Market update

[lamborghini]

For the third straight week, the number of jobless benefits declined nearly by 10,000 applications to a seasonally adjusted 425,000 which is better than the 427,000 expected by economists.

The Commerce Dept. also reported today US economic growth accelerating to an annual rate of 3.3% in the second quarter 2008. The 3.3% figure exceeds both the Department's initial estimate of 1.9% and analysts' expectations calling for a 2.7% growth rate. Currently the averages remain near session highs with the INDU trading up +174 points.

[lamborghini]

Weekly Performance for the major market averages based on last Friday's official settlement:

A decidedly negative week for the stock market where the volatility rose sharply as equities posted new monthly lows (lowest levels since mid-July).

The VIX and VXN also reached highs not seen since mid-July.: INDU: -2.7%, SPX: -3.1%, NDX: -5.5%, COMPQ: -4.7%, RUT: -2.8%.

The greenback took a swing lower post-payrolls Friday, but clearly there remains little-to-no appetite for owning euros outright. The greenback is now at a 2-1/2-year peak against the pound and today touched its 2008 high versus the euro. The buck remains perhaps relatively overbought on most timeframes, trade however, still sees some room to run with its latest break higher. As far as euro goes... the currency is supported near 1.4190 level with a break eyeing 1.4015 and an even longer term trendline near 1.3835.

OECD - Organization for Economic Cooperation and Development lowered last week its forecast for economic growth in the major European economies and Japan . The agency also said it expects the U.S. economy to grow 1.8%, revised up from 1.2%.

[lamborghini]

Currency

The buck added to overnight gains on the euro with trade giving the edge to the greenback. The expectation of mixed flows is only normal at these levels since things either unravel or stabilize depending on any given market perspective. The euro is supported at 1.4015 with a break eyeing 1.3850. Res sits up near 1.42.

[ron]

I can't remember the last time equity mrkt was so largely and illogically separated from fundamentals. Oil has lost nearly $50 from peak. Interest rates have dropped, with 10-T issues near five-year lows. The greenback has rallied to a 12-month high against the euro. Gold has dipped 25%. In normal times, despite the economy's ongoing financial problems - this would have been considered bullish and stocks would have soared. Granted, not all trends are sustainable. But still, stocks should have been up since lower energy prices, reduced inflationary pressures and a lower cost of money always equal higher pps. At least, downside seems limited from here, the upside potential is significant.