September 20, 2011 – Traders Are ‘Lost’ With the Economic Data


1) Traders Are 'Lost' With the Economic Data. Traders can be forgiven for believing that they are reliving an episode of the cult mystery TV show, 'Lost.' The economic data was truly a mixed bag last week, with lagging reports showing us that the economy is fine, while the most important leading indicators threatening a serious deterioration. They give more credence to the view that the Tea Party inspired near debt default and Standard and Poor's Treasury bond downgrade generated a real dip in the economy last summer.

The July trade deficit showed a stunning decline, from $51.6 billion to $44.8 billion. Due, no doubt to the advantages American exporters are reaping from the weak dollar, the report normally would have been cause for celebration by investors, politicians, and business leaders alike. But they are understandably nervous, gun shy, and punch drunk, and will await further confirmation to sound the 'all clear' signal.

It didn't help that the most crucial of leading indicators, the weekly jobless claims, worsened, rising 11,000 from to 428,000. The four week moving average rose 4,000 to 419,500. Capacity utilization remains in the basement at 77.4%.  This is a stunning figure, as our unused capacity would rank as the fourth largest country in the world, if it were carved out as a separate country. And August inflation rose at double the expected rate, popping 0.4% to a 3.8%., raising the ugly specter of stagflation.

The choppiness of this data suggests that the double dip risk is still on the table, and that market volatility will continue. This is great news for nimble and agile traders like myself, but terrible for long term investors. Watch for those trader alerts!


Sell the Rallies, Buy the Dips, or Both?