Analysis:
Yesterday's Analysis predicted that "the depressed home prices may continue to outweigh the improvement in employment outlook," and that "the CPI excluding food and energy will be flat or negative, as retailers lured shoppers into spending with large discounts." Today the Consumer Sentiment came in worse than the most pessimistic forecast, and the CPI excluding food and energy was flat in Aug.
Looking ahead to next week, the market will be fixated to the Fed's announcement on Tue., and the Fed will remind the market of the precarious economic condition with a language that is sterner than its Aug. announcement. But it is the Master itself that is also in a precarious situation because if it does not undertake QE2 (not your majesty's cruise ship) on Tue., it will be odd for it to act after the next meeting on the day after mid-term election. The PIGS saga will continue out of Europe and weigh on US financial stocks. Given the fact that the S&P 500 rally has been led by technology stocks, when the Nasdaq 100 takes a respite after rising for eight straight days, the S&P 500 may as well follow suit on Monday.
Strategy:
Hold short at 1,122
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