The Stock Market Pulse $49.95/month value November 24^th ,  2008 Edition Weekly review of the markets Last week, it looked like the MACD positive divergence indicated the markets were starting to stabilize and that the October low was going to represent a strong support level but for that theory to hold we would also need some good news on the economic front. Monday   the New York Empire Manufacturing Index came out at -25,4. Even though it was slightly lower then expected (-26) it followed -25.4 in October . The G20 countries reiterated their intentions to use every means at their disposal to stimulate demand and make credit access easier. Citigroup announced it would cut 52000 jobs. The weight of the slowdown is spreading across the board making it heavier and heavier to shoulder by the indexes. We started the day with a rally but we ended lower. We stayed dangerously close to the bottom of the corridor we identified earlier. Tuesday, we learned the PPI came down 2.8% when the consensus was -1.8%. Of course, this discrepancy was mostly due to the beaten down energy sector. Hewlett Packard surprised with higher then expected earnings; Mr Bernake claimed the credit market was stabilizing. Mr Paulson said the market would take longer than we think to recover but would be faster than what it would be without the rescue plan. The day was very volatile and after a new low we managed to finish up thanks to a late day rally. Wednesday it was the CPI who’s turn it was to come down dramatically. It came down another 1.0%. Energy prices came down 8.6%, cars -2.4% et appliances 1.0%. Plus we have no idea what’s going to happen to General Motors. The government is unsure how exactly to assist GM. If GM was to go belly up it would affect millions of family and being smack in the middle of a recession, this would be catastrophic… The Fed also released its minutes of the last reunion and they reduced their growth and inflation forecast. To understand what this means you need to know that a reduction of the inflation is not a good sign when in a recession. It means the consumers are expecting a general price reduction and are delaying their big acquisitions. This creates a recession that “feeds on itself”! This caused the markets to break below the support level we identified earlier. This means that what used to be a support will now act as a resistance level… All 10 S&P500 sub-indexes closed lower with financials leading the way with an 11% decline. The least affected was the public services, a defensive sector who’s yield depends on dividends. Thursday  the automotive industry’s uncertainty, oil prices that traded below 50$ and continued increase of jobless claims literally insuring an eleventh consecutive job loss report caused the markets to suffer, once again, all 10 S&P500 sub-indexes closing lower. Friday there were no significant economic news on tap, thank god! Markets opened higher but quickly returned to the recent low. We even managed to post new lows in the afternoon. When it became clear we wouldn’t go any lower we saw an impressive rally take place. The candle that formed following that rebound let’s us hope next week could continue in that direction… This Week Last week’s performance forces us to reassess where the next support level is. The strong slowdown of consumer spending is very worrisome for the economy especially with the holidays around the corner since we know a significant percentage of sales come during that period alone. A disastrous holiday season in regards to consumer spending would have a catastrophic impact on companies’ earnings in the fourth quarter. This week the relevant news to keep an eye on are listed below. Remember that we ended the week on a strong rally so don’t be surprised if we see it continue but also be wary of sudden profit taking which could reverse the rally and take us down even deeper… Technically, on the S&P500 we need to go back to 1997 to find the next support. Having to go back 11 years speaks volumes of the magnitude of this historical debacle we are going through… Good news is we’re already there! For the Dow and the Naz we don’t have to go back so far but nonetheless these support were also based on levels seen 11 years ago… It is difficult to be precise at this time because of the long tails some of the candles that form the chart during that period but for the S&P500 the support level is somewhere between 700 and 750. In the DowJone’s case this level is around 7250 and 7500 and in the Nasdaq case, the level is around 1100 and 1300. That’s the optimistic view! If we use technical analysis and calculate the price based on the height of the corridor we just broke through, we’re going even lower! See graphics, first the S&P500: Now look at the DJ: Finally, have a look at the Nasdaq: Now here’s the economic calendar for this week: Economic calendar (Reports I consider will impact the market the most with definitions and expectations) (Soon to be a section for Investor Rules members only ) Not a member yet? Just go to http://www.investorrules.com/membership.html Monday November 24^th Existing Home Sales 10:00 ET Consensus 5.00M Definition Existing home sales tally the number of previously constructed homes, condominium and co-ops in which a sale closed during the month. Existing homes (also known as home resales) account for a larger share of the market than new homes and indicate housing market trends. (National Association of Realtors) Why Do Investors Care? This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as home resales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Even though home resales don't always create new output, once the home is sold, it generates revenues for the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, home resales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the existing home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies. constraints may matter as much as domestic capacity constraints. Tuesday November 25^th ICSC-Goldman Store Sales 7:45ET Definition This weekly measure of comparable store sales at major retail chains, published by the International Council of Shopping Centers, is related to the general merchandise portion of retail sales. It accounts for roughly 10 percent of total retail sales. Why Do Investors Care? Consumer spending accounts for more than two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors. The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Retail sales growth did slow down in tandem with the equity market in 2000 and 2001, but then rebounded at a healthy pace between 2003 and 2005. The ICSC-Goldman index is one of the most timely indicators of consumer spending, since it is reported every week. It gets extra attention around the holiday season when retailers make most of their profits. It is also a useful indicator when special factors can cause economic activity to momentarily slide. For instance, it was widely watched in the aftermath of Hurricanes Katrina and Rita which hit New Orleans and the Gulf Coast in 2005. The ICSC-Goldman Sachs store sales series previously was known as ICSC-UBS before Goldman Sach's involvement with ICSC. The name change took place with the September 30, 2008 release. Corporate Profits 08:30 ET Definition Corporate profits, as reported by the Bureau of Economic Analysis (BEA), are summarized briefly as the income of organizations treated as corporations in the national income and product accounts. The BEA reports several measures of profits. Profits from current production (corporate profits with inventory valuation and capital consumption adjustment), are also known as operating or "economic" profits. Capital consumption adjustment deals with the differences in depreciation allowances used for accounting and income tax purposes. Inventory valuation adjustment (IVA) deals with the difference in measuring the cost of inventory replacement. Book profits amount to operating profits subtracting out inventory valuation and capital consumption adjustments. After tax profits are book profits after taxes are subtracted. The Econoday reports will focus on after tax profits reported by the BEA, since these are the most relevant. The corporate profit figures that are derived from the national income and product accounts (NIPA) depend on GDP growth. They don't always move in the same direction or the same magnitude as the profit data reported directly by individual companies or even the S&P 500. Why Do Investors Care? Corporate profits are the lifeblood of investment spending. Profits are the income of a corporation. When profits are strong, then companies will be able to increase their capital spending. This could allow better growth prospects for a company and is likely to increase its underlying value. When corporate profits decline, then capital spending tends to decline. Without the potential for growth, a company could be at a disadvantage, particularly in our global economic environment. Corporate profits also reveal the health of an organization. When a company's profits are anemic during economic expansion, it suggests that the company is not performing efficiently. The value of an inefficient company is determined by its stock price. Thus weak profits signal lower stock prices. When a company's profits are relatively strong, even during an economic downturn, it usually means that the organization is well-managed. The higher value for this type of company is reflected in a higher stock price. Gross Domestic Product (preliminary) 08:30 ET Real GDP-Q/Q change- SAAR-0.5% GDP price index -Q/Q change- SAAR 4.2% Definition Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. Why Do Investors Care? GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios. The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio. Redbook 08:55 ET Definition A weekly measure of sales at chain stores, discounters, and department stores. It is a less consistent indicator of retail sales than the weekly ICSC index. It is also calculated differently than other indicators. For instance, figures for the first week of the month are compared with the average for the entire previous month. When two weeks are available, then these are compared with the average for the previous month, and so on. It might be more useful to compare year-over-year figures since these are indeed compared to the comparable week a year ago. This index is correlated with the general merchandise portion of retail sales covering only about 10 percent of total retail sales. Why Do Investors Care? Consumer spending accounts for two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors. The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Retail sales growth did slow down in tandem with the equity market in 2000 and 2001, but then rebounded at a healthy pace between 2003 and 2005. The Redbook is one of the more timely indicators of consumer spending, since it is reported every week. It gets extra attention around the holiday season when retailers make most of their profits. It is also a useful indicator when special factors can cause economic activity to momentarily slide. For instance, once again, it was widely watched in the aftermath of Hurricanes Katrina and Rita which hit New Orleans and the Gulf Coast in 2005. Consumer Confidence Consensus 38.0 Definition The Conference Board compiles a survey of consumer attitudes on present economic conditions and expectations of future conditions. Five thousand consumers across the country are surveyed each month. While the level of consumer confidence is associated with consumer spending, the two do not move in tandem each and every month. Why Do Investors Care? The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Consumer confidence did shift down in tandem with the equity market between 2000 and 2002 and then recovered in 2003 and 2004. Consumers became more pessimistic in 2005 when gasoline prices surged. Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month. Wednesday November 26^th MBA Purchase Applications 07:00ET Definition The Mortgage Bankers' Association compiles various mortgage loan indexes. The purchase applications index measures applications at mortgage lenders. This is a leading indicator for single-family home sales and housing construction. Why Do Investors Care? This provides a gauge of not only the demand for housing, but economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the Mortgage Bankers Association purchase applications, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once a home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, housing construction has a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the MBA purchase applications index carries valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies. Consumer Price Index  8:30 ET  Consensus is -0.7% Consensus less food and energy is 0.1% Definition The Consumer Price Index is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation. Why Do Investors Care? The consumer price index is the most widely followed indicator of inflation in the United States. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments. If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 won't be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose about 4.7 percent a year in the U.S. during the first half of 2006. To recoup your purchasing power, you would have to charge 4.7 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge. Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion. By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits. For monetary policy, the Federal Reserve generally follows "core" inflation-inflation excluding volatile food and energy components. The Fed's preferred inflation measure is the core personal consumption deflator but core CPI data largely make up the core PCE deflator and CPI numbers come out sooner each month. In the long run, the overall CPI and core CPI track each other. Durable Goods Orders 08 :30 ET Consensus -2.6% Definition Durable goods orders reflect the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. The first release, the advance, provides an early estimate of durable goods orders. About two weeks later, more complete and revised data are available in the factory orders report. The data for the previous month are usually revised a second time upon the release of the new month's data. (Bureau of the Census, U.S. Department of Commerce) Why Do Investors Care? Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. Rising equity prices thrive on growing corporate profits - which in turn stem from healthy economic growth. Healthy economic growth is not necessarily a negative for the bond market, but bond investors are highly sensitive to inflationary pressures. When the economy is growing too quickly and can't meet demand, it can pave the road for inflation. By tracking economic data such durable goods orders, investors will know what the economic backdrop is for these markets and their portfolios. Orders for durable goods show how busy factories will be in the months to come, as manufacturers work to fill those orders. The data not only provide insight to demand for items such as refrigerators and cars, but also business investment such as industrial machinery, electrical machinery and computers. If companies commit to spending more on equipment and other capital, they are obviously experiencing sustainable growth in their business. Increased expenditures on investment goods set the stage for greater productive capacity in the country and reduces the prospects for inflation. Durable goods orders tell investors what to expect from the manufacturing sector, a major component of the economy, and therefore a major influence on their investments. Jobless Claims 08:30ET Consensus 537K Definition New unemployment claims are compiled weekly to show the number of individuals who filed for unemployment insurance for the first time. An increasing (decreasing) trend suggests a deteriorating (improving) labor market. The four-week moving average of new claims smoothes out weekly volatility. Why Do Investors Care? Jobless claims are an easy way to gauge the strength of the job market. The fewer people filing for unemployment benefits, the more have jobs, and that tells investors a great deal about the economy. Nearly every job comes with an income that gives a household spending power. Spending greases the wheels of the economy and keeps it growing, so a stronger job market generates a healthier economy. There's a downside to it, though. Unemployment claims, and therefore the number of job seekers, can fall to such a low level that businesses have a tough time finding new workers. They might have to pay overtime wages to current staff, use higher wages to lure people from other jobs, and in general spend more on labor costs because of a shortage of workers. This leads to wage inflation, which is bad news for the stock and bond markets. Federal Reserve officials are always on the look out for inflationary pressures. By tracking the number of jobless claims, investors can gain a sense of how tight, or how loose, the job market is. If wage inflation threatens, it's a good bet that interest rates will rise, bond and stock prices will fall, and the only investors in a good mood will be the ones who tracked jobless claims and adjusted their portfolios to anticipate these events. Just remember, the lower the number of unemployment claims, the stronger the job market, and vice versa. Personal Income and Outlays 08:30ET Personal Income –M/M change 0.1% Consumer Spending – M/M change -0.9% Definition Personal income is the dollar value of income received from all sources by individuals. Personal outlays include consumer purchases of durable and nondurable goods, and services. Why Do Investors Care? The income and outlays data are another handy way to gauge the strength of the consumer sector in this economy and where it is headed. Income gives households the power to spend and/or save. Spending greases the wheels of the economy and keeps it growing. Savings are often invested in the financial markets and can drive up the prices of stocks and bonds. Even if savings simply go into a bank account, part of those funds are typically used by the bank for lending and therefore contribute to economic activity. In the past twenty years, personal savings have diminished rapidly as consumers have spent a greater and greater share of their income. The consumption (outlays) part of this report is even more directly tied to the economy, which we know usually dictates how the markets perform. Consumer spending accounts for more than two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed. Investors can see how consumers are directing their spending, whether they are buying durable goods, nondurable goods or services. Needless to say, that's a big advantage for investors who determine which companies' shares they will buy. Consumer Sentiment 10:00 ET Consensus 57.9 Definition The University of Michigan consumer surveyquestions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending. Consumer confidence and consumer sentiment are two ways of talking about consumer attitudes. Among economic reports, consumer sentiment refers to the Michigan survey while consumer confidence refers to The Conference Board's survey. Why Do Investors Care? The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Consumer confidence did shift down in tandem with the equity market between 2000 and 2002 and then recovered in 2003 and 2004. Consumers became more pessimistic in 2005 when gasoline prices surged. Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month. New Home Sales 10:00ET Consensus 450,000 Definition New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances. Why Do Investors Care? This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as new home sales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, new home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the new home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies. EIA Petroleum Status Report 10:35 ET Definition The Energy Information Administration (EIA) provides weekly information on petroleum inventories in the U.S., whether produced here or abroad. The level of inventories helps determine prices for petroleum products. Why Do Investors Care? Petroleum product prices are determined by supply and demand - just like any other good and service. During periods of strong economic growth, one would expect demand to be robust. If inventories are low, this will lead to increases in crude oil prices - or price increases for a wide variety of petroleum products such as gasoline or heating oil. If inventories are high and rising in a period of strong demand, prices may not need to increase at all, or as much. During a period of sluggish economic activity, demand for crude oil may not be as strong. If inventories are rising, this may push down oil prices. Crude oil is an important commodity in the global market. Prices fluctuate depending on supply and demand conditions in the world. Since oil is such an important part of the economy, it can also help determine the direction of inflation. In the U.S. consumer prices have moderated whenever oil prices have fallen, but have accelerated when oil prices have risen. Thursday November 27^th US Holiday ThanksGiving Day All Markets closed Friday November 28^th NAPM-Chicago 09:45ET Consensus: 36.5 Definition The National Association of Purchasing Management - Chicago compiles a survey and a composite diffusion index of business conditions in the Chicago area. Manufacturing and non-manufacturing firms are both surveyed, but until recently, market players have believed that the survey primarily covers the manufacturing sector. Readings above 50 percent indicate an expanding business sector. The NAPM - Chicago is considered a leading indicator of the ISM manufacturing index. Why Do Investors Care? Investors should track economic data like the NAPM - Chicago to understand the economic backdrop for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers a moderate growth environment that won't generate inflationary pressures. The NAPM - Chicago gives a detailed look at the Chicago region's manufacturing and non-manufacturing sectors. Many market players don't realize that non-manufacturing activity is covered in this index and tend to focus on the manufacturing side only. Consequently, market players consider this as a leading indicator for the ISM manufacturing survey. On its own, it can be viewed as a regional indicator of general business activity. Some of the NAPM - Chicago's sub-indexes also provide insight on commodity prices and other clues on inflation. The Federal Reserve closely watches this report because in its long history, it has proven to be a good indicator of business activity as well as inflation. As a result, the financial markets can be highly sensitive to this report. Farm Prices Definition The Department of Agriculture releases the index of prices received by farmers at the end of the month for the current month. It reflects changes through the middle of the month. The index is not adjusted for seasonal variation. It includes crop prices and livestock & product prices. Analysts monitor farm prices in order to see early warnings of inflation or deflationary pressures in the economy. Why Do Investors Care? Farm prices are a leading indicator of food price changes in the producer and consumer price indices. There is not a one-to-one correlation, but general trends move in tandem. Investors need to monitor inflation closely. An individual investor who understands the process of inflation and how inflation influences the markets will no doubt benefit over those investors that don't understand the consequences of inflation. Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how data such as farm prices influence the markets - and your investments. If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation, because you know that the $100 won't be able to buy the same amount of goods and services a year from now, as it does today. If you were in a country where prices doubled every couple of months, you might want to charge 400% interest for a total payoff of $500 at the end of the year. In the United States, farm prices tells us that food prices were falling through the summer of 2005. This represents only one sector of the economy though. At the same time, the CPI was rising 3 to 3.5 percent during this period. You might want to add in one or two percentage points to cover default risk and the opportunity cost, but inflation remains the key variable in what interest rate you would charge. Inflation (along with default risk and opportunity cost) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates accordingly. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion. By tracking the trends in inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. That's it for the economic calendar this week and for this outlook on what we can expect in the markets this week so use it wisely, and prosper… :-) Yours truly, Eric LeRiche http://www.InvestorRules.com Legal Notice The Publisher has strived to be as accurate and complete as possible in the creation of this report, notwithstanding the fact that he does not warrant or represent at any time that the contents within are accurate due to the rapidly changing nature of the Internet. The Publisher will not be responsible for any losses or damages of any kind incurred by the reader whether directly or indirectly arising from the use of the information found in this report. This report is not intended for use as a source of legal, business, accounting or financial advice. All readers are advised to seek services of competent professionals in legal, business, accounting, and finance field. No guarantees of income are made. Reader assumes responsibility for use of information contained herein. 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