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Why The ISM's Plunging Orders Less Inventories Means It's All Downhill From Here
Digging beneath the surface of today's ISM report revealed a complete economic disaster: bad components (Inventories and Price) were up, while good ones (Orders and Employment) were down, as we pointed out at our first view of the ISM. What this implies, as John Lohman highlights, is that the "best" indicator - Orders less Inventories, plunged lower. As John explains: "Statistically, orders minus inventories leads ISM composite by 3 months (i.e., the highest correlation is at lag 3). Even when smoothed 3 months (slowing it down), orders minus inventories leads EPS estimates, and below 5 typically means a peak or plateau (and by definition therefore a slowing growth rate) in earnings estimates."
We are now well below 5, and looking at historical precedents, the market is now certainly due for a correction, which would definitely occur if the Fed would finally leave the economy alone for at least one second. But no, as Jim Grant earlier stated so eloquently, the Fed is now "lethally" ingrained in all sorts of intervention and manipulation of the US economy, and the only way the two can separate from each other is through the implosion of either, or both. And since the parasitic Fed is far more powerful than even the host country it has invaded for the past 97 years, we have a bad feeling it will be left standing long after America has been brought to ruin.
h/t John Lohman
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All negative facts are lagging indicaters. //sarcasm off///
Market shrugged it off. Why?
Because The Fed conquers all.
The Fed is now the market.
For yet a little while
It was the first day of the month - a typically positive day because of 401(k) contributions. And Chinese PMI beat (if you can believe their numbers). And of course the algo's only trade the headlines and not the sub-indexes (though the market did sell off about 15 minutes after the number printed).
I'm a bit more surprised that the market yawned over the Irish bank bailout numbers, the Irish PMI (sub-50) and the German retail sales miss.
I'm a bit more surprised that the market yawned over the Irish bank bailout numbers, the Irish PMI (sub-50).
Considering that they need more than total tax receipts to cover this mess and then find money to pay for running the country before interest charges. The Surprise is that under any accounting standard Ireland worse than bankrupt, it is a corpse and has been for some time (you can smell it)
Highlander Itchy Scratchy Wylie Coyote effect
or perhaps some residual short covering going into the weekend.
Because we don't have a market.
Bingo
How do people act at 12:57 am when they're drunk and the bar is about to close?
Most drank the Fed koolaid
Because the obvious thing to do was to sell. So the big boys watch you do the obvious thing, and then ram it up your behind.
It is called S-T-A-G-F-L-A-T-I-O-N folks.
But don't worry. It will only last for about 9 months - before another (and probably final) deflationary collapse.
No doubt.
if not much sooner
The dollar looks like hell.
Nothing else says "time for equities to tank" quite the same.
Bingo bango bongo
Bears are running out of time. I'd be looking to short if I saw relative weakness in the financials. For example I have STI, but no reason to sell it yet.
I bought NUE on Monday for the 3.8% dividend, so far so good. If the market is going to crash, I'd get stopped out on this first.
I also have HD for the dividend, this thing refuses to drop.
The fastest and easiest money is usually made shorting gold stocks. I'm watching NEM, still no sign of a swing low being broken yet. So I'll hold onto it for now.
And my VZ, T, MO, and other big dividend payers are still pinned at the highs, and still paying 5% - 6%. No reason to sell those and get a paltry .40 bp in a 2-year Treasury.
Sorry, I make my living trading full time for now, I have no other choice but to follow the tape or I'll get punched in the face by the PigMen.
Show a chart of an important reversal for the week, like NFLX. Took it out back and shot it post 52-week high.
Bulls are running out of time for the economy to improve. As the economy deteriorates/stagnates the sheeple grow more frustrated. More strategic defaults. More flame out final spending spree's. Companies will start layoffs again (which you are already seeing). The structure of the economy is being revealed as the fallacy that it is.
The government is doing everything it can to support the Ponzi. The end game is nearing. It'd be willing to pick a date and time in the future to wager a bet with you. Say a year from now, you get up 1000, I'll take down 1000. Loser never posts again. You game?
I'd be looking to short if I saw relative weakness in the financials.
FAZ up from 10.78 to 14.05 so far ain't chopped liver
http://stockcharts.com/charts/gallery.html?s=faz
Also AAPL, AMZN, GS, MON and many other market leaders already peaked and rolloing over
http://stockcharts.com/charts/gallery.html?s=aapl
http://stockcharts.com/charts/gallery.html?s=amzn
http://stockcharts.com/charts/gallery.html?s=gs
http://stockcharts.com/charts/gallery.html?s=mon
Risk with stops loss of liquidity Flash Crash II after QE II dematerializes
5% div doesn't sound so good when you look at the DX. It dropped almost 1% today.
That pic is the best you got? Geez, I remember when I used to like your posts...............
There's also the other side of the coin, where all investments get 'stopped-out', instead of an 'orderly' decline.
Guess we will see.
Robo, don't forget a quick dip into GOV. Coming up on ex-div there.
I don't know why people junk you (seriously) - you're makng money at this. I think this board would be too bearish without a colorful dissenter pointing out the reality of the charts. Are we all just pissed because we missed the rally?
Some sold into strength
I am going to make a yard sign of the above statement.
And who were the principal architects of the Fed 97 years ago?
Jacob Schiff, Warburg, Morgan (front for the red shield?)
Not that there's anything wrong with that.
since the parasitic Fed is far more powerful than even the host country it has invaded for the past 97 years, we have a bad feeling it will be left standing long after America has been brought to ruin.
Remains to be seen. Aint over till it's over
Personally betting on American pragmatism beating the Central Bankers
It is what it is, until it isnt. Its like traders that bet the whole account every trade and are right 99 times. Its a thing that always works......... until one time.
By the way, anyone looking for income can buy ERF, it pays 8% and it just broke out a few days ago. Anyone lucky enough to pick it up at $14 during the Flash Crash is probably eligible to see a close up of the stretch marks on Amanda's cleavage....
Plenty of targets for my...er...um... Do you go high, or low? I'm not sure, but I'd like to put some stops in below the neckline on that one.
Nothing like Wood on a Friday afternoon. Keep em coming. I want to meet my price target.
anyone lucky enough to pick it up at 14 was unlucky enough to find it DKed the next day.
Thats pretty lame...comn Robo after all these months this one barely makes the first quartile..
learned in 1949, 1967, 1974, 1987 and 2008 that income takes a back seat to protecting capital with value and cash reserves
Amanda - you are the new, no-nonsense voice on Wall Street. In your voice I sense a stern disciplinarian. I believe you can discipline Wall Street. Please, discipline Wall Street. Get your whip.
Whip it.
crack that whip
when a problem comes along
you must whip it
before the cream sits out too long
you must whip it
when something's going wrong
you must whip it
now whip it
into shape
shape it up
get straight
go forward
move ahead
try to detect it
it's not too late
to whip it
whip it good
Devo
http://www.youtube.com/watch?v=Xbt30UnzRWw
I'm still a short, But knowing the fed will do everythng in it's power to keep the game going, I will keep my three stocks and Gold until I have every indication that the game is going to implode.
Darn, was hoping there were no shorts left so we could get this crash going
The ISM chart does seem to correllate with some things we see in our business. Sales to semiconductor accounts seem to lead sales to electronic assembly accounts by 3 months. We are a private company selling globally.
In 2008 semi headed down in August and electronic assembly in November. This year semi softened (but not to the same degree as 2008) in September.
From my perch in the burbs it looks as if the new US normal lower consumption has not yet been reached and inventories have been built assuming a growth model.
Is it possible for the dollar to devaluate and not have inflation?
Dear RobotTrader,
I also thank you for your posts, though I am afraid that it was I who may have junked you first. My beef was the constant idiocy about Ukrainian escorts (try to find one, by the way, I dare you. Not a Russian escort, and, no, they are not the same thing...) and the silly pervasive myth that Japanese housewives run the 4X market.
Both ideas are offensive to me personally and professionally because they are both at least false but more like ludicrous stereotypes that need to be ground out once and for all.
I apologise if I set off a wave of RobotTrashing because, frankly, now the other extreme has evolved in that there are some here who also have false ideas but are attacking you personally. I do not associate myself with those remarks.
That having been said, I would like to point out that nearly all the charts you have demonstrated are forming bearish patterns: declining wedges, triple tops, etc. According to my own charting, we saw the top Friday afternoon when the SPX broke 1155. The top may roll over or it can fall off a cliff but there will at least be a ten percent correction from these levels.
With respect,
Orly
Updated GOLD monthly chart:
http://stockmarket618.wordpress.com
Thanks for making the effort to dig. The whole thing smelled fishy from the start! I just didn't (sniff) pass the smell test!