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Five Things You Need to Know: Glass Half Full?; Glass Half Empty? Glass Cracked and Leaking On Our Pants?; Small Change; Portfolios of the Federal Reserve


What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Glass Half Full?

Are we there yet? Are we there yet? Are we there yet? Yesterday's market meltup in the final 20 minutes of trading (which reportedly may have simply been a case of fat-fingers) has many wondering if we've finally seen extremes in market sentiment; extremes that are negative enough to produce a snap back rally. The answer? Not yet... but we are getting closer.

  • Today we want to take a look at the NYSE High-Low Index, an indicator that Investors Intelligence tracks in point and figure format on their subscription-based website.
  • The NYSE High Low, updated daily is just a ratio of the number of NYSE stocks showing new 52-week highs divided by the sum of the total new highs and new lows, that is then smoothed using a 10-day moving average.
  • What is it in English? It's an indicator that at extremes can help alert us to potentially tradable reversal areas.
  • As Investors Intelligence notes, "The reversals from extremes are NOT tradable by themselves, but provide early clues of potential reversals areas."
  • Below is a chart of the High-Low Index from Investors Intelligence.
  • It is currently declining, in a column of Os, and now nearing 20%.
  • This indicator does not reach levels below 20% very often. We've circled the most recent years it visited that low level.
  • Again, a reversal up from below 20% is not itself a tradable reversal, but it does suggest conditions are becoming more favorable for some type of meaningful market reversal.

2. Glass Half Empty?

More than two-thirds of Americans believe the U.S. economy is either in recession now or will be in the next year, a new Wall Street Journal/NBC News poll shows.

  • Yes, despite low core inflation readings (excluding food and energy), an economy that continues to show growth and strong employment, 67% of Americans are convinced that if we aren't already in a recession, we soon will be, according to the Wall Street Journal.
  • The poll also shows a dramatic lack of confidence in economic leaders.
  • That includes not just President Bush and Congress, the Journal says, but the financial industry, large corporations, and energy, drug and insurance companies.
  • Even worse, in the same poll only 14% of Americans say they have a great deal or quite a bit of confidence in professional sports.
  • Meanwhile, in related polling data, Minyanville has learned that only 23% of Americans say they have a great deal or quite a bit of confidence in confidence polls.
  • Similarly, a full 87% of pollsters say they have very little or no confidence that the answers provided by Americans they poll are truthful and accurate and not just attempts by those being polled to get off the phone with pollsters.
  • Not surprisingly, only 15% of news and polling organizations that employ pollsters say they have a great deal of confidence that the data reported by the pollsters is an accurate reflection of the attitudes held by Americans being polled.
  • And only 21% of people who track polls say they have a great deal or quite a bit of confidence that the polls are believable in the first place.
  • In a separate poll of pollsters and polling organizations, a shockingly low 7% of pollsters and polling organizations that were polled reported that they have a great deal or quite a bit of confidence that they are being accurately polled.
  • Even worse, a full 64% of pollsters and polling organizations reported stealing the questions of that poll and using them immediately in a new poll of Americans about their attitudes and feelings toward polls.
  • When those pollsters and polling organizations who reported blatantly plagiarizing the poll in the last bullet point were asked asked how frequently they steal polling questions, 46% answered by asking the pollster how frequently they steal polling questions themselves. (75% said very frequently, 23% re-asked the question, 2% reported having a seizure.)
  • Which leads us to the following question, why not simply skip the middle men and ask the poles themselves.

    What do the poles think?

3. Glass Cracked and Leaking On Our Pants?

As many feared, auto sales were horrible in July, falling 12% in figures that encompass most major auto manufacturers including Toyota (TM), which saw a 7% decline.

  • General Motors (GM) sales fell 22%, Ford Motor Co. (F) fell 19% and Chrysler Group (DCX) 8%.
  • As well, Detroit automakers' share of the U.S. market dropped below 50% in July for the first time in history, according to Jesse Toprak, senior analyst for the automotive Web site.
  • These sales figures go hand-in-hand with the consumer view expressed int he WSJ/NBC poll that if we aren't already in recession, we may soon be.
  • It's not every month we see double digit year-over-year declines in auto sales.
  • According to Merrill's David Rosenberg, other months where auto sales were down double digits include a 12% year-over-year decline in Dec. 2000; a 10.8% decline in April 1990; a 10.8%decline in July 1981; and an 11.1% decline in Dec, 1979.
  • What do all of those months have in common? According to Rosenberg they were
    three months or less away from the official start of an economic downturn.

4. Small Change

Ouch, we just hit the ATM and only have 200,000 dollar bills. Can you break a 200,000 for us so we can buy a soda?

  • Plagued by an official annual inflation rate of 4,500%, the Reserve Bank of Zimbabwe is trying to make like easier for its citizens by introducing a new 200,000 note to reduce the amount of currency Zimbabweans must carry.
  • What does a 4,500 annual inflation rate even mean?
  • The BBC ran the numbers and reports that in practice it means the price of a loaf of bread costs 50 times more in cash than it did a year ago.
  • The new Zimbabwe banknote comes on the heels of an International Monetary Fund (IMF) report that forecasts prices by the end of this year will be 1,000 times higher than they were a year earlier.
  • The new note is worth $13 U.S. dollars at the official exchange rate or $1 on the black market.

    This note is worth a mere fraction of a penny.

5. Portfolios of the Federal Reserve

Federal Reserve Chairman Ben Bernanke held financial assets of between $1.1 million and $2.5 million at the end of 2006, according to financial disclosures released by the Fed Chairman and other members of the Federal Reserve this week. So what are the Fed heads investing in? We tried to find out:

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No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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