The S&P 500 increased in three sessions and finished the week with a gain of 1.22% and appears to be rebounding from the earlier significant pullback.
The S&P 500 began Friday very bullishly but slipped deeply on news of a confrontation between Russian and Ukraine troops. Cooler heads prevailed as the index rebounded from the selloff to finish the session only $0.12 lower.
See related story here.
The S&P 500 found support near previous resistance boundaries and then pushed higher in the two pullbacks seen during the past week. It also pushed back above the 13 EMA and 50 EMA during the week and finished Friday slightly above the upper resistance of the 1940 to 1955 MRL. The S&P 500 is nearing a bullish cross of the 13 EMA above the 50 EMA.
Average daily volume levels fell 15.18% compared to the average daily volumes of the previous week. The week’s highest volume was seen during Friday’s selloff and rebound, and the lowest in Thursday’s push higher. The difference between five day volume variances dropped 6.08% below the previous week to 15.86%.
Major Stock Market Indexes
The NASDAQ popped above the 13 EMA on Monday, but slipped below it in Tuesday’s retreat before rebounding to finish resting on it. Wednesday opened higher and continued higher finishing near the session high. Thursday also opened higher and continued higher finishing the session at the day’s high. Friday opened higher but fell from those highs over concerns of the outbreak of violence in the Ukraine, before rebounding to finish lower than it opened, but with its fifth gain in the past six sessions. The NASDAQ established a gap above the 13 EMA with its move higher during the week and is in a bullish posture.
The S&P 500 broke back above both the 13 EMA and 50 EMA on Monday, but slipped to finish the session below both. Tuesday opened slightly lower and finished a little lower than it opened. Wednesday opened at the low and finished near the high, in the process breaking and finishing above both the 13 EMA and 50 EMA. Thursday again opened at session lows and finished higher with the close very near the session high. The S&P 500 opened higher on Friday and continued higher before slipping with the rest of the market. It fell briefly below both the 13 EMA and 50 EMA before rebounding strongly back above them to finish with just a $0.12 loss. The S&P is nearing a bullish cross of the 13 EMA back above the 50 EMA.
The Russell 2000 pushed above the 13 EMA on Monday, continuing to the 50 EMA before slipping to close at a gain about half way between the two. It pulled back on Tuesday, falling below the 13 EMA and finishing slightly below it. Wednesday opened at the 13 EMA and continued higher to finish above it. Thursday traded within a narrow price range, but finished the session with a gain. The Russell pushed bullishly above the 50 EMA in early trading Friday, before turning steeply lower into the overall market retrace that erased the early gains and continued to fall below the 13 EMA, but it rebounded strongly off the lows to finish back above the 13 EMA and with only a small loss for the session.
The NYSE rebounded to the 13 EMA Monday before falling back to finish below it but with a gain. Tuesday opened a little lower and finished slightly lower than it began. Wednesday opened higher and broke back above the 13 EMA before slipping to finish the session with a gain just below the 13 EMA. Thursday opened at the day’s low and broke back above the 13 EMA then continued higher to finish very near the day’s high. Friday saw a higher open above the 50 EMA, but it fell steeply with the overall market selloff breaking back below the 50 and 13 EMA in that drop. It rebounded later in the session to regain most of the session losses and finish back above the 13 EMA.
Monday’s push higher on the Dow fell just short of the 13 EMA, but it retreated to finish the session with a small gain. Tuesday retreated and finished lower, but little changed and well above the session lows. Wednesday opened at the day’s low and continued higher breaking above the 13 EMA to finish above it. The Dow continued to push higher on Thursday, finishing the session near the day’s high. Friday began higher and continued higher to break above the 50 EMA, before it slipped steeply into market selloff, falling back below the 13 EMA. It rebounded off lows to push back above the 13 EMA and finish with a relatively small loss for the session.
All of the indexes pushed out of fully oversold conditions, but most are still far from overbought. The indexes are showing some bullish signs in this rebound. The rebound from the news induced lows Friday is encouraging for a continued move higher. It seems possible the indexes could continue higher in the week ahead.
US Treasury Charts
The 20 year US Treasury Bond opened higher on Monday, but finished the session lower. Tuesday opened lower near session highs and continued lower to close near session lows, falling through the 13 EMA to finish below it. Wednesday opened slightly higher and continued higher to finish near the session high and back above the 13 EMA. Thursday opened much higher, but retreated to cover the gap before rebounding to finish with a gain near session highs. Friday gapped higher alongside a bullish open in stocks, and continued higher into the early stock rally and later selloff, slipping only slightly into the rebound in stock prices to close mush higher. The 20 year pushed to a yet another higher high, but could be nearing resistance that could set it back. It is also fully overbought.
The long term Treasury charts appeared to continue to show uptrends and to appear somewhat bearish for stocks.
The interest rate on the 10 year US Treasury Note opened higher and at the session high on Monday, and although it finished the session higher, it was lower than the open. Tuesday again opened higher and after falling to cover the gap, finished higher than it opened. Wednesday gapped higher at the open, starting the session at the 13 EMA and session highs, but could not hold these gains and slid off the highs to finish the session with a loss. Thursday again opened higher, but again slipped to finish slightly lower for the day. Friday opened lower and fell steeply before rebounding to regain about half of the days loses. The rebound of Friday’s low began higher than the previous low. The ten year rate has finished higher only eight times in the past 30 sessions. Although this chart continues to look very bearish, it is near support that could send it at least temporarily higher and is deeply oversold.
Gold rebounded slightly at the Sydney open before trending lower Sunday night, to finish the night just above 1306.
Monday gold trended slowly higher to reach about 1311 just after the New York open. It slowly retreated to about 1306 and then rebounded to about 1309 just before the New York close. Gold trended slowly lower from there to finish the day a little below 1306.
Tuesday gold trended higher in a bouncing pattern to reach a high of 1317 early in New York but trended lower off that high before careening back to about 1308 by the NYMEX close. Gold traded flatly between 1307 and 1310 from there and finished just below 1309.
Wednesday gold bounced to about 1311 in Hong Kong before slipping to 1306 shortly after the London open. It rebounded to about 1309 in London before slipping back to almost 1305 at the New York open. It rebounded strongly after the NY open to about 1313, and then bounced a few times before pushing to 1314 and slipping back to about 1309. It bounced between 1311 and about 1313 for the remainder of the day finishing a touch above 1313.
Thursday gold slipped to about 1311 in Hong Kong before beginning a bouncy rebound before the London open that pushed more strongly higher after the open above 1316. It slipped off that high to about 1309 into the New York open, before spiking to about 1317 shortly after the NY open. It fell nearly as sharply to 1312 then bounced between 1311 and 1314 for the rest of the day to finish a little above 1311.
Friday gold traded tightly between 1311 and 1312 in Hong Kong until pushing to 1314 just before the close then began to trend lower. The break lower steepened sharply before the New York open and continued to fall into early morning NY trading. It fell to 1294 before bouncing to 1296 and retesting the previous floor with that retest rebounding from a slightly higher low and moving steeply higher to about 1306. Gold leveled out near 1306 before continuing higher to 1309 and then falling slowly back to about 1304 before trading flatly between about 1303 and 1306 into the New York Spot close of 1304.50 that was lower than the previous spot close of 1309.10.
Gold rebounded into the news out of the Ukraine on Friday, but failed to regain earlier losses. Gold slipped for the fourth time in five weeks.
S&P 500 Constituent Charts
The majority of the constituent charts make it seem fairly likely the index could continue to rebound from the recent significant drop.
Most appear to have begun to rebound from recent lows. Some have broken to new 52 week highs during the week. Rebounds from significant drops often give those pushing to new high a temporary added boost in these runs. Many of these stocks are still short of long term highs or resistance levels they could stall at or drop from, so it does not seem unlikely these stocks could push higher.
Many that started higher in strong V rebounds have continued higher, although the pace has slowed in many of these rebounds. This slowdown is not uncommon after strong initial breaks higher and these constituents still appear to be in bullish moves higher.
Many constituents appear to be moving back above the 13 EMA, and it appears they could start to run higher above the 13 EMA.
It appears the significant drop could have provided a brief regeneration of exhausted tensions in many constituent stocks. It seems possible this regeneration could provide enough fuel to push the index above the 100 L.
Not all the constituents are showing bullishness in their charts, some have continued to fall in recent support breaks. The numbers in these drops do not currently appear large enough to stop an index rebound.
Others have trended more or less flatly near recent lows and appear to be riding on the cusp. They are not showing a clear direction at this point. If most of these stocks were to turn lower it could bring the numbers in drops high enough to begin to undermine the overall rebound. Overall the market is starting to show bullishness again so it seems likely more would move higher than lower. At the same time the delay in rebounding makes it likely many of these stocks could fall short of previous highs in this rebound, thereby continuing in a rounding top and increasing the potential of their slipping deeper in a future retreat.
Chart formations appear to suggest there is reason to remain cautious, but they also seem to show the index could continue higher for the time being.
Although the indicators featured in these articles are not always correct, they have been many times and being so they are worth reading about and taking note of.
The +2% L, -2% L, 100 L and 10 E indicators are currently active. The +10 day indicator expired with Friday’s close. See a more detailed description of most of the indicators developed through research and featured in these articles here.
The +2% L did not provide a correct indication in the past week.
The –2% L did not provide a correct indication in the past week.
A significant pullback was seen within the 100 L. The retreat began from a July 24 intraday high of 1991.39 and within likely resistance between 1980 and 1995 in the lower half of the 100 L resistance. If the index continues to rebound to recover from the significant drop, it seems likely the resistance in the upper half of the 100 L was softened considerably by this drop. Although the index could slow as it reaches this resistance, it seems possible it could move past it without further incidence.
If this rebound occurs and the S&P 500 moves past the 100 L resistance as it seems fairly likely it could, the potential for a larger drop still looms due to an increase in possible topping pattern failures of the constituent charts. The current topping pattern failures could soften support in future retests of these support levels. This continues to make the resistance at the 2035 to 2055 MRL appear potentially formidable.
The S&P 500 began Monday at the session low of 1933.43 and after pushing to a high of 1944.90, slipped to finish with a gain at 1936.92. Tuesday opened a little lower but rebounded to spend part of the day with a gain when it reached a high of 1939.65, but slipped to a low of 1928.29 before rebounding to close with a small loss at 1933.43. Wednesday opened at the session low of 1935.60, pushing to a high of 1948.41 before settling slightly lower at the close of 1946.72. Thursday also opened at the session low of 1947.41, pushing to 1955.23 and finishing just off that high at 1955.18. Friday began higher at 1958.87 and moved higher to 1964.04 before slipping steeply back to 1941.50, it rebounded strongly off these lows to close with just a $0.12 loss at 1955.06.
In Tuesday’s retreat the S&P 500 found support above but near the 1925 upper resistance of the 100 L at 1900 with a rebound at about 1928. Thursday finished slightly above the upper resistance of the 1940 to 1955 MRL and Friday rebounded from the news related retreat near the lower resistance of that MRL at about 1941 before again pushing higher to finish slightly above the upper resistance. The rebound points in the two sessions with losses appeared bullish as did Thursday and Friday’s finishes above previous resistance, this makes a continued move higher seem likely.
The +10 day indicator expired after Friday’s close. Although it finished higher, the +10 day indicator did not provide a correct indication in this instance and also finished below the 2% gain threshold it normally achieves in most failures to reach the 3% to 5% gains expected. It was noted at the time this indicator toggled high that the high state seemed somewhat out of step with the market and that it seemed possible it might not perform as expected in this instance. The following week it was noted the indicator saw a double toggle, making it seem possible it triggered falsely in the initial high. The +10 day finished its active period in the format: highest close / lowest close / last close.
+1.56% / -0.81% / 1.55%
The expiration of the +10 day indicator set a 10 E indicator into a high state. The 10 E indicates there is a high likelihood that the S&P 500 could continue the move higher that was seen during the +10 day indicator’s presence.
The index rebounded back above the upper trend line during the week. It seems fairly likely this rebound could continue to recapture previous highs and probably continue at least somewhat above these highs. The index has been running above the upper trend line off crash lows for a duration that makes a drop to at least the lower trend line seem somewhat likely. If this rebound occurs, it could put the index in a position that is more likely to see this type of drop.
The index saw a significant drop that began from an intraday high of 1991.39 and within likely resistance between 1980 and 1995 found within the lower half of the 100 L at 2000. The drop measured 3.94% from the July 24 highest close to the Aug 7 lowest close. The index also saw a bearish 2% drop during this retreat.
Index and constituent chart formations appear to be giving reason for added cautions.
The index has again broken above the upper trend line. Breaks above the upper trend line often produce larger retreats on the index at some point, although it is not uncommon for the index to see one or more significant drops before seeing this larger retreat. The index is in its second significant retreat since initially breaking above the upper trend line.
Many of the constituent’s charts are in topping patterns and the recent retreat saw an increase in failures in these patterns. Some of those stocks that held support in these falls saw brief failures of these supports that could weaken them in a future retest. Several constituents failed to rebound from retreats with the overall market. Some have continued to fall, while others have flattened near support.
As the index works its way into the 100 L at 2000 (from 1975 to 2025) it will begin to enter the level identified as a potential topping area during data evaluation beginning in 2008. These data evaluations make it appear resistances met between 2000 and about 2140 could have the potential to cause a large drop, possibly reaching crash proportions.
Although the 100 L at 2000 does not appear to hold crash potential, it has provided a significant drop. It seemed possible this pullback could reach near 5% and probably remain within or near the 3% to 5% range. It also seems likely the significant pullback within the lower half of the 100 L could considerably soften resistance in the upper half of the 100 L likely to be seen from 2010 to 2020. It therefore seems possible the index could move past the upper half of this resistance level without further incidence.
The next higher resistance once the index moves past the 100 L is likely to be seen in the midrange resistance (MRL) from 2035 to 2055. This level appears to have the potential to cause a very large drop possibly reaching crash potential. The 2035 to 2055 MRL also holds the level of concern at 2040. Data evaluation pointed to resistance at 2040 as the most likely area that a crash would be seen between 2000 and 2140. The research also suggested if this crash were to occur, it probably finds bullish support somewhere near the two previous tops in 2000 and 2007. Although the crash potential is within the 25 to 35% range, this evaluation makes a fall from near 2040 seem more likely to produce a drop of less than 30%.
Current chart formations tend to make a fall in excess of 10% seem possible within the 2035 to 2055 MRL, depending partly on the outcome within the 100 L resistance level. If the significant drop within the 100 L stays within projected levels, it seems possible the MRL could produce a drop that reaches the lower trend line or lower support line and probably stays within the 10% to 18% range, but could possibly fall to crash potentials if the drop is steep or falls to a rebound point near the tops seen in 2000 and 2007. If a drop to crash potentials is seen, it does not seem likely it would exceed 22% by much. Although chart formations are making it seem somewhat more possible a drop that reaches crash proportions could be seen, it still seems somewhat remote at this time.
A possible signal that an area of resistance could hold potentially larger drop potentials would be the presence of several volatile daily moves (those of 2% or greater) within a relatively short time period, for instance three or four within a few weeks more or less. The larger the number of volatile moves, the more potentially dangerous a resistance becomes. These volatile moves won’t necessarily all be seen within the resistance level, but they could be.
Some concerns as the index moves above the 2000 level include:
The aftermath of the recent pullback shows that there are a fairly large number of constituent stocks showing possible failures in topping patterns in their short and or long term charts. Although it seems likely many of these stocks are ready to rebound, these failures are reason for concern and could lead to a larger drop later. Some of the constituents failed to rebound with the overall market and several continued lower, while others have flattened near support.
Retests of many of the support levels that held in this drop look prone to further failures in a future retreat as it appears many of these support levels have been softened and could break in this retest. Several fractured the support that held before rebounding. Some have already turned lower and broken lower below this support. Others have rebounded back above support, but breaks below a support level tend to weaken it, making in more likely to fail in a future retest.
Several constituents fell through several potential support levels before appearing to find a support level that held in this retreat. If these stocks fail to make new highs in the following rebound, the numbers of potential supports they have already surpassed makes it appear likely they could fall deeper in a future retreat. Some of these stocks trended more or less sideways along these support lines in the early rebound, this makes it seem more likely they could fall short of highs if they do rebound.
The index rebounded back above the upper trend line in the trend off crash lows. Runs above the upper trend line have extended for several months in the past and often contained one or more significant pullbacks before finally breaking lower. Runs above the upper trend line eventually break more deeply lower, often finding support at or near the lower trend or lower support line established in the crash rebound. Constituent chart formations make it seem possible the index is nearing an area that this larger drop could occur at.
The numbers of the constituents showing possible long term topping patterns continues to grow. The numbers in downtrends off these tops is also growing, as are the numbers that have failed support in these patterns and broken lower. Although breaks from highs are often very steep, tops very seldom happen with all stocks failing at once, the numbers tend to grow until the weight of those that failed overwhelms those in bullish runs, dragging all lower in the larger retreat.
Few have broken higher and maintained these trends afterwards. Most that have broken higher in these patterns recently only went a short distance higher, then flattened again or fell off these highs. Although a rebound from a significant drop could make it appear some stocks are again moving higher above these resistances, it is not unlikely these runs could fizzle shortly after the index returns to new highs. Some of those that are currently in these runs are heading towards resistances that have proven to be staunch in the past.
Recent increases in these failures are reason for concern, but are probably not yet at levels that would cause a large drop. Current chart formations make additional failures in these patterns seem somewhat more likely. It seems possible deeper falls could be seen on many of the constituents in retests of support levels in a subsequent drop.
Although the numbers of constituents in this category is not large, chances seem remote that some of the constituents that have continued in runs or held high prices could produce earnings to justify their current stock prices in timeframes investors are normally willing to wait. These runs higher could continue, but any sign that longer term earnings projections are too high, failures or continued failures to meet expectations, or an overall change in market direction could cause stocks trading well forward of current earnings to see large fold backs. Some of these stocks have broken considerably lower after recent earnings reports and further into the overall market downturn. They could rebound with the overall market from this significant drop, but remain at risk for larger losses if a larger drop on the index is seen later.
Some constituents appeared to over extend moves higher caused by earlier upward tensions. This could increase downward pressure on these stocks when they finally turn lower. These numbers are also small at this time.
It also appears upward tensions in the constituents are beginning to wane, although most have seen pullbacks, some of these upward tensions appear to have remained intact into the significant pullback. Some of these tensions appear to have recharged and could help to push the index higher, but it does not seem likely this recharge could remain intact as long as earlier tensions developed at the 1883 resistance.
At the current time there does not appear to be an outside catalyst for a crash. Many crashes occur due to stocks becoming overpriced to earnings. Without a substantial reduction in earnings, it would be difficult to consider stocks overpriced based on the actual unadjusted average P/E’s during the time the S&P 500 was an index. Although some are overpriced, most are not and the average P/E is still fairly historically low.
Chart analysis makes it seem possible this catalyst might not be from an outside influence as earlier thought, but instead from a pullback caused by a large number of failures in current topping patterns. Chances still seem somewhat remote that a fall would reach crash proportions in this drawback, although several have dropped in excess of 20% in earlier pullbacks from highs.
Earnings reports for the second quarter have been mostly better than expected; although not all beating projections are seeing their stock prices increase. It seems possible that overall earnings could come in 2% to 4% above the early projections.
The absence of an apparent outside catalyst for this crash does not mean one would not materialize as the index reaches this level. There is also the possibility investors could overreact to news events that probably should not take the market to these depths. Pullbacks seen during the summer of 2010 and 2011 were much deeper than rational evaluation of the data indicated they probably should have been. These falls also came during a time when huge increases in earnings were being seen, with near or over 70% of the constituents beating their earnings projections. This makes it seem somewhat possible this fall could come even if earnings are reported higher than expected.
Ultimately the direction that the stock market takes from here could be influenced by news events.
Average daily volume levels decreased 15.18% week over week and the difference in the five day volume variance decreased 6.08% to 15.86%. Volume levels fell to levels consistent with bullish moves in the past week and the low variance levels remained consistent with the absence of volatile conditions.
There continues to be many reasons to be bullish at the current time; however the index is nearing an area of potential concern and some caution should be exercised. Any pullbacks in stock prices seen along the way are probably a good opportunity to add although some flexibility in these investments could become necessary later. If a large pullback is seen on the index, it could be prudent to increase equities holdings into this drop. It could also provide the best remaining opportunity to take profits in gold holdings.
If the index continues within the trend established off the crash lows, it seems possible it could reach the 2000 to 2100 level in five to 14 months if it reaches this level near the upper trend line and within 32 to 38 months if it reaches this level near the lower trend line. The data suggests the Midrange Resistance Level (MRL) at 2035 to 2055 could hold the resistance level of concern within this range at 2040. More details of this potential resistance can be seen in past articles.
It appears the index was running somewhat ahead of the projection to reach 2000, indicating it was running above the upper trend line. The recent significant drop pushed the index slightly below this trend line, although it is currently running at about this trend, it seems fairly likely it could again rebound above this trend line.
These data evaluations do not mean a crash is certain within the 2000 to 2140 range. The data evaluations only identified this level as one with a high potential to cause a large drop, possible reaching the 25% to 35% range; although a fall seen low in this range might not reach these levels. This range also holds most of the specifications identified in the first crashes of a market entering into a secular bull.
Please note there is no established resistance in the MRL levels before the index has reached these levels. Several instances have proven to hold resistance once reached; however MRL levels that the index has not yet reached are only the most likely levels that resistance will be seen based on research. Back tests of the data used to project these resistance levels work well, but they are not always exact, and these resistances could react sooner or later than expected, it is also possible the resistance will not be seen at all.
If the market should fall to crash levels, the blue chips, stocks with very low or no debt, and stocks with histories of stable dividends tend to fair best in pullbacks on a percentage basis. Caution should be used in stocks that have seen dividend increases well beyond those normal seen. Moderately priced stocks tend to lose less on a dollar per share basis. From a psychological standpoint this could be an important consideration, it is easier for an investor to hold a stock that falls from $50 to $25 without selling than it is to hold a stock that falls from $100 to $50. Even though the percentage lost was the same, the larger dollar value erosion of share price gives many the perception of a greater loss and a much larger distance for the stock to rebound to regain these losses, and this perception could lead to further sales of higher priced stocks in a downturn.
A crash in stock prices could be the last hurray for gold investors for many years to come.
There has been a fairly large increase in the numbers of job postings recently. This indicates that hiring could step up in the months ahead. Even though an increase in jobs looks to be forthcoming, wages have remained stagnant, which is troublesome considering the CPI has not been reflecting real inflation levels for quite some time, quite possibly never has.
There are many practices used by the Bureau of Labor Statistics to make the CPI appear lower than it actually is. For instance the BLS swaps items in their “baskets” to those that did not increase as much during the time period. The example given on the BLS website states that:
Within the beef steaks item category, for example, the assumption is that consumers on average would move up from flank steak to filet mignon if the price of flank steak rose by a greater amount (or fell by less) than filet mignon prices. If both types of beef steak rose in price by the same amount, the geometric mean would assume no substitution.
Their reasoning is that the swapped item is a “better value” due to this smaller rate of inflation increase. Does the BLS really think value shoppers would buy filet mignon at $17.99 a pound over flank steak at $5.99 a pound because the fillet mignon had a smaller increase? Despite the obvious conclusion many would draw from this statement they are not idiots, only shysters.
The real reason for this swap is it serves to keep inflation rates lower than they actually are. The following adjustment period is likely to see last period’s “better value” item increase at a higher rate, sending them back to the original item that did not increase, or had a smaller increase. With this method they can vastly decrease or completely miss many of the actual price increases, thereby greatly reducing the CPI. This is just one of the methods used to skew the calculation of the CPI lower. The CPI is not indicative of actual inflation rates, which are much higher than those reported by the BLS because of this and other practices used to calculate the CPI.
All of the Bureau of Labor Statistics methodologies for the CPI are skewed towards keeping the CPI as low as it can possible be kept. Substitutions and value estimations are used that have similar effects on reducing the increases seen in the CPI. The BLS hails the use of these practices as being supported by economists and economic academics; unfortunately most of the economic academics taught in America’s universities are not supported by the actual economic data. The data tends to show many of these theories and assumptions taught to our economists to be completely false. Based on personal experience, unfortunately those that have been taught them hold them as truths even when data is supplied that proves these theories incorrect.
The Bureau of Labor Statistics defends the use of these practices stating that the majority of the other countries that report CPI use the same practices. Just because the BLS uses practices adopted by the majority of other nations, does not make these practices correct or even ethical. It is in the best interests of many of the governments that use these practices to keep inflation rates as low as they can possibly make them appear, even if they are way lower than they actually are.
After all increases in many of the payouts they make are determined by the rate of increase in inflation, and if they can skew these increases to appear lower, they don’t have to pay out as much. Following the lead of other nations with momentary interests in keeping these rates low, as the US itself does, does not add creditability to BLS CPI number.
The Bureau of Labor Statistics also uses its own skewed data to try to justify its practices. It would be easy to agree with the BLS if their numbers reflected the actual increases in prices seen during any specific timeframe, but the data tends to show the CPI is consistently much lower than the price increases seen.
Another problem with the CPI is that it does not weight the number towards the products that consumers are most likely to buy. Most families will buy food at least once a week, but they are not likely to buy a new car every month. The CPI weights these two items the same and in doing so shows a CPI that has a family buying all the products and services in its basket once a month. Most consumers will buy some of these items many times a month, some once a month, others only once in many years, and still others never. This allows goods and services that are rarely purchased with lower rates of inflation to dominate the CPI and in turn skew this number lower.
The steak prices above are reflective of those seen on a shopping trip made just before publication. The flank steak was the lowest priced flank in the cooler and reduced for quick sale, the filet mignon was based on a bulk package of an entire beef loin, and cheaper than the cut packages. They also reflect over a 100% increase in the regular prices seen at this store for the same products just about a year ago.
Data provided for the S&P 500 was derived from the historical daily data tables, similar data can be found at Google Finance.
Stock and Treasury charts used for analysis and commentary were provided by ScottradeELITE.
Gold charts used for analysis and commentary were provided by Kitco.
Subscribe to receive Email alerts for new articles as they are published near the top or bottom of this page.
Have a great day trading,
Disclosure: Ron is currently about 76% invested long in stocks in his trading accounts, unchanged from the past week. Ron made no investment changes during the past week and although his rounded invest level remained unchanged, it decreased somewhat due to dividend payments. Ron feels comfortable with his investment level at the current time. However he has and will continue to sell stocks that reach long or short term targets and also continue to add stocks he feels are at a great value through a variety of buy orders. Ron will receive dividend payments from five issues in the coming week and 11 in the following week. If no further investment changes are made during this timeframe, his investment level would not change due to these dividend payments.
Some of the trades made during the past week may have been due to repositioning investments as discussed in previous articles.
Disclaimer: The information provided in the Stock Market Preview is Ron’s perception of the current conditions and what he thinks is the most probable outcome based on the current conditions, the data collected and extensive research he has done into this data along with other variables. It is intended to provoke thought of the possible market direction in his readers, not foretell the future. Ron does not claim to know what the stock market will do. If the stock market performs as expected, it only means he is applying the stock market history to the current conditions correctly. His perception of the data is not always correct.
This article is intended to provoke thought about investment possibilities. Acting on the information provided is at your own risk. You are urged to do your own research, and where appropriate, seek professional investment advice before acting on any information contained in these articles.