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Two Ways To Play: Consumer Confidence At 26-Year Low


Ride the wave of bad news.

Rising energy costs, a slumping housing market and employment concerns are killing the confidence of the American consumer. According to Bloomberg, the Reuters/University of Michigan sentiment index fell to 62.6, dropping from a prior month's reading of 69.5 and registering a 26 year low. Economists expected the index to come in at 63.2.

More importantly, expectations for the next six months fell to 53.3 from a reading last month of 60.1. In addition, the survey revealed Americans' confidence in their financial situation dropped to 77 from 84.2 last month. This data shows that consumers are more hesitant in making big-ticket purchases. Consumers are clearly concerned about inflation as Americans believed prices would increase 4.8% over the next year. For a related story, see Professor Kevin Depew's Economic Snapshot: How Are We Coping With High Gas Prices?

From the Bull Pen: Another bit of ugly news and the tape spikes. In the 2001-2002 bear market, five major rallies accounted for an average gain of 17%. Bulls are content to ride this wave and have a myriad of options including Russell 2000 ETF (IWM) and the financial ETF (XLF). Even Apple (AAPL), which defied expectations this week, is on the table.

From the Bear Cave: The tape is tough enough for the bears and next week we have the all-important FOMC announcement. Regardless, bears see the major headwinds for companies like Honda Motor (HMC) with a slowing U.S. economy and a strengthening in the Japanese yen.
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