Market Recon Tuesday

Good Morning,
                        The ugly stick is out, kids…. and it’s hitting everything in it’s path, sort of like the Whack-a-Mole game.  Hitting everything west of Shanghai that is.  Credit Suisse cut mining stocks a cross Europe, and there are of course concerns over Global, and Chinese demand/growth, but this persistent lack of clarity from the FOMC is certainly impacting markets….and currencies that in turn are impacting markets.  Hillary Clinton may have taken a wrecking ball to our markets (particularly the Health Care sector) yesterday, but today, at least so far, I don’t think we can blame her.  Regardless, you may want to read the sports page before you check on those S&P futures.
                      There are a few numbers out there for us today.  Not the kind numbers of that will substantially impact the marketplace.  Not the kind of numbers that make cowboys and warriors tremble, but numbers none the less.  Those of you following the retail sector, and really….who doesn’t?…will be looking for the weekly Redbook print at 08:55 ET.  At 9am ET, the FHFA will release their House Price Index for July.  Consensus here is for 0.4% m/m, but honestly, no traders I know follow this one.  (I haven’t asked traders that I don’t know.)  The HPI they follow will print in a week’s time.
                       The Richmond Fed Manufacturing Index (10am ET release), though far from a “red star” item could be something of interest for September.  After the abysmal showing by the Philly Fed, and the Empire State (2 months), some may look to Richmond to see if the negative trend is broader than just the northeastern corridor.  The Prices Received for Final Goods component has been particularly weak in both of those other two releases, and is something to watch closely here.
                       Back by popular demand… just one day removed from his last  public speech…. I give you number 43 in your program, number one in your hearts…. Atlanta Fed Pres. Dennis (Spider) Lockhart.  The Spider will speak from Montgomery, Alabama tonight at 19:00 ET.  BTW, his Victory Tour continues tomorrow with an incredible third speech in three days.  I don’t know how parents with young children are getting the little ones to sleep at night in this atmosphere of constant excitement surrounding every Fed speech.
                       Maybe the Mets can play the Braves the rest of the way.  Try to have a good day, gang.  This could be a little messy.  With S&P futures trading 26 points below fair value, just before I hit “send”, I have adjusted my levels for a gap lower opening.
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Sarge’s TRADING LEVELS
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SPX: 1962, 1956, 1948, 1939, 1932, 1921

RUT: 1158, 1151, 1144, 1139, 1135, 1130

Market Wrap Monday

Good Evening,
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Macro:
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Existing Home Sales missed, while average home sale prices declined in every U.S. region for the second straight month.
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1) Today was really a matter of where your beans were.  The Russell 2000 declined, the NASDAQ Composite closed virtually unchanged, while the DJIA, and the S&P 500 closed higher.  Trading volume was light.
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2) The only sector closing in the red today was Healthcare, and that was largely due to a tweet by Presidential Candidate Hillary Clinton aimed at price gouging in the Bio-Tech/ Pharma fields.  That tweet did spark a market-wide sell-off, but the rest of the market recovered nicely.
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3) Financial stocks, and Info Tech brought home the ribbons today.  Surprisingly, the Energy sector, though up on the day, was not among the leaders despite a surge in Oil prices.
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4) Treasuries gave up some ground, while Gold stayed near where it started the day.
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5) Oh, and another Fed speaker dragged himself into the public, and tried to sound hawkish in what is starting to seem like a concerted effort a damage control.
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6) Tomorrow’s Tuesday.  Rock and roll.

Market Recon Monday

Good Morning,
                       There sure is a lot of peripheral noise out there right now for market participants, and it’s a good thing too.  We may need a little distraction after the FOMC fumbled at the goal line last week.  It really is so interesting that from 2:30 pm on Thursday through Friday’s closing bell, equity markets gave back just about everything that they spent Monday through Thursday afternoon pricing in.  Such is the “hypothetical” cost of uncertainty.  Today, at least is a new day.
                      Now for those peripherals….  Japanese markets are closed until Thursday.  Now that’s what I call a party.  Today, specifically, is “Respect for the Aged” Day in Japan.  Maybe every country should start celebrating this one.  The Pope will land on US soil tomorrow, and bounce around from Washington to New York to Philadelphia.  If you live in these areas, your days will be impacted.  No maybes.  Then President Xi of China will meet with President Obama this Friday in Washington, just in time for China’s Mid-Autumn festival.  Word is that they’ll be sharing moon cakes together.  Oh. and the Syriza party won re-election in Greece, which puts Tsipras back in the role of honcho.
                       Ok. let’s get back to thinking.  Welcome to another wonderful week of macro.  There will be some numbers to chew on every day this week, but the higher impact data will be back-loaded with August Durable Goods Orders due on Thursday, and the final revision to Q2 GDP due Friday morning.  Today, we’ll have to wait until 10am ET to see any numbers at all.  That’s when the National  Association of Realtors will print their August edition of Existing Home Sales, the fattest slice of the housing pie.  The pace for this item is expected to have eased from July’s 5.59 million units to something closer to 5.5 million.  Don’t forget, if your new to this, that these numbers appear bloated because they print in a seasonally adjusted annualized rate format.
                       There is a Fed speaker lurking out on the perimeter today, and they were out and about over the weekend as well.  At 13:00 ET, we’ll hear from Atlanta Fed Pres. Dennis (Spider) Lockhart, who is a voting member of the FOMC this year.  In short, in order save you from reading the articles, San Francisco Fed Pres. John Williams, who is a voting member this year, and has been viewed as dovish in the past indicated that this past decision was a close one, and he expects that the liftoff for the Fed Funds Rate will come this year.  St. Louis Fed Pres. James Bullard, who is not a voting member at this time, apparently agued for a rate hike last week. He indicated that the Fed’s data dependent  objectives have largely been met, and had he a vote this year… he would have dissented.  This is starting to sound to me like the meeting was a lot messier than the lopsided vote might indicate.  October should be fun.  At least the marketplace isn’t behaving in a volatile way or anything.
                       OK, gang….have a good day, and have a good week.  Shoulder to shoulder, that’s how we stand.  Now, God bless.
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Sarge’s TRADING LEVELS
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SPX: 1978, 1970, 1965, 1957, 1948, 1939

RUT: 1178, 1173, 1167, 1162, 1157, 1151

Market Recon Friday

Good Morning,
                        Amazingly….somehow….13 of 17 policy makers at the Fed still feel that they will likely lift the Fed Funds Rate off of zero this year.  Yep, that’s right…. in 2015.  (You may want to note that one of those goons actually has a negative rate in that space by year’s end….hmmmm.)  Somehow, though, September just didn’t feel right to Dr. Yellen,and her gang despite 3.7% GDP, and 5.1% Unemployment.  (That’s if you’re buying what the BLS is selling.)  Apparently, they just bowed to the IMF, and the World Bank, and decided to ignore that old guy in the produce aisle buying cabbage tonight because it’s cheaper than lettuce.  Maybe they’re just not here for us.  Oops, there I go again.
                       Three cheers for the new voice of reason, also known as Jeffrey Lacker.  Kid’s got guts, and in my book, along with at least some smarts… guts is enough.  Hear he’s also against the DH rule…Ok, I made that one up.   Seriously, the Fed may have missed their opportunity to get themselves into a position of strength when they could have.  Low end rates never should have gotten to this point, and while there is life in the economy, every effort must be made to get the central bank into a position where they are able to bring a knife to a knife fight, should a knife fight break out.  The marketplace has been perverted for far too long.  Not a soul out there actually knows where the free market value of credit should be, nor anything else reliant upon credit conditions.  Let’s see how markets shake out over the next few weeks.  They give me a pop in my 401K, and maybe I’ll get off my soapbox.  I am human.  In the meantime, how in the world have we allowed academics, and politicians to run our country?  Enough !!  Give me some kid who actually had to figure it all out, or else starve anytime.
                       There’s almost no macro out there for you today, just the Conference Board’s Leading Indicators for August at 10am, but you do not have to be on top of this one.  In terms of trader reaction, this one does not even exist.  You do have to cognizant that today is Quadruple Witch Friday, which means that there will be outsized volumes for equity traders concentrated on the bells.
                      Time for a weekend.  Let’s get through this one together, and then maybe get a little rest.  Make sure that you notice that filthy homeless guy that you pass on the way home tonight.  Let him know that you know he exists.  Might just save his life.  More important than anything else you do today.
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Sarge’s TRADING LEVELS
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SPX: 1994, 1987, 1978, 1972, 1965, 1956, 1948

RUT: 1185, 1178, 1173, 1168, 1162, 1157, 1151

Market Wrap Thursday

Good Evening,
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Macro:
Didn’t matter today, but the Philly Fed stopped holding up in he face of the Empire State’s recent awfulness.
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1) Every drug addict gets to a point where the drug loses it’s desired effect, and starts to injure the user, yet they continue to desire the drug.
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2) I accurately predicted in this morning’s note that we, indeed…would go ape, once Janet Yellen brought out the jugglers, and the plate-spinners.  Didn’t read that in anybody else’s market note, now did you?
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3) The NASDAQ Composite, and Russell 2000 closed up small, while the other major indices all closed modestly lower, after stocks traded in wild swings throughout the afternoon.  Not only was trading volume heavy for the day, but it was all crammed into two hours.
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4) The Utility sector was the day’s winner, thanks to Treasuries, and Bank stocks were slapped around because, duh..
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5) Treasuries rallied strongly in what was some wild price action.  The Two Year traded in a13 bps range just in the afternoon.  That’s simply remarkable.  (Almost typed: That’s just plain kooky, then decided it looked unprofessional).
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6) Pretty boring night ahead of you.  No Mets, No Yankees, No Republicans.  Just the NFL, and we all know that this league has devolved into an arena for cheaters, and thugs at this point.  Rather read Von Mises, or play Strat-O-Matic than waste three hours of my life.
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7) Tomorrow’s Friday.

Market Recon Fed Day

Good Morning,
                        Wake up, and smell the air.  Nothing else in the world smells like that.  “Fed Day”.  A lot of Wall Street honchos seem to be saying “no dice” on any kind of rate hike today.  I’m not so sure.  Guess I’m not a honcho, but we’ll all know soon enough, now won’t we?
                        OK, gang, let’s settle in.  This may be an uncertainty, but it’s not confusing.  There really are only three moves available to those who find themselves sitting on the FOMC this afternoon.  In all cases, the  dog and pony show that arrives at 14:30 will matter almost as much, if not more so than the actual policy decision on the Fed Funds Rate.  That’s when they can bring out the jugglers, the acrobats, and the plate spinners.  Yeah, go ape.  These are the options available, as I see them.
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2pm: Option Left, Option Right, or Fullback Dive
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A) No rate hike.  Dangerous.  We all know that several FOMC members have been talking up the idea of leaving the era of ZIRP behind.  Credibility is at stake here.  Then again, with consumer level inflation below target, and very little wage growth, there are data-based reasons to hold off, and they have always claimed to be data dependent, well sort of data dependent.
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B) 25 basis point hike.  Also dangerous.  Some who bear the mantle of leadership might call this step scary.  Some over at the FOMC might be afraid that they’ll have to retrace this step if it ends up seeming like they let it happen too early.  Nine years is pretty quick.  Coming from the James Grant, Richard Fisher, Tom Hoening, Ludwig Von Mises camp myself, this would be my vote, if I had one.  I am well aware that I do not have a vote, and would be surprised if they actually took this route today.
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C) 10 or 15 basis point hike today, with the other 10 or 15 basis points to total 25 to come at a later date.  In my opinion, this option is a compromise where all save face, and is not enough of a move to exceedingly hurt anyone.  That means, in my opinion that this option could very well be today’s outcome.  On top of the ideal of compromise, this tiny move does not fundamentally change anyone’s trade, or anyone’s standard of living.
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                       That third option really may be what you’re left with at the end of the day…..and they do not have to wait until December to complete the move.  If you were watching FBN AM (The new 5am show on Fox Business featuring Nicole Petallides, and Lauren Simonetti) this morning, and why wouldn’t you be, if this is what you do for a living? (What are you going to do?  Sleep?)…. then you heard from Greg McBride of Bankrate.com.  Mr. McBride simply stated that it’s as simple as calling a press conference for October, so as not to have the pressure mount up for the year’s final policy meeting.
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2:30 PM:  Bedazzle Us
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                        What to look for in the press conference depends on the outcome of the decision on interest rate policy.  We all know that the good doctor is going to do her dovish best regardless.  What we, the trading community want to know is….
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A) If no rate hike now, is there still an expectation to get something on the tape this year?
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B) If the ball does start rolling this afternoon….  What are the Fed’s intentions regarding the length, and depth of this tightening cycle.  Yes, Benny Boy, it’s normalization, but to normalize you must tighten.
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                        You will get some macro today, but I think that Housing Starts, and Jobless Claims, though very important will clearly not be in focus today.  Staying focused in the light volume ahead of the announcement this afternoon will be your challenge.  Then it will be game on.  Good luck today to you all.
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Sarge’s TRADING LEVELS
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SPX: 2021, 2012, 2005, 1994, 1986, 1978, 1972

RUT: 1190, 1185, 1178, 1173, 1168, 1162, 1157

Market Wrap Wednesday

Good Evening,
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Macro:
CPI unexpectedly contracted, Core CPI hit consensus, Housing Market Index beat expectations, Oil Inventories were well below expectations, TIC print shows that Chinese accounts reduced their holdings of US Treasuries by $30 billion in July.
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1) All four major equity indices closed up at least half of one percent today on trading volume that was above this week’s norm, but still uncomfortably light.
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2) Crude scored gains of a rough 5% on that Inventory surprise.  Thus, the Energy sector was today’s clear winner, easily outperforming all other sectors.  Telecom finished as the only sector in the red.
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3) Treasuries, for the most part sold-off today, but nothing like yesterday’s drubbing.  The US 10 year did trade at a yield above 2.3% at one point.  Gold had a nice session, as did Silver.
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4) One day ahead of the Fed’s announcement, VIX options seem to be telling us that at least those who trade them feel that equities will be higher than they are now, in a month’s time.  Steve Sears illustrates this at Barron’s.  Here is the link.
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5) I’ll catch you kids on Thursday.  Stay motivated.

Market Recon Wednesday

Good Morning,
                       We do have some breaking news.  Standard and Poors has cut Japan’s credit rating from AA- to A+, which is utter nonsense.  The BOJ has no problem printing money.  We all know that.  No promises on the value of the yen, but the face value of Japanese sovereign debt instruments….. not a problem.  The Shanghai Composite closed up almost five percent on the day after going parabolic near the end of the day.  Just who would do that?  I dunno, Ma, maybe Jimmy did it. “Raise the roof”.  Oh, we also saw weak consumer level inflation for the Euro Zone, and Germany held a sloppy 30 bund auction.
                      I bet you watched Treasuries yesterday.  I mean, who doesn’t?  With moves like Jagger, particularly for shorter term durations, it’s almost as if somebody knows something, right?  I mean… I know there are good reasons with or without the Fed to have a mildly bearish outlook for US Treasuries (like those big scary nations out there who own a ton of this stuff, and may need to raise cash), but that was a lot all at once.  Maybe a 10 or 15 bps move in the Fed Funds Rate is a compromise that those kind folks over at the FOMC can live with.
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Macro Party USA
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                        At 08:30 ET we’ll get August CPI.  Though not the Fed’s preferred measure of consumer level inflation, how could this data-point not be in the FOMC’s focus as they begin their two day policy meeting.  For July, we saw the CPI lay a dud, even though the PPI came in a bit hot.  Well, the PPI came in a bit hot this month too, yet expectations are for another dud in this space.  At the headline, we expect a flat print.  No growth.  No contraction, though the skew is for a slight contraction should there be a mild surprise.  Less food and energy, or simply at the core, we are looking for 0.1% month over month growth.  The skew for the core print is slightly to the high side.
                        The September print for the NAHB Housing Market Index is due at 10am ET.  This one can get markets fired up, and then again if something more important already has set a fire (today’s CPI ??), it can pass unnoticed.  Simply put, this is a homebuilder sentiment survey, and it has been very strong in recent months.  Projections are for a repeat performance of August’s 61 tag.  This leave two more macro economic data-points for the day.  One of those will matter to you.
                         Oil markets will shake and bake leading up to, and certainly after the weekly Oil Inventories number at 10:30 ET.  Stocks will surely be impacted as well.  Those polled are thinking that we get another increase in supply today, though not quite the pop that we saw last week.  We’ll also get the TIC number for July, but not til 16:00, so it will not impact regular session trading.  What it will tell us is the dollar amount of cross border flow into or out of US Treasuries.  Unfortunately, the data is stale, being two months old.  We would love to see up to date numbers on this.  That said, June was a big month for foreign investment, despite Japan lightening their load, and July’s print should be interesting.
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                          I was fortunate enough to meet two of my idols yesterday.  Sarge, you met Joe Namath, and Tom Seaver ??  Close, but no cigar.  Working on the trading floor of the NYSE for several decades has allowed me to rub elbows with Presidents, Other Heads of State, Movie Stars, Famous musicians, you name it.  Yesterday, I met former Dallas Fed President Richard Fisher on the trading floor, and James Grant author of Grant’s Interest Rate Observer out on the sidewalk.  Talk about two guys who dish out common sense every time I hear them speak.  Just wow.  I was like a fourteen year old at a Justin Beiber concert.
                         Have a most victorious trading session.
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Sarge’s TRADING LEVELS
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SPX:  2005, 1993, 1986 (year of the Mets), 1978, 1972, 1965, 1956

RUT: 1185, 1178, 1172, 1167, 1162, 1157, 1151

Market Recon Tuesday

Good Morning,
                       Equity markets across our wonderful planet are soft this morning.  Except that is for the Nikkei 225, even though the BOJ decided not to pour more kerosene on the fire at this time.  Needless to say, the US dollar is lower vs. the yen this morning.  The Shanghai Composite was slapped around more than the rest today, as no white knight showed up late in the day to plaster some makeup on this ugly duckling.  The crackdown on illegal margin trading was today’s culprit, and I guess the puppeteers wanted to see where that market would go if they sat on their hands for a bit.
                       Just love when a prominent financial website has a story predicting an imminent market crash right next to a story warning against an imminent market melt up.  (soft chuckle)  Some of us change our minds on this, twice a day.  at least these are two different authors.  Hey, that’s what makes a market, right?  Enough fun and games, let’s do some thinking.  I’m not going to sugarcoat this.  We’ve got a lot of macro to look at today.  It’s going to leave a mark, and the only way it will sink in, is if we tear it apart, identify what’s important to you on a timeline as a trader, and then put it back together.  That said, take a breath, and let’s attack.
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08:30 ET
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August Retail Sales. This one is important.  No doubt, it is the most important item you’ll get today.  Things are expected to cool a bit from July, where we saw growth of 0.6% m/m at the headline, and 0.4% m/m less the autos.  For August, we look for a 0.4% m/m print at the top.  The low end of the range is flat, so negative growth here would not just be a shock, it would be a “kick in the pants” shock.  Without automobiles, we are likely to have barely seen growth at all.  Consensus is for a 0.1% m/m tag.
September Empire State Manufacturing Index.  This item does matter, though it will be a little overshadowed by the Retail Sales release at the same time.  The Empire State has hard a real hard time sustaining any momentum in 2015, printing in contraction every other month or so.  August was a disaster at -14.5.  Hopefully we’ve contracted enough, but this will be a close shave.  I have seen expectations all over the place for this one.  My number her is zero, a big fat 0, but nothing at all would surprise me here.
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08:55 ET
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Weekly Redbook.  For the retail trader in you.
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09:15 ET
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August Industrial Production.  Here’s to another item that often plays both side of zero growth.  In fact the consensus of economists has this one sporting a print close to -0.1% m/m, which would be down big from July’s +0.6%.  That was a really large one month move for this data-point, so a small contraction here will not cause an outsized response from the marketplace.
August Capacity Utilization. Cap Utilization is expected to be rather stable, maybe a small drop-off from July’s 78% to something like 77.8%.  The range is 77.5% to 78.5%, so nobody on our radar is looking out in the weeds for anything odd in this space.
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10:00 ET
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July Business Inventories.  Not unimportant just the least focused on piece of the pie for the day, as far as the trading community is concerned.  If you are focused elsewhere this one probably will not hurt you.
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                         Now, the whole ball of wax is now sliced and diced in neat fashion, but for a nice recipe, you may have to go to Kenny’s note.  The Fed’s  decision will be visible in two days time, and today’s price action, at least in the early going, will jerk on these releases.  I would tell you to have a nice day, but when you woke up this morning, you already knew that you would.  I don’t know why, but Bill & Ted just popped into my head.  It was Bill and Ted who told us to “Be excellent to each other”  Good advice to live by.  Party on, dudes.
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Sarge’s TRADING LEVELS
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SPX: 1974, 1965, 1957, 1948, 1939, 1932

RUT: 1167, 1162, 1157, 1151, 1144, 1139

Market Wrap Monday

Good Evening,

No Macro

1) All of the major equity indices closed modestly lower in extremely light trading.

2) The Utility sector finished the day slightly in the green, and thus were your winners. The Materials sector was hit with today’s ugly stick, while Energy shares struggled in the face of a lousy day for Crude (particularly Brent).

3) Gold found itself up on the day, despite tough day for Metals & Mining stocks (Part of the Materials sector).

4) Treasuries were well mixed, as the curve actually bowed, with some strength in the middle durations, and some weakness in the long and short of it. Smells like somebody was raising cash at certain limits.

5) One down, four to go.