David Fry's Daily Market Outlook: Wednesday, Sept. 13, 2006

by: David Fry

The Congressional Budget Office assured us that the US budget deficit would be cut by 14%. That’s another dose of positive news for bulls.

Also, the head of the National Assn. of Homebuilders stated that future home sales will have (brace yourselves) “below trend performance,” and that the “slowing housing market will have a muted effect on the US economy.” Whew! I was getting a little worried.

The news we’re most happy about is the SEC filing by Deutsche Bank/Powershares for bull and bear ETFs based on the Dollar Index. Previously we’ve had currency ETFs from Rydex which were welcome. However the problem has been that retail investors were unable to short them readily. While Rydex offers a wide range of currency ETFs to target, if you can’t short them, their use for hedging and speculation are virtually useless. Bull and bear Dollar Index based ETFs will go a long way in helping with that situation.

Retail sales data will be released tomorrow followed by the CPI on Friday along with Industrial Production and Consumer Sentiment. Given existing bullish attitudes combined with the markets natural forward look, I expect even poor numbers to be dismissed. However, never underestimate the weirdness caused by options expiration which occurs Friday.

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