as well for obvious reasons! We also get the Chicago Purchasing Managers index and this is also an important gauge of economic health as it measures mid-western manufacturing activity. We like to see a reading over 50, which means things are expanding. Lastly we get the Help Wanted Index. This is self-explanatory and it is a survey of how many help wanted ads go into newspapers across the nation. Now that's a pretty cool number!
Bottom line here with all these numbers: They are a snapshot of what is going on and often times the method of the survey is fuzzy. Some are backward looking and some are forward looking. Take them for what they are and use common sense in evaluating them. Remember, life and business takes place in the real world and not in some classroom where you can judge economic health by evaluating a couple of equations. Let's move on to the charts.
The SPX, Dow and NDX all continued their run at what looks like is going to be another test of the 52-wk highs. Watch for resistance to enter the marketplace at 1060-1063 in the SPX, 9850-9900 in the Dow, and 1440-1452 in the NDX. The corresponding support levels are 1044-1040 in the SPX, 9700 in the Dow, and 1400 in the NDX. Remember today and Friday will be very light in terms of volume so in my opinion use extra caution when entering a position.
Good luck and have a Happy Thanksgiving!
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