Market Recon Friday

Good Morning,
                        Blinding lights….flashing colors.  Look to the left, or to the right, and you just might see that global equities…. with, or without the contribution of the Chinese marketplace are being sold ahead of this morning’s US Employment Situation data.  More on that shortly.  Not helping matters much was a serious miss for German Factory Orders (July) that kind of took some of the warm and cuddly off of the Mario Draghi afterglow across Europe.  Let’s not even talk Japan…. Ok, let’s.  That economy has been missing on pretty much all cylinders of late, and the Nikkei has been beaten like a rented mule in response.  That index is down more than 2% today, and down 7% this week.  So much for Abenomics.  Ahhhhh, in all fairness to our old pal Shinzo, a strengthening yen, and worries over Chinese demand have indeed contributed to this. Let’s do US jobs now.
                       The August Employment Situation, or rather the August Employment Situation as perceived by the BLS is pretty much all of the macro that we’ll get today.  As always, the headline event will be the Non-Farm Payrolls number.  That’s the one that will have traders lining up, and forming a kick-line at 08:30 ET.  That knee-jerk will be immediately visible in the already lower US futures market.  The range for this bad boy today is roughly 170K to 260K, but consensus is in the middle…. right around 220K, which would be an increase of 5K over July if both consensus for August was accurate, and July numbers were to be left unrevised.  LOL.
                      Traders also want to see wage growth.  On that note,  Average Hourly Earnings are expected to have grown 0.2% m/m again.  FYI, IMO, the possible skew here is to the high side.  Now for the stuff that traders don’t look at, but other folks do.  The headline Unemployment Rate, which is only truly believed by buffoons, and repeated as fact by those with something to sell, will likely drop from 5.3% to 5.2%.  This despite Gallup’s numbers heading in the other direction for August.  We head into this data with the Participation Rate at 62.6%, and the U-6 Unemployment Rate at 10.4%.  Of these three items, the Participation Rate is probably the most important.
                      We do have a Fed speaker on our radar this morning, and that would be Richmond Fed Pres. Jeffrey Lacker.  He will speak in Richmond at 08:10 ET on “making a case against further delay”.  Wonder what’s on his mind?  Seriously, Lacker is a voting member of the FOMC this year, and he is going to take questions from his audience, so…..this item will likely move futures markets ahead of the jobs data.
                       My parking lot, and train car were both empty this morning, so the kids going back to school ahead of labor day may not mean everybody came to play today.  Thin attendance can often mean opportunity if you stay alert.  On that note, good luck today, enjoy the barbecue & the family this weekend… and God bless.
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Sarge’s TRADING LEVELS
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SPX: 1946, 1939, 1925, 1916, 1906, 1895, 1880

RUT: 1144, 1139, 1130, 1125, 1119, 1110, 1104

Market Wrap Thursday

Good Evening,
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Macro:
Trade Balance “less bad” than expected, Jobless Claims higher than projected, Markit & ISM Service Sector PMIs both beat, Natural Gas supplies rose.
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1) US stocks finished mixed on very light volume.  Among the major indices, the DJIA, and S&P 500 closed just a “smidge higher, while the NASDAQ Composite, and Russell 2000 closed just a “tad” lower.
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2) Equity markets did show us a couple of false pops today, at first fueled by Mario Draghi’s “There’s more QE where that came from” press conference, and then by Donald Trump’s pep rally, but in the end stocks seemed to correlate to the price of crude.  WTI, btw finished moderately higher, but well away from the highs.
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3) No S&P sector index closed much more than 5/8 of a percent away from where they started the day.  Yes, I still dream about trading in eighths.  Top sectors: Telecom, & Consumer Staples.  Ugly stick award: Health Care.
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4) Gold gave up some ground today, but Treasuries hung on to some gains after the yield curve did some wiggling around.
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5) You all probably know Ben Willis as that smart guy from TV.  Well, I listened to his album while writing this wrap up  tonight.  Kid’s got some set of pipes.
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Levels
SPX: Our 1947 level was superb at the bottom of the chart.  Along the way, our 1971, and 1965 (twice) levels also worked.  My 1956 would have done better as 1958, and I did not give you 1975 at the top.
RUT: Our 1156, and 1149 levels served well today.  Sure wish I gave you 1144 though.

Market Recon Thursday

Good Morning,
                       Show of military force in Beijing “celebrating WW2″…. Chinese Navy ships cruising around Alaska… Support in Congress (party loyalty over common sense) for an Iranian Nuke deal that doesn’t seem like much of a deal, unless you’re Iranian.  Hey, at least they freed the host…..oh wait.  Never mind.  What could possibly go wrong?  The Mets won.  They’re off tonight.  May have to watch a sitcom.
                       The European Central Bank will step to the plate this morning.  While most experts do not expect any actual change to monetary policy at this time (repeat: at this time), you did witness something of a sellers’ strike yesterday afternoon, as…at least from this old dog’s point of view, some of these kids seemed a little frightened of getting short, or even participating at all on the sell side, in front of Mario.  Perhaps, his gang will mess with their inflation target, no guarantees there.  The press conference will matter.  ECB Pres. Mario Draghi can sweet talk the marketplace with the best of them.  Maybe even more so than Narayana Kocherlakota, because Mr. Draghi actually has an impact on decision making.  BTW, the President of the Minneapolis Fed will be speaking tonight (well after the closing bell) from Missoula, Montana.
                      Another busy day of domestic macro beckons.  Two items will hit the tape at 08:30 ET, one will pass unnoticed by the trading community… that’s July’s Trade Balance.  The other is our weekly print for Initial Jobless Claims.  Consensus calls for a very consistent 273K, up slightly from last week’s 271K.  The four week moving average for this flat lining item is…..drum roll please…..273K.  How did you know?  After we get through the opening bell, we’ll run the same drill that we ran on Tuesday for the manufacturing sector for August, only this time, for the service crowd.  Markit will print their much ignored number at 09:45 ET.  This one “flashed” at 55.2 last Tuesday. The ISM will release their data at 10am.  We’re thinking that they’ll get knocked down a couple of notches from July’s robust print of 60.3, hopefully catching above 58.  For those of you who enjoy bungee jumping, and the medieval sport of jousting, the weekly Natural Gas Inventory number will print at 10:30 ET.  If you’ve never watched that market over the five or six seconds around this print, you really should.
                      You guys tired?  Me neither.  No excuses. Let’s do Thursday like we mean it.
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Sarge’s TRADING LEVELS
SPX: 1979, 1971, 1965, 1956, 1947, 1939

RUT: 1163, 1156, 1149, 1139, 1130, 1125

Market Wrap Wednesday

Good Evening,
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Macro:
ADP Employment Report missed, Productivity beat, Labor Costs missed, Factory Orders missed, Oil Inventories showed supply much higher than expected.
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Beige Book:  Interesting takeaway….. Most districts showed modest upward pressure on wages this Summer in stark contrast to Q2 Unit Labor Costs that were revised downward this morning.  Improving situation for the working masses?  More on that this Friday.
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1) Today was a good day for equities, though it was far less good than yesterday was bad.  The NASDAQ Composite picked up 2.5% on the day, thanks to strength in Technology names.  The other major indices all gained less than 2%.  Trading volume was above Summer norms again, but fell far below levels seen over the last week, and a half.
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2) Statistics show that every odd numbered year where September starts with a 3% decline on the first day, followed by a 2% gain on the second day, that in turn is followed by a Chinese “Victory in WW2 parade”…… What?  This is the first time ????  Next thing you’re going to tell me is that the ECB fits in here somewhere, and that this is “Jobs Week”.  Nah…..
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3) All ten S&P sectors finished in the green, once the Utility sector limped across the goal line.  Info Tech, Industrials (led by the Airlines), and Consumer Discretionary were your most loved sectors.
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4) Crude gained on the day, despite that massive pop in supply, while Treasuries & Gold sold off just a tad.
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Levels:
SPX:  We gave you 1926, and it did serve as a useful enough pivot, but you would have been better served if you recognized 1921 support early on.  The index did make a headlong charge into the bell, and actually pierced our 1947 level on the close.
RUT:  The 1132 level saw the same kind of action that SPX 1926 did for half a day.  1139 slowed the afternoon advance, and then broke to the upside late, adding support into the bell.

Market Recon Wednesday

Good Morning,
                      The good news is that global equities are rather quiet relative to what we saw just yesterday.  European stocks are mostly in the green so far today, as are US futures markets, but tread lightly, the ice is thin.  Those shares, and our futures have been quite volatile all night.  FYI, today is the last day of trading for this week in China.  Those markets will be closed over the next two days for that big “Victory in WW2” party.   Go nuts.
                       I am sure that many of you have noticed the recent movements of the Russell 2000, which had been somewhat insulated from the harshest selling, and then sort of caught up to the other major indices yesterday.  There will be some hype today about the “death cross”, which is what the TA crowd calls the chart formation formed when the 50 day moving average crosses below the 200.  I don’t really buy into this as pure theory, but it’s hard to ignore that some traders do, and those traders react.  So, does the selling beget the cross, or does the cross beget more selling?  What came first?  The chicken or the egg?  You just need to know that it works for short term traders more often than it does not.  However, it is definitely not the big deal that the hype machine makes it out to be.  So, don’t fear the reaper.
                      There are a bevy of macro-economic data-points about to hit you today, and first among them will be the ADP Employment Report at 08:15 ET.  This one is supposed to predict the Private Payrolls portion of the Non-Farm Payrolls number on Friday.  Sometimes it’s close, sometimes it is not.  That is neither here nor there.  What is important to you is that, though they will forget this item by Friday, the futures market does tend to react to this print upon it’s release.  The expectation for today is for something close to 207K, up from July’s 185K.  The range today spans from 190K to 230K, so a failure to show improvement would surprise the marketplace.
                     Shortly after this release…at 08:30 ET, the Bureau of Labor Statistics will print their quarterly numbers for Productivity, and Costs.  It’s kind of hard to know what you’re rooting for in this space.  For Q2, we expect to have seen an increase of some 2.8% q/q for Productivity on a seasonally adjusted annualized rate, and a decrease in Unit Labor Costs of -0.9% q/q (also SAAR).  If true, these would be great numbers if you just want to keep your job, but maybe not so hot, if what you are looking for is upward pressure on wages.  We’ll also see July Factory Orders at 10am ET.
                     Two other significant items that will move money today are the weekly Oil Inventories print at 10:30 ET, and the Fed’s Beige Book at 2pm ET.  About the Beige Book, the anecdotal evidence received from the Regional Federal Reserve banks could be dicey.  Taking a look at the Manufacturing data for August that we have seen…. Philadelphia did OK, but the Empire State, Richmond, Kansas City, and Dallas all had awful months.  My radar has not picked up any Fed speakers sneaking around today, so I guess they’ll take a hike opposite the BB release.
                     Most of you got hit in the teeth last week, and even yesterday.  I know.  This is not an “I told you so”…. it is a reminder that the extra expense of protecting your positions via the options market, or something more complex depending on your level of sophistication is usually well worth it.  I learned this the hard way, myself, gang.
                    Now, take things as slow as you need to, get out there, and fight your fight.  God bless.
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Sarge’s TRADING LEVELS
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SPX: 1955, 1947, 1926, 1906, 1895, 1880

RUT: 1149, 1139, 1132, 1125, 1119, 1110

Market Wrap Tuesday

Good Evening,
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Macro:
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Total Vehicle Sales beat, Markit Mfg PMI beat, ISM Mfg PMI missed badly, Construction Spending right on consensus.
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1) The ugly stick was out on Wall Street today, as all of the Major Equity Indices suffered beat-downs of close to 3% for the day.  This came in response to misses on August Manufacturing data from around the globe, but the one that really hurt, came from the Chinese government.
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2) All ten S&P stock sectors closed down at least 2% for the day, with the Energy, and Financial sectors being slapped around the hardest.  Consumer Staples were your “outperformer”, down just 2.12%.  Trading volume was about a third higher than the Summer norm, but still well below levels seen just last week.
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3) You may want to take note of the sell-off suffered by the Small Caps.  The Russell 2000 had been beating the rest of the stock universe over the last few days, and started doing so early in today’s session.  However, that index did catch up to rest of the pack throughout the day.  This happened despite the lesser degree of it’s component corporation’s exposure to China.  I find this somewhat concerning.
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4) Safe Haven??  Sure, Treasuries, and Gold did edge higher, but edging is about all they did.  They did not perform as one might expect in such a “risk off” atmosphere.  There’s got to be money somewhere, maybe in cash ??  In the case of Treasuries, with German Bunds lower on the day out on our periphery, it is likely, in my opinion, that there was a large holder of sovereign debt suppressing prices.  Maybe China raising some dough?
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Levels:
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SPX: Our 1926 level performed very well, acting as support until mid-day, when it broke, and then forming precise resistance over the course of the day.    The 1907 level got mushier than I would have liked at the bottom, but did hold into the close.
RUT: The index met first support at 1138, two points below my level, second support, precisely at our 1132 level, which did work twice, and bottomed out at 1125, one point below our 1126 level.

Market Recon Tuesday

Good Morning,
                        Just in case you are just waking up, and haven’t checked on all of the global numbers yet…. sit down.  The PMI numbers released in China last night show their manufacturing sector in contraction if you believe the government, or deep contraction if you follow the Caixin (formerly HSBC) number.  Globally, while Germany, and Greece…yes that Greece did beat expectations for their Manufacturing PMI’s, we saw misses from the EMU in general, Ireland, Russia, Sweden, Norway, Poland, Spain, Italy, and France.  In other words, the planet ain’t doing so hot.  Global equity indices are all off at least a couple of percentage points in response, and US futures markets are no exception.  Still thinking about the Chinese government printing a number below 50.  Wow.
                       Hungarian Goulash doesn’t always look the same, or taste the same, or maybe that was just what my very Irish grandmother used to say.  It is cheap to make though, and there’s usually enough of it.  Well, that’s sort of the way it is with the domestic macro today.  We’ve got a lot of it, but I’m not sure how it’s going to fit into today’s mess.  You’ll see auto sales from all of the car sellers throughout the day, so you won’t have that “knee jerk” moment in that space.  Retail traders will get the weekly Redbook at 08:55, but the real fun starts at 09:45 ET, when our domestic PMI show starts.
                        That’ll be when Markit releases their overlooked version of August Manufacturing PMI.  The much focused on, ISM version will print at 10am ET.  Expectations are for 52.9, and 52.7 respectively.  The range is broader for the ISM number, but as long as it falls somewhere between 51, and 54, I think the market will take it in stride.  We’ll also see July Construction Spending at this time.  Economists are looking for a jump here from June’s 0.1 m/m growth to something like 0.7% m/m.  If this is accurate, it would still be slower growth than what we saw in March, April, or May.  Winter is coming.
                         We do have a Fed speaker here in New York today.  He’s not a real live voting member of the FOMC, but Boston Fed Pres. Eric Rosengren is going to let you know what he thinks about the economy at 1:10 this afternoon.  The earnings front remains quiet.  OK, gang, they’re at the gate looking for blood…again.  Helmets, Shields, and batons.
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Sarge’s TRADING LEVELS
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SPX:  1971, 1965, 1955, 1947, 1926, 1907, 1895

RUT:  1163, 1156, 1149, 1140, 1132, 1126, 1119

Market Wrap Monday

Good Evening,
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Macro:
Chicago PMI missed, Dallas Fed Manufacturing Survey missed very, very badly.
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1) Crude was a far bigger story today than stocks were.  WTI soared another 8%, and even traded above $49 a barrel.  This gave strength to the Energy sector, the only sector finishing in the green for the day.
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2) All of your major Indices gave up close to a percent today, with the exception of the Small Caps.  The Russell 2000 only lost 0.3% today.  Trading volume was well below last week’s levels.  All four major indices closed out their worst month in years, surrendering a rough 6% throughout August.
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3) Treasuries were hit hard late in the day, and as they were, so were the Utility, and Health Care sectors.
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4) My take…. The Fed is confused, and putting out mixed signals.  Chinese leaders are confused, and sending out mixed signals.  The only guys not confused are Oil traders.  They certainly seem to know what they want to do.  The market is trying to price in multiple uncertainties all at once.  This is why every twenty minutes or so for, market participants…. seems to have it’s own personality.  Better learn to live in this environment… it’s not going anywhere anytime soon.
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Levels:
SPX: Our 1986 was a precision strike at the top, while 1979 worked as resistance twice, as well.  I did give you 1972.  You might have been better served by 1970.  It does look as if a level is also developing in the 1960’s.
RUT: I gave you 1162, and  1156…. the tape gave you 1164, and 1156.

Market Recon Monday

Good Morning,
                       Stanley Fischer had a message for you.  In fact, it appears that most of the Fed officials at the big pow-wow in Jackson Hole felt the same way.  Basically, to make it short, the turbulence seen in financial markets of late has not had a significant impact on the Fed’s decision making process as far as getting the Fed Funds Rate off of zero some time this year goes.  I can live with that.  You all know that I am something of a policy hawk, and while I often doubt the Fed, there’s no way in heck that the fair price of credit is close to zero if the economy is really expanding at an annualized rate of 3.7%.  Yes this should cause dollar appreciation, and that is a risk, but these guys are starting to see consumer level inflation (outside of crude, and imports) on the horizon.  Wouldn’t you rather have this gang out in front of inflation than chasing it?  I know that I can’t be the only one old enough to remember how lousy that felt, and how desperate the morale of the average American citizen was at that time.
                        US Futures markets are lower this morning in response to Jackson Hole.  European equity markets are also down a  rough percent, but that could be due, as much to disappointing numbers as anything that any central banker might have said.  This morning, German Retail Sales, French Consumer Spending, and Italian Unemployment all missed consensus, and in the case of German Retail Sales….. missed badly.
                       From a macro perspective, a busy week will get off to a sleepy start today.  All we have to look at today are a couple of tertiary items that traders generally do not react to.  At 09:45 ET, the Chicago ISM, will release the Chicago PMI, an item that used to garner a lot off attention as a tone setter for the national picture (which you’ll get tomorrow).  Maybe today, with a light schedule, you’ll get a reaction.  The expectation is for slight improvement to something like 54.8 (ish).  When you’re not sure, make sure you always add an ish.  “Don’t wait up for me honey….I’ll be home late-ish”  At 10:30 ET, you can probably expect that the Dallas Fed will let us know that their manufacturing sector losing streak has continued.  There are no earnings releases that you need to be cognizant of, and it looks to me as if the Fed crowd may sleep in after their party out west.  They will be out and about this week, however.  As a reminder, we’ll get key Chinese PMI data tonight, and there will be global impact.
                        It’s Monday morning, gang.  Crank it up.  Your family is counting on you.  Providing is one thing.  To be a shining example of what you would want your children to be, that’s another.
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Sarge’s TRADING LEVELS
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SPX: 2012, 2005, 1993, 1986, 1979, 1972, 1955, 1947

RUT: 1178, 1172, 1167, 1162, 1156, 1149, 1140, 1132

Market Recon Friday

Good Morning,
                       China?  Sure the Shanghai Composite is up again today, but that kind of news is sooooo Tuesday.  There’s a new sheriff in town, and it’s the old sheriff.  Goes by the name of Crude.  Oil that is, Black Gold.  So, now we do know that much of that price action yesterday was indeed initiated by short coverings.  We also know that the gains were exacerbated by Venezuela linking arms with the Sovie…err Putin to try to get a whole bunch (OPEC) of oil producers to go ahead, and cut production.  Good luck on that one.  I’m guessing the Saudis have probably already though of this…. and rejected it.  Let’s just see what Crude, and the energy sector do this morning.  If I were a betting man…. hey wait, I’m not a betting man.  You’re on your own with this one.
                      When the clock in New York strikes 08:30, you’ll be hit by a triple headed monster.  The Hydra??  Good guess, but no.  That’s when the Bureau of economic Analysis will release it Personal Income, and Outlays report for July.  What the data will include will be Personal Income, Consumer Spending, and the all important PCE Price Index.  In other words, there’s a lot of stuff in there that the Fed looks at.  Most economists are expecting that both Income, and Spending grew by 0.4% m/m, which would keep Income on it’s recent pace, and would be a pop for Spending.  That brings us to Janet Yellen’s favorite measure of consumer level inflation.  I am kind of a nerd, but I’ve got to tell you, that I have a favorite baseball team.  I have a favorite flavor of ice cream…. but I don’t really have a favorite measure of consumer level inflation.  They all rot.  That said, we’re looking for m/m growth of 0.1% at both the core, and the headline.
                     What we can not forget about is the University of Michigan’s final Consumer Sentiment print for August.  The mid-August print disappointed at 92.9, but keep in mind that the very similar Consumer Confidence print put together by the Conference Board on Tuesday surprised big to the upside.  Keep in mind that this print generally does move the market when it is released, gang.  You also can’t rule out that somebody in Jackson Hole says something stupid…… or smart.
                      Anybody who saw Carlos Torres, and Dan Murphy play hacky sack last night, knows the Mets are different this year.  Surely the MLB play of the week.  It’s Friday, my fine bunch of pals.  Finish line is right in front of you.  Stay focused, and let’s get everybody out of here in one piece.  God bless.
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Sarge’s TRADING LEVELS
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SPX: 2121, 2012, 2005, 1992, 1980, 1973, 1955, 1947
RUT: 1172, 1167, 1162, 1157, 1149, 1140, 1132, 1126