The Daily Trading Report

Over the course of the last few weeks we have been absolutely bombarded by commentary by the press of popular opinion that the US economy is headed for a double dip. The big talking points have been (and continue to be) the turn down in the ISM Manufacturing indices and the lack of improvement on the jobs front. I am not going to get caught up in a detailed analysis/debate/argument, what I do want to do is to put into context the recent down-turn in the ISM Manufacturing Survey and the increase in continuing claims.

Below are the long term charts of both indices. I will go out on a limb (yet again) and say that the data releases over the last few days/weeks are nothing out of the ordinary. If think people were expecting the ISM manufacturing index to keep moving above the 60 level when a reading above 60 hasn’t been achieved in a very long time. Actually a very reasonable reading is 55 (above 50 signals expansion). So why has everyone suddenly jumped on the “double-dip” bandwagon. Is it because the S&P 500 has fallen below “support” at 1040 to form a “head and shoulders” pattern and now we need to justify that action?

Now it seems that the media is getting sick of the Euro debt crisis thing and is now discovered something new that they can dramatize in the lack of improvement on the US jobs front. Surely the economy must be “stalling” if there is not a continuous reduction in continuing and initial claims each week? Well there is the chart in the overall scheme of things everything looks OK to me!

From a slightly different angle here is the JP Morgan Global PMI. The weakness that the crowd is currently possessed with is nothing more than random noise!

Now if the US economy was genuinely in trouble wouldn’t you logically expect to see commodity prices on their knees already? Once again it seems that the press of popular opinion suddenly has a unique insight as to what is going to happen. Yes commodity prices have gone sideways for some 8 months (a miracle in itself considering how strong the USD has been) but that doesn’t necessarily mean that the next big move is down. Remember, when everyone thinks a like the opposite is most likely to happen.

Seeing is believing and I certainly do not see any credible evidence that the US economy is slowing down in a material sense, certainly nothing suggests that we are heading back into a recession! Incidentally have you taken time out to check out what is happening down at your local container terminal/port……….or are you just relying on the Baltic Dry Index?

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