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Five Things You Need to Know: Fed's Plosser Takes a Few Potshots at the Fed


The Philadelphia Fed chief explains why he was adamantly opposed to the most recent FOMC policy move.

3. The Garbage Indicator

From Bloomberg Economist Michael McDonough in the Bloomberg BRIEF Economics newsletter comes this rather quirky but interesting Garbage-to-GDP indicator. According to Bloomberg's calculations, from early 2001 through the first quarter of this year the growth rate of carloads of waste has shown an 82.4 percent correlation with the year-over-year change in Gross Domestic Product. That's not only higher than Total Freight, but higher than Motor Vehicles Petroleum and Metals.

The chart below shows railroad cars carrying garbage overlaid with MacroEconomic Advisers' monthly real GDP indicator.

4. Flashback: Panhandlers vs. House Flippers

When Flip This House debuted on A&E on July 24, 2005, you could just feel the air about to be let out of the housing market. I mean, this was a television show about people, most of them inexperienced real estate speculators, buying condos and houses and seeing how quickly they could "flip" them for a profit. You knew even then it wouldn't end well, and it didn't. Reading this in the NY Post yesterday, I got a strange sense of deja vu.

Reality GOLD: 'Pawn,' 'Auction' & 'Gold Rush' stars talk huge demand

Doyle says he noticed one other thing while filming the show in the midst of the hyper-inflated gold market.

"We flew up in the Dawson [Alaska] area on an 'Indiana Jones'-type airplane and all of the sudden you see bustling activity below you in the middle of nowhere," he says, noting that everyone who mines for gold in Alaska has their own "claim" (and their own space in which to mine).

"What our crew is contending with is essentially a modern-day gold rush," he says. "People are coming out of the woodwork -- some are doing well, some are getting into trouble.

"But they're literally staking their claim in an economy that's created a little bit of panic.

Of course, Flip This House preceded the housing collapse by a couple of years. So there's still time for gold bulls.

5. Market Update

The German DAX has long been our "canary in the coalmine" for U.S. markets. With the European sovereign debt crisis recently roiling global markets it makes sense to keep an eye on Germany as the economic leader of the EU. Looking at the DAX, the index qualified a break of its TDST Down level today with the lower open and a tick below the open. What this means in English is that the trend is confirmed negative and we should get a full progression to a TD Sequential 13 buy signal, which can only occur at lower prices. The DAX is going lower.

With that being our canary for U.S. markets, we should be expecting a move lower for the next few weeks, in line with the context of the MONTHLY TD sell setups that recorded in May giving us a window where sellers dominate that extends into September. In the next couple of weeks, we should see first TD Combo 13 buy signals record in many major indexes, followed by TD Sequential 13 buy signals. This, combined with very low readings in the bullish percent indicators, will give us a very good entry point for equities ahead of a move higher into year-end.

Some individual stocks that are nearing WEEKLY TD Sequential 13 buy signals, but have not yet recorded 13s, include Target (TGT) (currently on a 12), Ford (F) (on an 11), US Steel (X) (on a 12), Morgan Stanley (MS) (on an 11), DR Horton (DHI) (just recorded a 13 this week and is above the TDST level). Interestingly, Bank of America (BAC) this week has recorded a 13, despite the ugly rumors about the bank. Food for thought.

Twitter: @kevindepew

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No positions in stocks mentioned.

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