Reports on retail spending were downbeat in general, with several significant exceptions. Most Districts characterized sales as weak or indicated that they had softened, with a few reporting that the volume of sales had fallen relative to the preceding survey period or a year earlier. However, the Boston, Philadelphia, Minneapolis, and Kansas City Districts highlighted a pickup in retail sales relative to the preceding survey period. Among product categories, several Districts noted continued solid growth in sales of consumer electronics, while a few also noted that demand for luxury goods continued to rise at a healthy pace. By contrast, sales of automobiles and light trucks were flat to down, with contacts from several Districts expecting declines going forward.
The retail ETF is clearly in a bearish posture. Prices are below the 200 day SMA by 9.3%. All of the shorter SMAs are moving lower, the shorter SMAs are below the longer SMAs and prices are below all the SMAs. This is a chart that says "sell me."
The electronic stores sector is at least above the 200 day SMA. But it has been in a trading range for the better part of a year. Also notice the shorter SMAs are bunched-up indicating a lack of direction.
While the auto dealership sector is still above the 200 day SMA, it broke a three year uptrend on heavy volume earlier this year. That indicates this sector is in the middle of a trend reversal.
Reports on nonfinancial services generally were consistent with expanding economic activity, with the primary exception of transportation services. Several Districts pointed to continued strong demand growth for health-care services, while the Richmond, St. Louis, and Minneapolis Districts noted an ongoing expansion for providers of legal and other professional services. The Dallas District reported steady demand for legal services but noted a shift toward litigation related to bankruptcy filings, which may signal a slowing economy. In the San Francisco District, demand for advertising services was held down by weak demand from sellers of automobiles and home furnishings. Providers of temporary staffing services saw strong demand in the Richmond District as well as a pickup from the legal and financial industries in New York City, but demand for temp workers was reported as "sluggish" overall by Dallas.
The transports are in a bear market. Prices are below the 200 day SMA. The shorter SMAs are below the longer SMAs and all the shorter SMAs are heading lower. While this index experienced a bounce yesterday, we have a long way to go before we can confirm this is a trend reversal.
Ad agencies broke a three year uptrend recently, although they are still about the 200 day SMA.
Management services formed a double top and are currently trading at important support levels. However, this sector is still in bull market territory.
Staffing agencies have
1.) Broken a 5-year uptrend,
2.) Broken through the 200 day SMA
3.) And are trading at a technically important level. If they fall further they have a ways to go before they find additional technical support.
Manufacturing activity was mixed across subsectors but appeared to be largely stable on balance. Demand remained weak or fell further for machinery and manufactured materials related to home construction, such as lumber and concrete, and automakers have scaled back their production activities this year. By contrast, demand rose solidly for various other types of capital goods, such as non-automotive transportation equipment, information technology products, and machinery used in the agriculture, energy extraction, and mining industries. Chicago reported that steel production increased, in part because of reduced import competition of late, but Cleveland characterized steel shipping volumes as "flat" in that District. Among nondurable products, several Districts noted continued robust demand for food and significant gains for paper and plastics. However, Dallas reported "stable" demand for food and a drop in sales of corrugated boxes, and St. Louis noted that food manufacturers plan to lay off workers in that District. The reports generally indicated that increases in demand were especially strong for products and firms with significant export markets, for which sales have been boosted in part by the lower exchange value of the U.S. dollar.
Manufacturing is still in a strong uptrend. However, it may have formed a double top over the last few months.
Materials and Construction formed a head and shoulders formation over 2007 and recently broke through a 5 year trend line.
Demand for residential real estate remained quite depressed, with only a few tentative and scattered signs of stabilization amidst the ongoing slowdown. Most Districts pointed to further increases in the inventory of available homes, with the earlier tightening of credit conditions for mortgage lending continuing to create barriers for some buyers. Consequently, prices on new and existing homes sold were reported to be down on a short-term or year-earlier basis in most Districts. The pace of homebuilding remained very low in general, and builders continued to shelve projects and lay off workers in many areas; contacts generally do not expect a significant pickup in homebuilding until well into next year at the earliest. Among scattered positive signs, however, co-op and condo sales in New York City picked up during the survey period, Richmond reported favorable readings on home sales in a few areas, and Kansas City reported that home inventories fell a bit in the Denver metro area. Weak home demand had mixed effects on conditions in rental markets: Chicago reported that builders' conversions of new homes to rental property put downward pressure on rents, while Dallas noted that demand for apartments picked up, in part because some potential homebuyers are unable to qualify for mortgages.
The homebuilders ETF is in a bearish chart. Prices are below the 200 day SMA; shorter SMAs are below longer SMAs; all the SMAs are moving lower and prices are below all the SMAs. It does not get more bearish than this.
The real estate ETF broke a 5 year uptrend earlier this year.
After breaking the 5-year uptrend, the ETF rallied to the previous trend line and has since traded down. Also note the index is below the 200 day SMA. Prices and the SMAs are a bit jumbled right now, indicating a lack of clear direction. Finally, this ETF may have formed a double bottom, with the first being in August and the second occurring over the last few weeks.
Lending to businesses generally was at high levels, but the reports suggested a slower rate of growth than in previous survey periods. Commercial and industrial lending activity changed little or declined in the Cleveland, Atlanta, St. Louis, Kansas City, and San Francisco Districts, although it increased noticeably in the Philadelphia District and continued to show modest growth according to Chicago. Lending standards for construction projects and commercial real estate transactions tightened further in the New York and St. Louis Districts, and they remained tight more generally and reportedly held down the volume of lending for these categories in the Boston District. The reports indicated slight increases in delinquencies on commercial and industrial loans and slightly larger increases for commercial mortgages in many areas.
The Financial sector is in a bear market. The index is below the 200 day SMA. The shorter SMAs are below the longer SMAs. All the SMAs are headed lower. While prices have rebounded recently, it's doubtful this trend will continue. The sector is continually announcing writedowns at this point.
Reports on the natural-resources sector indicated further growth from very high levels of activity. High oil prices have stimulated expanded drilling in the Atlanta and Dallas Districts; Minneapolis reported increased activity in the energy and mining sectors since the last report; and Kansas City reported that "energy activity remained robust." However, Cleveland reported a slight decline in production of natural gas.
The basic materials ETF is still in the middle of a 5 year rally. However, it may have recently formed a double top.
On the 6-month chart, notice prices rebounded through the 200 day SMA yesterday. While the index formed a shorter duration double top in October, yesterday's rally may have helped to kick this sector back into bullish territory.
The energy sector is still in a bull market.
On 6 month chart, we have prices pulling back from a mid-October high. However, the pullback is very orderly; the chart doesn't have a lot of wild price swings. While the shorter SMAs are headed lower, the shorter SMAs in general are bunched in a tight range. Also note that prices have formed a trading range for about the last week while the market has been a but more haywire. Finally, prices are still above the 200 day SMA, indicating we're in a bull market. Until we see more volatile action or serious price drops, this chart looks to be in the middle of a standard bull market sell-off.
