What’s that … up ahead … ?

Ever tried to move towards your goals while looking backwards? Its awkward. Sure, a glance in the rear-view mirror from time-to-time while driving is necessary, but most of the time looking out front & ahead is the safest. (OK, now that analogy is out of the way, lets move on).

I track the news/blogs/opinions for two reasons:
1. To judge the reactions of the market (as shown in the ES price, mainly). As Richard Wyckoff said: “The study of responses … is an almost unerring guide to the technical position of the market.”
2. To look ahead and try to pick up on changes in the market/economy before they are commonly recognised. This is quite difficult, and timing the reaction of the ES to changing circumstance is very challenging, but recently picking up on the change in behaviour of the global leading indicators and not ignoring the persistent rise in oil prices has meant not being blindsided by the falling US equity indices. Thankfully my trading style/method/process is not reliant on being too adept at ‘global macro’, but every little bit helps.

OK, so this post was prompted by the front page of two leading daily broadsheets here in Australia. Both are owned by the same company, so don’t read too much into the fact that there are similar headlines on the same day in two different papers, the two papers are not independent of each other. Here are the front pages, with the relevant headings circled; first the Sydney Morning Herald:

And also, and more scarily/forcefully this time (must need to sell more papers), The Age:

OK, so neither is the New York Times, but I think the fears both headlines reflect are symptomatic of a widely-held pessimistic view of the markets, a view that may not be as relevant/helpful as it would have been a couple of months ago.

So, what is ahead that may justify a not quite so pessimistic outlook (remembering that timing is tricky, so don’t necessarily go out and load up on the basis of this blog post)? In short, the Durable Goods figures from the US on Friday were not too shabby. This is a reasonably brief article that discusses the release better than I could (a fairly low hurdle, admittedly), from the Capital Spectator:
http://www.capitalspectator.com/archives/2011/06/durable_goods_o_2.html

Score another point in favor of the soft patch theory vs. expecting a new recession around the next corner…
All in all, a decent report, and just in the nick of time, given the current worries about the economy. It’s only one indicator, of course, but as a closely watched leading indicator it’s encouraging that the latest number is higher vs. the previous month. More importantly, the trend for new orders continues to look solid.

There will be alternative, less optimistic views of this report, some even from credible sources. Peter Boockvar, for instance, is worth paying attention to (bolding mine):
http://www.ritholtz.com/blog/2011/06/durable-goods-fine-but-japan-likely-distorting-data/

Most importantly, non defense capital goods orders ex aircraft orders were up 1.6%, better than the 1% estimate and after a drop of .8% in April. For all 3 of the categories, the April figures were revised higher. Its important to note that these are orders and the Japanese supply issues will likely impact the timing of the actual shipments of some big ticket items. Also, it’s possible that orders were accelerated due to concern with supply issues out of Japan so as to better stock inventories with the uncertainty of delivery timing. … Bottom line, durable goods orders rebounded from the April weakness but as mentioned above, the Japanese delivery issues have and will distort the data for a few more months.

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2 Responses to What’s that … up ahead … ?

  1. Pingback: I’ll take it! | FMTrading Blog

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