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Reaction to Confidence number


The US Conference Board's Consumer Confidence fell to 80.3 vs. 84.9 in November. The reading was widely expected to improve, not worsen. Rather than get into economics - which I am really not good at - lets look at what it could mean.

I want to remind you that in November, the Fed lower short-term interest rates by a greater than expected 50 basis points (1/2 percent) because there was increased signs of economic deterioration. That doesn't change as quickly as the Fed can reduce rates. It takes time for confidence and the economic landscape to improve. It seems unrealistic for us to expect immediate improvement in the stats just because the Fed lowered rates.

Either way, if this were a month ago, the consumer confidence number would be used as the excuse for profit taking/consolidation/pullback. Instead, more than profit has been taken since the market peak so there seems to be a limited response.

That seems like the right answer to me and again reinforces the fluff has been largely removed from the tape right now setting up the potential for an oversold rally that should ultimately prove unsustainable.
No positions in stocks mentioned.
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