Monday, March 30, 2009

Tuesday's Lil Early Dance Will Not End on a High Note; Yet Our Short-Term Sentiment Changes Late Wednesday; Update Tuesday Night

Tuesday, March 31st brings Consumer Confidence at 10ET for March: Prior confidence was an historically most dismal 25, now consensus calls for an improvement of 27-28. The psychology of this consumer confidence dance is bound to improve as we dig ourselves out of the snowy months, yet the policies being legislated cannot go over well with
most sane capitalists. Will the market react after this number? We don't think so since the S&P/Case Schiller Home Price Index for January that came before it at 9ET carries more the painful weight. Prior was minus (18.55%), consensus now calls for minus (18.5%). These kind of numbers are beyond depressing. The wealth destruction in the capital markets have moved into the residential real estate arena, and since equilibrium has not yet been reached, we cannot be optimistic the market will cheer even slight improvements for more than a few minutes. Chicago Purchasing Managers Index for March at 9:45ET: Prior reading was 34.2, now consensus estimates are 34.7 - 36. This is a leading indicator and an important barometer of future business activity in the Chicago region. There are some traders who will establish positions into this report, and very few after the report unless it falls far from its mean estimate. For the market to go meaningfully higher, the Chicago PMI would have to break above its 6 month average of 38.4, and meaningfully lower if it broke below the previous 34.2, as most expect minor seasonal improvements from very cold February to less cold March. (Perhaps they'll blame the result on global warming, regardless if it comes in hot or cold)
Before Market Earnings from: Lennar Corp. (LEN), Q1 '09, average revenue estimate is $530M, year ago same quarter was $1.06B, that is a b for Billion. Bottom line or earnings per share are estimated to come in at minus (.$71), year ago same quarter was minus ($.56). Jim Cramer mentioned he likes the homebuilders on his Friday Mad Money program. Whether you like, hate, or are indifferent to Cramer, as forward-thinkers we will continue to offer opinions from talking heads who are in the spotlight. We do not recommend going long any homebuilders, only waiting for them to possibly dead cat bounce, then we'd think of shorting the false run-ups. The policies of this administration are working to crucify risk takers, so we anticipate any reflex bounces from sector to sector to be short lived. Jim Cramer disagreed with us on his Monday show, saying bears are wrong and Obama is no Hoover. Our answer is simple, while in the grips of a bear choke down, do not give the all clear signal. Comparing 1929 to 2009 is irresponsible Jim Cramer, the scope of today's global destruction of wealth has never before been felt before, not even in 1929. After market earnings from: Apollo Group Inc. (APOL), Q2 '09, average revenue estimate is $865M, year ago same quarter was $694M. Average earnings per share estimate is $.65, year ago same quarter was $.41. Even though the education sector seems like an Obama favorite, the fundamentals are growing nicely, and the shares are above their 200 day moving average. We recommend taking an intelligent, forward-thinking trading approach and ignoring the earnings and initial move up or down. Patience, patience, patience, not gambling. A lot of money is wasted by gambling ahead of earnings, and we confess to being guilty of that stinkin' thinkin' behavior in the recent past. Although there will be instances where we recommend going long or short ahead of earnings, they will be rare. We'd much rather our forward-thinkers ignore the initial moves up or down and then take advantage of the fear and greed in the over-reaction. We feel that is a more intelligent behavior than merely throwing the dice, like Jim Cramer does so often. Cramer is not a bad man, yet like the rest of us humans, he has his deficiencies and is not to be looked up to as an expert in this treacherous political environment.. That's precisely the reason we feel the Psychological Financial Fusion (PFF) ratio will be widely accepted a 21st century ratio. The political/policy analysis of the PFF ratio is what average investors were missing in either studying the arts in the charts or the fundamentals/accounting. Not too many investors/traders have the time to follow policies that are coming down the pipe, POTC does. PFF ratio of the S&P will be revealed in a special email and posting on Tuesday, April 7th. The PFF ratio's goal wil be to find that perfect recipe of technical, fundamental, and political/policy analysis, sprinkled with an intelligent dose of behavioral psychology. It will combine the lagging indicators of technicals & fundamentals with the all important leading indicator of game changing policies/legislation/bills ahead. The PFF ratio will be issued for S&P 500 index from month to month based on those three components. POTC believes it will be effective and accepted as a forward-looking indicator due to its forward-thinking/anticipating political component.
IF you think this piece was useful, or IF you believe the PFF ratio may be something to monitor, especially its change effect/percentage due to future DC policies, please help us spread the blog address. If you are not a subscriber, please send an email to: and we'll add you to the growing list of fiscally conservative thinkers who are anxious to better understand what hurdles lay ahead~

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