The Financials Pit Review: By PitGuru Kalvin O’Brian

U.S. Economy

Starting another trading week, I believe that one thing is becoming amazingly clear, things are worse than expected.  I still have a hard time understanding things like how Citigroup losing $2.5 billion in the second quarter and investors were relieved because it was not as bad as estimated.  I also read horrible things like how US business just saw its steepest quarterly rise in corporate bankruptcies in 2 years spiking to 17% in the second quarter this year and still last week the S&P 500 Banks Index surged 16% the biggest increase since March 2000?   Now let’s add to that Freddie Mac, the second-largest U.S. mortgage-finance company, might halt purchases of home loans from banks and bonds backed by housing debt to shore up its capital amid record delinquencies.  I have to honestly say that there is really no reason that this market should test the 1300 mark.  The bottom line is as long as analysts continue to lower the bar the numbers will never appear to be as bad as expected.  This does not mean that things are getting better.  I am looking at these false rallies to go short. 

Currencies

The ECB President announced he does not expect strong growth in the second and third quarters of 2008.  The expectation for 2009 however is moderate growth.  With the problems facing the US and the dollar I would look for the Euro to continue to climb and test 160 again.

Statistics Canada announced wholesale sales were not only up 1.6% from the previous month and up 2.9% from a year ago but were also stronger than expected.  It still looks like there will have to be some serious help in the form of a crude and gold rally to get this currency above the 1.00 mark. Concerns over the largest export market – the US – slowing down and dragging Canada’s economic growth down too will keep some heavy pressure on the dollar.

Across the pond, the U.K's Office for National Statistics announced a budged deficit of 24.4 billion pounds in the April to June quarter.  This was somewhat historic given that it was not only more than expected but it was the largest quarterly deficit since records began in 1946.  The housing problems remain a key factor and concern in the United Kingdom and will keep the British Pound from rebounding quickly.

 

*Chart Courtesy of Gecko Software’s Track n’ Trade Pro

The Energies Pit Review: By PitGuru Joe Marshall

The trend for September Crude oil is down, with recent action looking weak. This market lost a whopping sixteen dollars last week, so we are approaching an oversold condition. These numbers project a test of at least 125. Rallies capped by 137.50 should turn back down. One or two days of sideways trade between 129 and 133 should trigger another sell off to test 125. So what changed last week? Well, Wednesday’s inventory numbers were a bit of a surprise, looking for a draw and getting a 3 million barrel build. The main culprit was profit taking and it’s not over.

The trend for September natural gas is down, with recent action looking weak. This market is in an oversold condition. Last Thursday’s 1050 low could stand up for a while. The inability to post a close below that number will trigger short covering and could get back everything that was lost during last Thursday’s reversal. In the short term, rallies capped by 1085 should turn back down.  

The Softs Pit Review: By PitGuru Jamie Fink

Cocoa deliveries in Ghana's mid-crop might be off to a slow start, but the estimated 50,000 tons they may see this harvest season is enough to take cocoa lower when paired with a stronger US dollar. To keep this movement to the downside, news out of London points to lower grindings in Europe.