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Personal income flat, but spending jumps 1%

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This morning's economic data released by the Commerce Department showed that personal income was flat for the month of July, but spending jumped 1%, which was the biggest jump in nine months and a sign that consumers continued to spend despite telling economic pollsters that they are worried about the economy.

Personal income was inline with expectations, but the gains in spending were higher than the 0.7% forecasted by economists.

The bulk of the spending came on durable goods, which is typically a positive sign because it means Americans are shelling out for big-ticket items. With spending showing gains and income flat, consumers were purchasing items either from savings or on credit.

In June, incomes were revised slightly higher, to a 0.7% increase, while spending was left unrevised at a 0.5% gain.

Looking at a rather flat open

Stock futures improved slightly after this morning's economic data, but remain in the red. S&P futures (sp02u) currently trade down 2 points at 914, while NASDAQ futures (nd02u) are lower by 6.5 points at 951 and Dow futures are off 23 points at 8,630.

Fair value for the S&P 500 today is $0.24. That price will not change during the session. HL Camp & Company has their computers set for program buying at $1.82 and set for program selling at $-1.52. Fair value for the NASDAQ-100 today is $1.50.

Status change for NASDAQ-100 Bullish %

Yesterday's actions did have the NASDAQ-100 Bullish Percent ($BPNDX) from www.stockcharts.com reversing lower to "bull correction" status at 52% (meaning 52 of the 100 stocks in this market still have a point and figure buy signal associated with their chart) from "bull confirmed" status. This is a sign of some internal weakening taking place and bullish traders begin to exercise more caution in their bullish trading for stocks in this market (NASDAQ-100).

Stocks that trade BELOW trend and give sell signals can be good candidates for bearish traders to be trading.

Bullish traders that hold stocks that trade BELOW trend should immediately begin assessing potential downside risk to a level where that stock's point and figure chart would generate a sell signal (column of O violating a previous column of O).

Most frequently asked question

I have no clue how many subscribers to OptionInvestor.com and premierinvestor.net have ordered Tom Dorsey's book "Point and Figure Charting" to find out that Tom removed Professor Davis' probabilities study from the second addition, which has subscribers asking where they can find some of the results from Professor Davis' study.

Here is Professor Earl Davis' point and figure charting study as described in Tom Dorsey's 1st edition book, "Point and Figure Charting." Subscriber interested can order Tom's 2nd edition book, however, Tom took out this table as some investors were NOT correlating sector and market bullish percent to understand what type of MARKET and/or SECTOR environment was underway.

A triple-top buy signal in a bear confirmed sector or market should NOT have a trader looking at the Bull Market Pattern conclusions for a triple-top and then immediately thinking... "Oh boy, this stock has an 87.9% chance of gaining 28.7% in 6.8 months." SECTOR bullishness/bearishness is SO IMPORTANT when analyzing a specific stock as is MARKET bullishess/bearishness.

Bull Market Pattern Conclusions

Pattern               Profitable   Avg. Gain    Avg. Time
DOUBLE TOP               80.3%       38.7%     11.5 MONTHS
TRIPLE-TOP               87.9%       28.7%      6.8 MONTHS
SPREAD-TRIPLE            85.7%       22.9%      7.7 MONTHS
BULLISH TRIANGLE         71.4%       30.9%      5.4 MONTHS
BULLISH SIGNAL           80.4%       26.5%      8.6 MONTHS
BEARISH SIGNAL REVERSED  92.0%       23.2%      2.5 MONTHS
COMBINATIONS             79.5%       36.0%      8.0 MONTHS

Bear Market and Pattern Conclusions

Pattern               Profitable    Avg. Gain   Avg. Time
DOUBLE BOTTOM          82.1%        22.7%       4.7 MONTHS
TRIPLE BOTTOM          93.5%        23.0%       3.4 MONTHS
SPREAD-TRIPLE BOTTOM   86.5%        24.9%       4.6 MONTHS
BEARISH TRIANGLE       87.5%        33.3%       2.5 MONTHS
BEARISH SIGNAL         88.6%        21.9%       4.9 MONTHS
COMBINATIONS           83.3%        22.9%       3.4 MONTHS

Remember! It is very important to "know" if the stock your trading is in a bull or bear market condition. Sector bullish % helps determine what shape the sector is in and the various market bullish percent helps determine what shape the broader market is in.

Jeff Bailey
Senior Market Technician
Option Investor


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