Fusion Chart Book

8/19/2013
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Summary
U.S. markets have come off a bit in the past few sessions as good news has become bad news. With the historically slippery months of August and September looming, budget debates in the foreground, combined with less than stellar market internals, we can see how sellers have had itchy trigger fingers of late. Fears of the fed leaving the party early have been cited most often as the reason behind the selloff. As we examine some charts below, especially the economic charts, there may be some rationality to this line of thinking as the real economy has not responded as well as domestic equity markets over the last few years. As evidence we cite our slides on pages 8, 9 & 10 which illustrate the following; leading economic indicator growth has virtually flat-lined for several years, credit growth is still non-existent, while shipments and inventories still remain at a standstill, suggesting real economic activity is sluggish. That said, we believe the current market weakness is just a correction of the excesses of the recent market rally. We believe the data points we have illustrated suggest the fed will stay around for a while longer. As the market grasps this concept we think the correction will abate and the market can rally into year end.

S&P 500 Index (SPX) - Daily Chart

The S&P 500 broke below support (red line) and now sits on its last uptrend line (green dotted line). A modest bounce could occur here, however, it appears it would be shallow given poor market internals and seasonality trends. The uptrend line (orange line) comes into play near 1,630.

Thomson Reuters/Jeffries CRB Index (CRB) - Weekly Chart

Commodities prices have stabilized and worked back above a downtrend (red line). Upward pressure from commodities could be dampen growth.

Continuous Crude Oil Futures - Monthly Chart

Crude Oil broke out above $ 99 and ripped to $ 110. This is a key area as it represents big resistance (red band and arrows). Keeping crude under this level is crucial as a breakout would imply $ 120, which would certainly be a drag on the recovery.

10 Year Treasury Yields - Daily Chart

10 year yields continue to push higher

Bloomberg REIT (BBREIT) & Philadelphia Utility Index (UTY) - Daily Charts
REITs (green line) and Utilities (red line) have fared worse than other market sector as rates have risen. While oversold in the near-term, the technical damage suggests lower prices are likely to follow any bounce.

LEI YoY - Monthly Chart

LEI YoY growth has been paltry for last several years (red band). In fact, since 2009 to 2010 it has been down to flat.

Conference Board Leading Credit Index - Monthly Chart

Access to credit is an economic stimulant. As seen in this Leading Credit index chart which includes components such as; Senior Loan Officers C&I loan survey, Bank tightening Credit to Large and Medium Firms (quarterly), and Security Repurchases (quarterly) from the Total Finance-Liabilities section of Federal Reserves flow of fund report credit availability is still dead !

Cass Freight Shipments & ISM Business Inventories - Monthly Charts

2000 - 2001

2007 - 2008

While there is no inventory back up (green line) there hasnt been any uptick in shipments (orange line) either.