Analysis:
Below are comparisons of the language in yesterday’s Analysis and in the Fed’s Beige Book:
Analysis: “Manufacturing activities continue to grow but at a decelerated pace.”
Beige Book: “Reports on manufacturing activity pointed to further expansion, although the pace of growth eased.”
Analysis: “The growth in retail sales will be limited.”
Beige Book: “Consumer spending appeared to increase on balance despite continued consumer caution that limited nonessential purchases.”
Today the market dropped after the release of the Beige Book but ended the day higher. Looking ahead to tomorrow, the trade deficit will likely surprise on the narrower side due to the strength of the US dollar in July, and the Initial Jobless Claims will also surprise on the lower side as they edge further towards 450,000. The market’s initial reactions will rise, but as the day goes on, the market’s lack of momentum to pull away from the congested 1,100-1,105 area will prompt profit-taking and send the market lower at close.
Strategy:
Hold short at 1,080
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