Today, the market is looking at a multitude of data points that will be coming in throughout the day. it starts at 8:30 with the Import Price Index. At 9:55 AM, the Michigan Consumer Sentiment Index will be released that measures the attitude of consumers for the month of August. At 10:00 AM, the Commerce Department will be releasing August information on wholesale inventories, which is a strong barometer for the health of the industrial side of our economy. Finally, at 2:00 PM the Federal Budget Balance is released, which will give a reading on the budget deficit, which is expected to go down. So, there is a ton of data that is going to be coming out throughout the day that will shape the market’s direction.
As of now, the sentiment of investors appears to be neutral with the Dow up only a single point and the NASDAQ up over five points. Investors are waiting for some of this data to help give them a sense of direction. The world markets have all given some hope to investors as the European markets are all in the positive, and there were mixed results in Asia with Japan doing well while others struggled. A continually weak dollar is helping these stocks have stronger relative value.
The American market did not get a lot of other pertinent news this morning. National Semiconductor has been giving some gains to the tech world as it beat expectations this morning despite a 61% drop in profits. Additionally, Plum Creek Timber, one of my least favorite stocks moving forward, was upgraded by Credit Suisse because the stock does not warrant the type of sell off it has been receiving. Other than that, it has been a very light morning on the news front.
Oil continued above $72 per barrel in Asia on Friday, but the NYMEX has already dropped future prices below $72 per barrel. This could be due to some general lack of information that came out today, but the rise may be taking a temporary halt on Friday.
8:30 AM Update: The import price index increased more than 2% in August, which was double the 1% expected rise. The price of imports increased due to higher oil prices. Even without oil prices, the import prices still rose 0.4%. The increase is very different than the 15% drop one year ago. The news is not extremely positive for the market, but the market has not really moved in either direction still.
So, where to make some money?
Buy Pick of the Day: Direxion Daily Financial Bull and Bear ETFs (FAS and FAZ)
Its a tough call today because so many different economic points are going to be released throughout the day. My thoughts are not bullish on the market, but that Michigan Index could definitely be a positive number that could propel the markets. Its hard to say though without knowing that result because it has such a large market influence time and again. Then, at 10 AM, we get the wholesale inventories additionally.
Therefore, this is the reason for the indecision. The market does not appear to be extremely weighted on other side. Some sectors appear to open in the green while others in the red, and I think that low volume and more data on the way will make the first 25 minutes pretty flat and uninteresting.
What I want to do is buy financials in either direction on the news. We want a lot of volatility so we can be sure to make 2-3% in a very short amount of time with a quick market movement on the Michigan Index. Two of the most volatile ETFs are the Direxion Daily Financial Bull and Bear ETFs (FAS and FAZ). If the Michigan Index is strong, it will give the market a lot of momentum, especially since it was weak last month. That will propel FAS. If it is bad, FAZ will move upwards, especially because of how beaten down the inverse ETF has gotten lately as the market has rallied. Either way, it is a good situation.
I chose financials because of their tendency to be with the market, either driving it forward or lagging it terribly. Financials, overall, have become relatively overvalued and overbought, but that does not FAS has no more room to increase. FAS is more overvalued in the short term than FAZ, but I like either one. The inventories is very industry specific, and the next major report is not until four hours later…plenty of time to make 2-3%.
Set up your buy for both before 9:55 AM, so right when we hear the news you can select buy of either.
Happy Investing, and I will let you know which one I chose at 9:55.
David Ristau
