After the last week’s good “window dressing” equities performance, it is time to reconsider some facts on the Economy. Our short term targets in SPX have been reached, since bouncing off the 200 day moving average. We should start hitting some resistance levels shortly (1320). The dull summer months might even provide some kind of consolidation/trading range, where volatilities come off, and present a nice set up for the autumn collapse we think will happen. More Technical Charts Updates over the weekend.
What about that Recovery though? The Economy is still not showing overly positive tones. Many Indicators are on the contrary falling, and people feel worse off. Despite the manipulators printing SPX higher as the QE2 ends, one should recheck some indicators below. Gallup reports below;
After surging in May, Americans’ economic confidence receded in early June and remains near its 2011 low, averaging -33 in the week ending June 26. This is down seven percentage points from the week ending May 29 and down a similar amount compared with the same week a year ago.
U.S. economic confidence peaked this year at -18 in February and then generally declined, reaching -39 during week ending April 24, as gas prices surged and economic activity slowed. Confidence increased in May, averaging -26, likely in response to the news of Osama bin Laden’s death in a U.S. military raid.
Gallup’s Economic Confidence Index combines two measures: one assessing Americans’ views about whether the U.S. economy is “getting better” or “getting worse,” and the second involving Americans’ ratings of current economic conditions as “excellent,” “good,” “only fair,” or “poor.” Both ratings have deteriorated thus far in June.
Fewer Americans See Economy “Getting Better”
In the most recent week, 31% of Americans said the U.S. economy is getting better — on par with what Gallup has measured throughout June, but down from 37% weekly readings during most of May. The latest reading is also down from 36% during the same week in 2010.
More Americans Rate the Economy “Poor”
Forty-five percent of Americans rated current economic conditions “poor” in the week ending June 26 — three points worse than the 42% readings during the week ending May 29 and a year ago. June’s “poor” ratings are at or near their highest levels of 2011.
Implications
The worsening of Gallup’s economic confidence measure during June may be due in part to the dissipation of the “halo effect” surrounding the death of bin Laden. Confidence has now moved back near the April 2011 low. This suggests that the consumer benefits associated with steadily declining gas prices at the pump — down 14 cents per gallon in the past two weeks — are being offset by other factors. One such factor might just be that gas prices remain 82 cents per gallon higher than they were a year ago. Another could be the continuing dismal jobs situation.
Federal Reserve Board Chairman Ben Bernanke last week seemed to add to the growing economic pessimism, noting that the Fed has reduced its 2011 growth forecast for the U.S. economy. Wall Street continues to suffer as a result of the Fed’s apparent confirmation of the economic “soft patch” and the financial problems in Europe. The battle over raising the debt ceiling has not disrupted the money markets to this point, but certainly represents another negative for overall economic confidence.
It may be that declining gas prices will eventually lead to improved consumer confidence and increased consumer spending, which could make the current economic soft patch modest and transitory. At this point, however, Gallup’s monitoring of economic confidence does not support that idea.
And some more Important Charts below. All trends loosing steam, and are soon turning lower. That is NOT a strong recovery. Charts from Stratfor;
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