After an extremely slow Thursday trade, as the market waits on Friday's Jobs data, I bring you a follow up on Wednesday's ISM report. As I wrote yesterday it was very odd indeed. Analyst David Rosenberg agrees, pinpointing what I also thought was quite curious: regional data simply did NOT even come close to reporting what the ISM did.

STRANGE ISM NUMBER DOESN'T PASS "SNIFF TEST" Here's why:

1 Most of the regional reports were very poor in August. Either they collectively all wrong or the ISM is.

2 The share of respondents saying the experienced "growth" was 61%, the exact same as a year ago when the ISM was sitting at 52.8.

3 The ISM gain was led by employment (58.6 to 60.4 - best since December 1983) in the same month that ADP manufacturing fell 6,000 (second decline in a row - it was -11k in July when ISM employment was 58.6, so clearly the latter is proving to be, at least for now, an unreliable labour market barometer). Production also ticked up to 5... more

Was Wednesday's massive rally real, or is the market suffering from psychosis? Was there news that warranted such a move? What about the volume? Is anything real anymore?

1. Wednesday's volume was lethargic. The NYSE consolidated volume was just 1.19 billion, which is barely better than the 10-day average and LOWER than Tuesday's. One should expect massive volume - much greater than the 10-day average - to support such a wild price swing.

2. ADP jobs data came out before the open and was worse than expected, showing job losses are increasing.

3. Construction spending was atrocious, coming in far worse than expected.

4. Auto sales were worse than expected.

5. The "savior" was the ISM manufacturing report that came in at a reading of 56.3 when the market was expecting 53.0. Bloomberg, however, didn't pump up the details like I expected... "Lagging factors gave what is a bit of a deceptive boost to the ISM's manufacturing index masking a further slowi... more

As surely you have heard on many financial stations, August's volume has been abysmal. Day after day the lack of volume kept the needed volatility at bay resulting in the choppiest (non-trending) month we have ever recorded. Eighty six percent of all trading days in August were classified as #4 days - not good. And when there was a slight amount of volatility on a given day, it would end as fast as it started and begin the next excruciatingly long sideways (and narrow) move. Goodbye August!

The market continues to desperately support the S&P 1040.00 level as well as Dow 10,000 despite the poor economic news. Today was no different.

Three reports that were said to be very bullish this morning were the Case-Shiller HPI, the Chicago PMI, and the Consumer Confidence reports. Of course, this is more propaganda.

The S&P/Case-Shiller index of property values increased 4.2% from June of last year. However, what I did not see reported anywhere was the fact that t... more

In my last report I wrote..."The market went crazy with glee last Friday when it found out that the GDP report was close to the expectations. For a change the inept economists that supply Fraud Street with its expectations did not embarrass themselves. The report showed growth two-tenths better than expected.

Unlike inflationary data, the GDP data is annualized to make it sound more palatable than it really is, just like inflationary data is reported on a monthly basis to keep it from sounding catastrophic if one or more months showed a surge in prices. To be sure, few would be excited over the true monthly GDP growth, which is just .00133%. Uh huh, real exciting!" It would seem Mr. Market read this blog and indeed realized that .00133% monthly growth is nothing to get excited about. The S&P futures nearly gave back 100% of Friday's gains.

Although the market did "eventually" drop a lot, the day's most prominent feature was its lack of volume. Monday was one of the... more

The market went crazy with glee last Friday when it found out that the GDP report was close to the expectations. For a change the inept economists that supply Fraud Street with its expectations did not embarrass themselves. The report showed growth two-tenths better that expected.

Unlike inflationary data, the GDP data is annualized to make it sound more palatable than it really is, just like inflationary data is reported on a monthly basis to keep it from sounding catastrophic if one or more months showed a surge in prices. To be sure, few would be excited over the true monthly GDP growth, which is just .00133%. Uh huh, real exciting!

Below we read another quick update on the GDP data from analyst Dave Rosenberg of Gluskin Sheff & Associates.

REVISIONISTS UNITE!

Like the equity analysts, the economists are now in the process of cutting their GDP forecasts - but in dribs and drabs, and nothing very draconian just yet. It is interesting to see that the... more

I have already given the details of the two recent housing reports; however, today I'd like to give you "Rosie's" perspective today. Breakfast with Dave is always a good read.

Burning Down the House

Once again, the consensus was fooled. It was looking for 330k on new home sales for July and instead they sank to a record low of 276k units at an annual rate. And, just to add insult to injury, June was revised down, to 315k from 330k. Just as resales undercut the 2009 depressed low by 15%, new home sales have done so by 19%. Imagine that even with mortgage rates down 100 basis points in the past year to historic lows, not to mention at least eight different government programs to spur homeownership, home sales have undercut the recession lows by double-digits.

In the aftermath of a credit bubble burst and a massive asset deflation, trauma has set in. The rupture to confidence and spending from our central bankers' and policymakers' willingness to allow the prior cr... more

Before the second shockingly bad housing report was released today, there was another poor report: durable goods.

Although the durable goods data showed a very modest increase of +0.3%, it was far below what the so-called experts - economists - said it would be. Once again, these experts couldn't be more inaccurate as they predicted a +3.0% reading. Wrong again boys!

JP Morgan said the following...The July durable goods report was a major disappointment and raises the risk that third quarter GDP growth prints below 1%. Shipments of core capital goods (ex-aircraft and defense) fell 1.5%, the most since April 2009, and orders for core capital goods plunged 8.0%, the most since January 2009. This category is the most important element of the report as it is the best gauge of business capital spending and it feeds into the calculation of GDP. Other aspects of the report weren't quite as bad: total orders were up 0.3%, which was entirely accounted for by a 76% jump in booki... more

Existing home sales plummeted last month - big time. Housing sales have been in a down trend since the government took away the freebies. Of course that government cheese did nothing but pull forward future demand - demand that would have occurred naturally without government giveaways. I knew it. You knew it. But guess who didn't know it and probably never will: economists.

You' have to be as dumb as an economist to think that housing was getting better now and that the government handouts were anything but faux-stimulus. Said another way, you'd have to be as dumb as an economist to think that government giveaways were real economic activity. Moreover, you'd have to be as foolish as a Keynesian devotee to believe that all of the additional debt doesn't matter.

The program didn't work, yet we're saddled with the massive cost of the program and politicians are dreaming up even more housing giveaway schemes.

Bloomberg said, Sales of U.S. previously owned homes plu... more

Today I bring you a quick piece from "Breakfast With Dave." Analyst Dave Rosenberg from"Gluskin Sheff"believes Q3 data will come in with a negative reading and economists saying that the recession never ended.

Our suspicions have been confirmed - the recession never ended. Macroeconomic Advisers produces a monthly U.S. real GDP series and it shows that the peak was in April, as we expected, with both May and June down 0.4% in the worst back-to-back performance since the economy was crying Uncle! back in the depths of despair in September-October 2008.

The quarterly data show that Q2 stands at a +1.1% annual rate (so look for a steep downward revision for last quarter) and the "build in" for Q3 is -1.5% at an annual rate. Depending on the data flow through the July-S... more

Concentration

Off floor day trading from a computer monitor from a "home" office is particularly challenging and beyond the capability of most. This is part of the reason why over 95% of such traders fail. One of the biggest reasons traders fail is that most people are incapable of maintaining intense concentration for any length of time.

But that's no reason to give up. Why not?

Because you don't have to be stuck in front of your monitor every moment of the trading day. Markets develop their own characteristics and their own flow, which hold true most of the time. To be in harmony with the flow of the market is a distinct advantage over those who are not.

Predictable Humans

Most of the time, there are only 2-3 good intra day swings in the E-mini S&P market. The majority of professionals are happy to catch 3-4 really good trades a week. For most traders, trades turn out to be a series of small wins and losses.<... more

With a title "Death Warmed Over" one might think I was about to write about my singing career. Oooff, that's bad! No sir, I will write about the state of the recent stock market, which is death warmed over indeed.

We expected a large move Thursday and the market delivered - kind of. Almost as quickly as the sell-off began, it stopped. Yesterday I said that its overall Market Profile distribution suggested a lower market followed by a rally. OK, great; the market delivered again. The "death" and "warmed over"parts, however, are everything in between!

For example, Thursday the 12th through Monday the 16th the market traded almost entirely within a 7 point range. Friday's range was slightly lower than the prior two days but still traded within the aforementioned band. To be sure, the total range between the highs and lows were greater, but approximately 80-90% of the traded there.

Were the subsequent days better because the overall daily gains or losses were much l... more

As I stated yesterday in Notes From the Pit, the market was waiting on today's first data point: weekly jobless claims. The surprise, however, came from the Philly Fed data. To be sure, both were horrible once again and the only to be surprised - again - were U.S. economists.

Consensus economic expectations for weekly jobless claims were for a bad reading of 480,000. The data reading came in at 500,000, with the prior week's reading revised worse than initially reported and the 4-week average of claims climbing as well. Bloomberg said this "initial claims are piling up, indicating that businesses are continuing to cut costs. Initial claims came in at 500,000 in the August 14 week for the largest total since November. The four-week average of 482,500 is the largest since December. A month-to-month look shows significant deterioration of 25,000 for a percentage change of nearly six percent. The Labor Department said special factors are playing no part in the data."

In th... more

It appears that Greece may be making headlines again. But that's odd; I thought the (Euro) money printing by the ECB had fixed everything? I also thought that the Greek banks had passed the so-called "stress tests" with ease? Were the tests another scam?

Zero Hedge picks up the Greek news, which can be found in its entirety here

Those patiently following the Greek Bond-Bund spread to its inevitable conclusion have been fully aware that the plan that Europe is betting its entire future on, is patently flawed: namely that austerity, by its definition does not, and will not work. In fact, instead of bringing stability, austerity will slowly but surely eat away at the economy of whatever country it is instituted in - in some cases slowly, in others, like Greece, very rapidly.

Indeed, the Greek spread has now risen to levels last seen during the early May near-revolution in A... more

I had planned on writing about Tuesday's trading action but was intrigued by what I saw all over the internet on various websites: an interview with hedge fund manager, Kyle Bass. At first I ignored it until it showed up on the 3rd and 4th site I had come across, which intrigued me enough to watch it. Now I know why its up and I have to send it along to you. The following videos are rather shocking because Mr. Bass is allowed to state his case without being shouted down. His point of view, and facts, are striking enough to make the host of the show depressed and declare, "I need a drink." Until then, he had apparently willfully ignored all of the "other" news around him.

He covers

1. The scam stress tests.
2. The Keynesian endpoint.
3. The Japanese economic death spiral.
4. Demographics.
5. ZIRP
6. Central bank money printing

...and more.

more

As far as our estimate that Monday or Tuesday would be a "break-out" type of day, we can scratch off one. Monday was incredibly slow, with the NYSE notching the lowest volume of the entire year. Yes indeed folks, it was more of the same...a whole bunch of nothing.

Before the market opened we were treated to the latest batch of data from New York, specifically the Empire State Manufacturing Survey. This report came in below expectations, which surprised economists - of course. Bloomberg said "The Empire State report poses bad news for the manufacturing outlook. Readings on new orders, unfilled orders, and shipments all show month-to-month deterioration in August. If these readings are repeated in Thursday's Philadelphia Fed report, expectations will look for a step lower in the monthly ISM manufacturing report."

"The Empire State's headline index did show improvement, but this index is the sum of a single subjective question on general business activity. Again, question... more

The trading floor had an eerie silence to it last Friday. The lights were dimly lit and it seemed like there was a fog rolling across the trading floor. Then again, maybe my glasses were dirty. At any rate, it was an odd start to Friday's trade; rather than the bell being rung at 8:30am central, I heard "Ki-ki-ki, ma-ma-ma...Ki-ki-ki, ma-ma-ma."

"Am I in Chicago?" I thought. "Or am I at Camp Crystal Lake?" the setting for the 1980 movie "Friday the 13th."

Although there wasn't a mad killer, Mrs. Voorhees, taking out traders like camp counselors in the original movie (then son Jason in the sequels), someone sure slashed the volume and volatility all to hell last Friday the 13th. Indeed, the market was as lifeless as said counselors in the movie.

Friday's range was so small it barely spanned 9-points. The vast majority of the range, perhaps 90%, occurred within a minuscule range of just 6 crummy points. Moreover, it was so slow - dare I say DEAD? - that Friday's v... more

How often have you heard or read the phrase "There is so much cash on the sidelines that the stock market is sure to rally - any time now. Wait for it...wait for it..." Uh huh, right. I'm still waiting. This drivel is often repeated to get Joe Six-Pack to buy now, before these fantasy-bucks hit the tape and drive the market higher. The problem is, it never happens.

This is a nonsensical idea to begin with because when you buy, a market maker SELLS; thus there is no gain for the market. However, let's pretend there are reasons why Joe Six-Pack is indeed flush with cash on the sidelines. OK, the first reason doesn't make him flush but rather broke, and yes, on the sidelines: unemployment! Last Friday's monthly jobs data was terrible and this morning's weekly jobless claims were FAR WORSE than the market expected. You'd have to be as dumb as an economist to believe it would get better, but economists are the ones supplying false hope to the market.

The other reason why th... more

The Downfall

The world where we humans live has always been and will always be a turbulent one. Life progresses smoothly for a while, and then unexpectedly, it can change. Success becomes failure, and sometimes failure can turn into a catastrophic loss.

It happens to the best of us, even to someone as successful as Tiger Woods.

At the height of his career, Tiger was the highest-paid professional athlete in the world, he was only behind Jack Nicklaus in the number of times he had won a major professional golf championship, and he ranked third all time in total number of PGA Tour events. He seemed unstoppable.

Fast forward to this season, and the story changes quite dramatically. He is currently only 85th on the PGA Tour money list, and he is not even in the top 100 in scoring average, driving accuracy, greens in regulation and putts per round. Last week, he had his worst 72-hole professional tournament since his very first one in 1996.

Unrelated to the newsletter, but nevertheless a very funny clip sent by one of my best pupils (Andy L.), I think you'll get a kick out of it: Click Here to watch!

I ended yesterday's newsletter with "Google Wiemar Republic and Zimbabwe inflation rate. Then pray 'but it's different this time.'" This was an incomplete thought.

What I mean is; although I believe that there are odds of Wiemar-like hyperinflation some time in our future, I also believe those odds are quite remote. If the banks lend out too much money, both the banks and the Fed (where it came from) will be repaid in worthless dollars. It is not in their best interests.

What could lead us to this horrible destination, however, are the glittering-jewels-of-colossal-ignorance in the House of Representatives and Senate - otherwise known as The Clown Posse. If these idiots believe that they can spend any sum they choose without any consequence becau... more