Amazing how the government can continue to put out numbers that are subsequently revised, and almost always worse than expected. The latest was the second reading of Q2 GDP, where the first reading was 2.4 and the revised number 1.6. It might not seem like that big of a deal, but when you do the math, the number was revised by 33% - down.

It's not like the market doesn't have a way to figure out when the number might be different than expected, but it gives the appearance that the government is purposely over/understating results, and in the case of the GDP trying to show a better picture than what really existed. And, while the Fed might want to keep everyone's spirit buoyed by inflating the numbers, it's not the way it should be done.

Perhaps if there were more accountability for such big misses they might get better at reporting the true picture. I mean, have you ever heard of anyone in the government being disciplined or called on the carpet for reporting a number that is subsequently revised by 33%? I'm not even sure how they go about calculating the numbers, but in most private or publicly run companies, if you miss an estimate by 33% you're probably not going to be given too many additional chances.

Many times, if an initial economic number is revised substantially, the market reacts, whether it is up or down, yet no one ever discusses why. How about holding the government accountable for its flawed reports instead of trying to figure out how the market might deal with the consequences?  

This is our latest Chatter, which was referenced in this week's marketREWIND. If you're interested in learning more about our PREMIER service, just contact me!

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Dear Members,

TECHNICAL ANALYSIS:

PRICE/VOLUME COMBINATION:

The weakness over the last few weeks has carried us down near critical intermediate-term price support levels. Across our major indices, these intermediate-term levels are represented by the late June/early July lows. To the upside, we have price resistance at the levels that we recently broke below, namely 10097 on the Dow Jones, 1064 on the S&P 500, 2159 on the NASDAQ, and 606 on the Russell 2000.

So our trading range is fairly narrow as traders judge Fed Chairman Ben Bernanke's speech from Jackson Hole, WY that began at 10am EST. It should generate a lot of interest among traders as they look for ANYTHING new from the Fed. Expect volatility.

MACD DIVERGENCES:

Like price/volume, MACD divergences are weak. 60 minute divergences have shown signs of strengthening, but we'll need to see a significant reversal with lower prices in place to potentially benefit from a positive divergence on these charts.

MOMENTUM OSCILLATORS:

Stochastics saw a little reprieve from yesterday's early strength, but the late day sellers again pushed stochastics down. RSI is in the 30s, indicative of selling pressure, but not yet confirming oversold stochastics.

SENTIMENT:

The VIX finished just beneath the 27.50 level we've been watching at Thursday's close. A definitive break above this level would be bearish for equities, so keep a close eye here.

HISTORY:

The Bowley Trend turns BULLISH from NEUTRAL at the close today on the Russell 2000. At Monday's close, both the S&P 500 and NASDAQ turn from NEUTRAL to BULLISH. This upcoming Bowley Trend period, however, is the shortest (only 4 days) of all the Bowley Trend periods, and probably should be viewed as less reliable because of that fact.

The S&P 500 has risen on 65% of the days that fall during this bullish period since 1950, while the NASDAQ has risen 68% of the time since 1971, and the Russell 2000 has risen nearly 70% of the days since 1988. Clearly, there's been a tendency for bullishness over many years, although we should mention that last year the market performed horribly in early September.

We tend to use the Bowley Trend as a corroborating signal to other technical signs we see. For example, if our technical indicators are lining up bullishly, and the Bowley Trend indicates that historical tendencies are to the upside as well, it increases our confidence in the short-term market direction. When there's a disparity between our technical indicators and historical tendencies, we'd simply suggest a bit more caution in applying the Bowley Trend as we view historical trends SECONDARY to current technical indications and patterns.

Technically, we're bearish right now. The Bowley Trend is about to turn bullish. Bottom line? We've got a mixed bag. What else is new, right?

SECTORS:

All sectors seem to be searching for direction, or a reason to move higher. Thus far, they're not finding it.

We're keeping a close eye on a few indices. First and foremost, watch the Dow Jones US Financial Index ($DJUSFN on StockCharts.com). Loss of 240 price support would be VERY bearish technically. The market does not need further deterioration technically from financials right now. A second index to watch, which we believe tells us a lot about the state of the consumer, is the Dow Jones US Apparel Retailers Index ($DJUSRA). Major support resides there at 335 and we're on the verge of losing that key support. Despite incredibly oversold conditions, the yield on the 10 year treasury can't seem to budge to the upside. The 2.45% area is critical in terms of support under the equity market. Finally, the XLP:XLY ratio that we follow closely, has resistance at .89. A break in this ratio above .89 also would portend of lower equity prices ahead.

Pay attention to the signals.

ECONOMIC REPORTS:

The second estimate of 2nd quarter GDP was released this morning and it showed our GDP has been lowered to 1.6%, slightly better than the 1.4% analysts were expecting. The reality, however, is that the government is once again revising key economic reports lower, and we expect we'll see another downward revision in a month.

Fed Chairman Bernanke has begun talking in Wyoming and now the market will hold its collective breath, awaiting something - ANYTHING - that suggests brighter economic days are ahead. Trying to forecast not only what he'll say, but also the market's reaction to what he says, is next to impossible, so remain on your toes if you decide to trade. Keep things very light.

INDIVIDUAL STOCK TRADES:

We're going to pass on individual stock trades. If you must trade, consider an ETF to avoid too much individual equity exposure.

SUMMARY:

Our technical indicators are suggesting that we be VERY cautious with many key support levels on the verge of being lost. An argument could be made for going long juiced ETFs today in groups like financials (UYG is the Ultra ETF on the long side). Why? Because we are at a MAJOR support level. The problem we have with being too aggressive is that we are in a current intermediate-term downtrend. Downtrending markets mean that resistance usually holds, but support doesn't. Therefore, a shorting posture during periods of strength makes the most sense until the market proves to us otherwise.

Technically, if we see significant intraday breakdowns among sectors like financials, and an afternoon recovery, that would be the most bullish short-term sign we could see right now. As a result, we'd be tempted to wait until later this afternoon before putting on any long positions (or shorts, for that matter). If you decide to trade now, looking for a certain type of finish today, that's an individual decision. Just make sure you get the confirmation you're looking for at such a critical technical juncture.

Have a great weekend and Happy Trading!

Sincerely,

Your Invested Central Team

The most recent housing statistics show that 1 in 10 homeowners in the US have missed mortgage payments and run the risk of going into foreclosure. To get some perspective on this staggering number, imagine being at a football stadium that holds 50,000 people, knowing that 5,000 people there are in danger of losing their home to foreclosure.

That type of visual should be enough to convince just about everyone that we've got an epidemic, one that has crippled our economy. Yet the efforts to resolve have really been weak, not the type of all out effort that was taken to make sure the banks didn't go under a few years back.

Why is it that there is so much time, attention and resources devoted to the same financial institutions that helped to get us into the current mess in the first place and so little to the average person on the street?  Certainly, the big banks have the financial resources (the ones backed by taxpayers) to hire top lobbyists and it's well known that there's a true brotherhood between Wall Street, bankers and the legislators who see to it that the banks get special treatment.

That means that the rest of us have to rely on those same legislators that we voted in to represent us, and right now, they aren't doing a very good job. Doesn't matter if they are Democrat, Republican, Independent, Tea Party, we're not getting the same treatment as the banks. And, it's a joke to think that a shift in the number of House or Senate seats is going to do anything at all to shift the emphasis on you and me; it's all a mirage.

Maybe it's going to take 1 in 2 people ready to go under before we see something meaningful happen. That might do it, because at that point, it would probably include plenty of our representatives as well.