How to interpret the consumer credit outstanding numbers?

Consumer Credit Outstanding data for August showed a decrease of 4.5% annualized. But the difference on the monthly basis is only -0.389%. Furthermore, 4.5% of the current 2.44t is equal to $100b. The last time, the yearly credit change by $100b was 2008-2009.

When we analyzed the very detailed table reported by the Fed, we see that year over year total credit is actually higher. Further investigation shows that the federal government non-revolving debt is responsible for $75b increase. Private sector credit is falling, but being replaced by the federal government. The not seasonally adjusted numbers are actually higher in all categories except pools of securitized assets, which suffered major corrections during the 2008 financial crisis.

The numbers have to be watched, but the latest report does not seem negative.

 

 

Is this week’s market optimism going to hold?

The employment numbers came out today, and there was an initial mild positive reaction by the markets. The Canadian dollar spiked on the news but ended the day neutral. The financial sectors sold off heavily.

This concludes a traders week of testing support and resistance levels. It is important to notice that on Tuesday we tested the 1080 level on the S&P500 and rallied to re-test the 1165 level. Today the market met resistance at 1170. We believe that 1080 is a very strong support level and we reiterate the 1170 level that was last seen on the FOMC meeting day.

Next weeks everyone is focused on the earnings releases, starting with Alcoa.