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Muddy Monday

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Today brought forth the Kansas City Fed manufacturing survey, which displayed an expanding regional manufacturing industry. Production for August grew to 13 from 8, volume of shipments increased to 7 from 6 in July, and numbers of new employees decreased to -5 from -3. The survey results indicated that a manufacturing recovery is slowly continuing, but the heartbeat is very faint. However, hiring has not yet begun to swell, even with increased corporate production.

Of concern, the September Cambridge consumer credit index has indicated that U.S. households' intentions to pay down debt is differing from what they actually do. In August, 80% of Americans planned on paying down debt, though only 64% followed through. This trend causes trepidation with analysts, as rising debt burdens could be overwhelmed in future months, tapering consumer spending.

Chart of: Crude futures, daily.

Crude futures are trading slightly negative on the day with the price per barrel at $29.48. Apparently, with Iraq tensions increasing and a potential pro-war speech coming from President Bush on Thursday, oil enthusiasts certainly aren't backing off at this point. However, without oil above $30.00 per barrel yet, OPEC is not expected to increase production quotas at its meeting on September 19th.

On the Daily chart, the Defense Index (DFI.X) has pushed above the 200-dma, and could see buyers taking notice of the technical event. The DFX.X has also recently broken through descending resistance on the P&F chart. Option Investor and Premier Investor both added L-3 Communications (NYSE:LLL) to their play lists on Friday, as the stock embodies many positive technical events regarding the defense sector. The stock recently witnessed a close above the 200-dma on Friday, and has had a "double top breakout" on the P&F chart.

For Option Investor play write up:

For Premier Investor play write up:

Chart of: LLL, P&F.

The Dow Jones U.S. Home Construction Index (DJUSHB) has pushed above the 50-dma in today's session. The Index was trading up +1.19% at 332.42 at the time of this post.

Nextel (Nasdaq:NXTL) grew more bullish on its outlook for 2002 and 2003. The wireless carrier said it was on track to meet or exceed its previous forecasts for 2002. More importantly, the company also announced that it was planning on spending almost 2 billion dollars in 2003 on capital equipment. Although this won't help coax our economy back to premium levels, renewed confidence in corporate spending is a good sign.

Mark Whistler
Option Investor

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