All things considered the market should be down much more, but that's not to say this isn't unnerving. The underlying tone of worry as expressed in yesterday's consumer confidence numbers has played out today in mortgage applications. Sure, it stands to reason that mortgage applications would come down ahead of the completion of the homebuyer's tax credit. However, the degree of the fall suggests something more than people just missing the boat. In fact, I think that there should have been a last minute rush to take advantage of the program. In addition, September durable goods climbed slower than expected, and the build in gasoline is consistent with an economy in reverse not drive.
I think that everyone should be long the QID, a play on the NASDAQ composite going lower. While there could be a relief move on stronger than expected GDP data tomorrow, it's time to have more cash and some insurance in place. The reaction to earnings the last three days has been a serious problem. I'm watching stocks taken to the woodshed on the scent of the slightest slowdown or hiccup.
The NASDAQ composite is on the cusp of falling through its 50-day moving average, and that's a huge red flag. Below there, the 200-day moving average is all the way down to 1,900.0.
Afternoon Notes from WSS Research Desk
- Yesterday, I penned a note for our website www.wstreet.com titled "A Holiday Gift from yours Truly", detailing the virtues of owning shares of American Eagle Outfitters (NYSE:AEO) going into 2010 (yes, I am looking beyond the holidays, as are most analysts). Today, please revisit the website to obtain my second holiday gift to you, another investment from the specialty retail sector.
- Tomorrow morning I will be diving deep into the 2Q numbers from Timberland (NYSE:TBL), a company that surprisingly voiced improving business trends ahead of most competitors earlier in the year. The products, based on my checks, appear innovative and in line with the fall season apparel trend. I wouldn't be surprised if the company beats on EPS modestly, and suggests the future may not be as bad as some expect.