We all want to know the outlook on the economy going forward
it’s not great at all, but markets rally up in down turns just as they fall in up markets, we need to let the market confirm its long term downward direction before going short these rallies are designed to take the shorts out.
The outlook on the economy is not healthy when you look at the unemployment rate.
Initial claims tonight will be our first way of looking at the outlook on the economy each week, let’s see whether there is a short term improvement or it is worse. Then we have the GDP numbers tomorrow night they are expected to be released at 2.9%, then on August the 10th the FED members meet again to discuss quantative easing which means printing more money, if they do it’s very likely that we will see a similar rally of March 2009 but on a much -much smaller scale.
Another round of quantative easing will be the last tool Bernanke can use to avoid the next leg down in this recession.
If flooding the system with more money fails to lift equity markets, then all hell will break loose in the markets and it will be a perfect time to go short.
By doing this they will have used all their aces up their sleeves as they can’t lower interests rate they’re already are at 0%.
Outlook on the economy in the short term
If the S&P breaks above 1120 a retest of 1150-1170 which puts the DOW at 10,700.
High unemployment remains a drag on the economy I have noticed the companies that have exceeded their quarterly earnings have been companies like Caterpillar, United Parcel, and John Deere to name a few companies that have revenue outside of the US.
The stream of earnings news continues to be strong, now that 49 percent of the S&P 500 companies have reported. Earnings have risen an average 42 percent, and 77 percent of the companies have beaten earnings estimates. Sixty-four percent have beaten revenue estimates.
Outlook on the economy looking at the Banks and Financial companies
Last night Moody’s changed their outlook on the economy on the bank ratings for Citigroup, Bank of America and Wells Fargo and warned they may need to downgrade their senior debt of several regional banks because now that the US banking system has moved beyond the depths of the financial crisis, the probability of government support for these banks could be lower.
Moody’s has warned that if regulatory reform lessened the willingness of the US government to stand behind our largest banks, it would have to close the ratings uplift gap. By its actions last night, it would appear that Moody’s has now begun that process.
The outlook on the economy in the commodities market of Oil and Gold seem to be bright going forward but at the moment they are pulling back setting up very soon for some nice entry levels to buy into on the pullbacks.
So our outlook on the economy next week looks to be the time to enter some short positions on the Indexes and long Gold and oil.
The out look on the economy will be confirmed tonight and Friday we are ready to jump when all earnings are out the way.
Tensions in the middle east now are now spreading to the Arab countries, with Libya erupting in violence and extreme unrest. The protests have taken many lives and disrupted any signs of future peace.
