3:20 pm Central Time

What happens when unexpected expenses hit your budget?  Unless you want to go in debt, you have to cut back somewhere else. 

Case in point: Rising gas prices have forced debt-burdened consumers into a corner.  The weekly fill-up at the pump has jumped substantially in the past couple of years.  According to official reports, consumers are paying +41% more for gasoline this year than they were in 2006.  With the house ATM (aka, home equity loans) running low on funds, consumers are forced to borrow from other places to finance daily trips down the highway.  'Rob Peter to pay Paul' has become a way of life for the American consumer.

That's why it's not surprising this came out today.  Bloomberg reported for the first time since 1982, consumers spent more for gasoline than for new cars.  In June, gasoline accounted for 4.4% of consumer spending versus 3.9% for automobiles and motor parts.  This is a startling find, although not completely unexpected.

Even though gas has been trending down over the past few weeks, the broad economic effects have been felt in other areas.  It has hit consumer discretionary especially hard, where automakers reside.  In the past 52-weeks, that sector has fallen -11.7%, where the S&P 500 is only down -7.5%.  The immediate results can be seen in high-profile bankruptcies: Sharper Image, Linens & Things, Mervyn's, etc.  Now we see the effect in automakers.  People don't want to buy new cars when they can't afford the gas they put in their old cars.  It's simple economics.

The bigger question is how long this will last.  Trends are pointing against discretionary at the moment, but trends can change.  Six weeks ago, trends pointed towards energy and materials -- My what a difference a month can make.  This week, we're staring at a +0.5% rise.  Next week we could be down half-a-percent.  Momentum shifts daily as the market decides what to do.  That's what makes this business interesting...and yes, sometimes painful.  At least falling gas prices are lessening the sting of a volatile market.  Let's hope this trend continues.

Have a great weekend. 

11:00AM Central Time

I stumbled across this graph today.  All investors, traders, stock, fund, and ETF shareholders will apreciate it!  We've all been there before.  Maybe some of you are smack in the middle of the chain of events today!  I found the graph somewhere this morning when persusing my daily dose of market news and analysis....I think I was reading Mish's Economic Analysis Blog, or maybe Fund My Mutual Fund blog, or or or???...but went back and couldnt find exactly where I got the link.  But after emailing my colleagues earlier today, one recommended we put up the link, and another mentioned how it brought him back to his days of trading e-minis.  I hope you enjoy it!  Have a super day.

Here it is again:

http://4.bp.blogspot.com/_vIR9lEpVYYw/SKNurv146aI/AAAAAAAACt0/4hae79JPqfU/s1600-h/ImageProxy.png

2:25PM Central Time

Hmmm, isn't it interesting that one day after the expiration of the SEC's emergency ban on naked short selling for the 19 banks and brokerages we find many of the shares beaten down today.  Click here for the Marketwatch article. 

It's too early to determine if the downside move in the financials today is the result of overall market weakness, or if there are some nefarious things going on in the background.

Other items worthy of discussion, is the violent upward move in the mining, metals, uranium, and energy sectors.  What was working earlier this year, that of being long commodities and energy, while short the financials and retailers, is back in play today. 

What lit gold and oil was the 9:30AM Eastern Time release of the weekly oil inventories. There was a huge -6.4mm barrel gasoline draw against an expectation of a +2mm increase.  Crude inventories were --316k versus +300k expectation.  We'll see if the one-day burst in energy and other commodities has legs, but these inventory numbers were bullish.  Some argue oil service and other energy-related stocks are cheap with oil at $115.  Recall, earlier this year, we would have all thought crude oil with a  $115 handle would be a spectacularly high price.

So, after a month of energy declining and financials moving higher, we'll watch to see if the trend has reversed course.  Good Luck!