Intraday Market Thoughts Archives

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As if the jobs report wasn’t bad enough, the US government topped off a tough day on markets by announcing enormous mortgage security lawsuits against financial companies. On the day, CHF and GBP led while the commodity currencies lagged. Friday's CFTC data showed CAD and AUD longs expanding while EUR and GBP positions falling. Our weekly analysis is below.

Non-farm payroll posted a reading of zero on August, missing the +68K estimate. It was the weakest jobs report in 11 months and there was no silver lining as downward revisions to June and July data trimmed another 58K jobs. Private sector employment increased 17K compared to the 95K expected and the unemployment rate remained at 9.1%.

NFP was the first data point of August not based on surveys and it points to an economy that's in danger of falling into recession. Market are increasingly betting on the announcement of Operation Twist at the FOMC on Sept. 21. The move is a maturity swap using the funds from QE1 and 2. It's not QE3 and it will provide only a mild stimulus but it's a step closer to true QE3 and that's what triggered a rally in CHF and precious metals on Friday. Gold surged $52, or 2.9%, to $1881. Silver gained 4.3% to $43.30.

Risk assets sold off with the S&P500 falling 2.5% to 1174. US 10-year yield fell 13 basis points to close the week at a 60-year low of 2.00%. Greek two-year notes hit an obscene yield of 79% dashing hopes Greece could return to borrowing markets next year or two.

Bank of America led an 8% drop in financials on reports that the FHFA – the US government agency that supervises Fannie Mae and Freddie Mac -- was preparing to sue many large banks over mortgage security fraud. The announcement came after the stock market close and included 17 banks (in the US and overseas). The numbers continue to leak out but appear to be in excess of $30 billion. Shares of financials were flat after hours, hinting that the lawsuit numbers were close to expectations.

Weekly Charts

On the week, EUR and GBP lagged while CHF and NZD led. The euro finally broke out of its slumber on the weekly chart to post a bearish outside reversal. Cable bounced before reaching the early Aug lows but support at 1.61 will be key. The rebound in USD/CHF looks very precarious but may have been salvaged by the late day rally on Friday.

Commitment of Traders

- JPY longs fell to 41K from 47K

- EUR fell to a net short position of -0.3K from +2.5K

- GBP fell to +0.4K from 10.9K

- CAD longs increased to 14K from 8.8K.

- AUD longs expanded to 47.6K from 43.6K

- NZD and CHF longs were virtually unchanged.

Regardless of the severity of the US August jobs report (+0K, unemp rate unchanged at 9.1% & average hourly earnings at the worst decline in 5 years at -0.1%), we stick with our main trading ideas of the past 10 days; Remaining bearish on EURUSD & EURGBP as highlighted in recent Premium charts. Today's latest Premium trading ideas are here: http://ashraflaidi.com/products/sub01/access/?a=487 NONsubscribers can join here: http://ashraflaidi.com/products/sub01/

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Gold hits 1860, silver at 42.60s. Swiss employment drops significantly, UK construction PMI declined and Eurozone PPI increased. PIMCO's El-Erian sees ECB cutting rates. Market turns to US labor market data.

The employment level in Switzerland dropped significantly in the last quarter to 2.77M from 4.11M previously. Such a drop comes as a surprise especially because analysts expected an unchanged reading of 4.11M. Despite this alarmingly bad result, CHF continues to surge as EURCHF lost another 200+ points and reached as low as 1.1061.

UK construction PMI fell in August to 52.6 from 53.5 in July which is the lowest print since December 2010. Construction PMI has been decreasing steadily over the past five months.

Eurozone monthly PPI came out at 0.5% from a previous unchanged reading and reached 6.1% on annual basis in July. The highest growth came out of the energy component.

A noteworthy article was published by Bloomberg last night in which Mohamed El-Erian, the CEO of PIMCO, said that ECB will probably cut interest rates as the chance of a recession in the Eurozone has risen to 50%.

The New York session will bring the eagerly awaited labor market news. August Non Farm Payrolls are expected to drop to 74K from 117K in July and the unemployment rate is seen unchanged at 9.1%.

Wednesday's ADP report showed a somewhat lower print than anticipated (91K vs. 102K exp.) so the probability of a significant positive surprise is lower to some extent. It is important to keep in mind that the correlation between ADP and NFP is not high (slightly above 0.6) and that ADP report excludes government workers.

Average hourly earnings are seen growing at 2.2% on annual basis in August from 2.3% a month earlier.

Eurozone PPI edges up, UK construction expansion slows after disappointing manufacturing. US August Nonfarm payrolls awaited.

After yesterday's disappointing manufacturing PMI's increased concerns about the sustainability of growth across Europe, Eurozone July PPI rose 0.5% from no change m/m, while up 6.1% y/y from 5.9% y/y. the focus shifts towards prices today with the release of the latest PPI data for July.

A couple of weeks ago a rise in prices would have had markets looking towards the ECB with respect to further tightening, however a lot has changed since then, as the growth picture has darkened considerably.

Yesterday's final German Q2 GDP growth number didn't make great reading after revisions to consumption, imports and investment, which were all revised lower, while manufacturing PMI slipped back from 52 to 50.9.

Trichet’s comments earlier this week about looking again at recent developments in medium term price stability have raised the prospect that the next move in interest rates could well be lower, given the recent economic data coming out of Europe.

This view is likely to gain traction if economic data continues on its downward path.

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UK August construction PMI slipped to 52.6 as expected from 53.5 The more important number from a UK perspective will be Monday's August services PMI which is also expected to remain firmly above 50 at 54.3. Recent comments from MPC member Adam Posen about further QE has raised fears about the likelihood of a move at next week's Bank of England meeting, especially in light of yesterday's manufacturing PMI data which came in at 49.

Today's August non farm payrolls are the next key event, and this number could give extremely important clues to the Fed's thinking at this month's 2 day FOMC meeting. Whatever the outcome it promises to be volatile in the event of a miss ahead of the long Labour Day weekend.

Better-than-expected US manufacturing data boosted broad sentiment and lifted the dollar across the board. The euro slumped for the third consecutive day, with EURUSD breaking below its 55 dma for the 1st time in nearly 4 weeks. Swiss franc led for the second straight day. Japanese data on capital spending is due to be released.

Markets breathed a sigh of relief as the ISM report on manufacturing didnt post a drastic fall like some of the regional indexes earlier in the month. The measure fell to 50.6 from 50.9 but it was better than the 48.5 expected. Initial jobless claims improved to 409K from 421K, in line with expectations.

Late in the session, the market began to buckle down for Friday's non-farm payrolls report.

The CHF gains came after the Swiss government announced a second stimulus package to offset the strong franc. The euro fell on talk of ECB rate cuts, the poor European PMIs and a report that Greece will miss its deficit target. Greece'ss budget chief also resigned.

At the moment, the market saying Eurozone problems are a bigger worry than a US slowdown. After hitting a seven-week high on Monday, EUR/USD has fallen more than three full cents. EUR/CHF has fallen six full handles.

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The White House released its latest growth estimates with GDP at 1.7% in 2011 and 2.6% in 2012; the US jobless rate averaging 9.1% in 2011 and 9.0% in 2012; and CPI +2.8% in 2011, 1.8% in 2012. The numbers are slightly optimistic on growth/inflation next year but that’s to be expected.

Asia-Pacific Preview

The lone indicator of note in the upcoming session is Japanese capital spending. It is expected to rise 1.1% in July after a 3.3% rise in June. We don’t expect to see any meaningful reaction to this report as flows and apprehension ahead of NFP dominate.

Both Eurozone Manufacturing PMI and UK Manufacturing PMI contracted, US Manufacturing ISM and Unemployment claims are next. USD is stronger in the ongoing session with the exception of CHF that gained as EURCHF plunged 200+ points. UK Manufacturing PMI showed a similar result as Eurozone manufacturing PMI just 30 minutes earlier. Ashraf's Premium Trades are up

Manufacturing PMI in the UK slowed to 49 in August from 49.4 in July printing the worst result since June 2009. Despite the weak print, the figure was still stronger than the estimate of 48.5. The manufacturing sector in the UK contracted for the second time in a row.

The collateral deal between Finland and Greece showed up on the newswires again today as Irish finance minister said that the deal is definitely off the table and that both parties are seeking other solutions. German government official later said that German, Dutch and Finnish finance ministers will meet on Tuesday in Berlin to discuss this issue.

The New York session starts at 8:30 am ET with Unemployment claims that have been gradually increasing the past three weeks. This week claims are seen at 407K from previous 417K.

August ISM Manufacturing is due at 10:00 am ET and it is expected to fall further to 48.7 from previous 50.9. This is the first month in almost two years when analysts expect a reading below 50 which indicates a manufacturing sector contraction. The decline seen over the past four months (April’s reading was 60.4!) confirms the significant deterioration that the economy is experiencing. Should fundamental data releases continue to disappoint, the Fed’s projections that the growth will pick up in the second half of the year is likely to be questioned soon.

Traders should also note that FOMC member and Federal Reserve Governor Elizabeth Duke will speak at 12:00 pm about the housing market. Q&A session after the speech is expected so any remarks regarding monetary policy could cause high volatility.

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Eurozone Aug manufacturing PMI joins Italy & French PMI in contraction territory for first time in 2 years. UK PMI remains in contraction. Chinese PMI, Australian retail sales, Swiss Q2 GDP slips back. Ashraf has new Premium trades after Tuesday’s EURUSD, EURGBP & EURJPY shorts hit all targets.

EURUSD drops more than 200 points since our Tuesday bearish call. We renew our negative take on the currency. The fundamental catalysts have been deepening contractions in Aug French and Italian manuf PMIs and the first contraction in overall Eurozone PMI since September 2009 (August figure at 49).

Overnight fears of a slowdown in China remain evenly balanced after slight improvements from the official measure of manufacturing PMI and the HSBC measure. Chinese manufacturing PMI for August came in at 50.9, below expectations of 51 but an improvement on the previous 50.7 measure. The HSBC measure of PMI also improved slightly from the previous contraction of 49.3, but still remained in contraction territory at 49.9. Weakening export orders remain a concern, however as doubts grow about the health of the wider global economy.

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In Australia retail sales numbers for July showed an improvement from declines in May and June, coming in much better than expected at 0.5%. The Australian dollar continues to hold up well against the US dollar, especially given speculation about further Fed easing.

The strength of the Swiss franc continues to be a thorn in the side of the Swiss government and National Bank, though there does appear to be an acceptance that they won’t be able to weaken it in a hurry given the fiscal situation elsewhere in Europe. The effect on Swiss GDP is expected to be reflected in a lower Q2 GDP number with expectations of a slip back to 0.4% from a previous 0.6%, suggesting that the rise of the franc is starting to impact growth.

The month began with fireworks but ended with on a quiet note as risk appetite inched higher on positive data from the US. The Swiss franc easily led the market after the government said it accepts the strong CHF. Australian retail sales and China’s manufacturing PMI are the highlights of the upcoming session.

US economic data was surprisingly strong:

- Chicago manufacturing PMI at 56.5 compared to 54.8 exp. and 58.8 prior

- Factory orders up 2.4% in July compared to +1% exp.

- ADP employment at 91K vs. 103K exp

The Australian dollar was the second-best performer after CHF on the positive sentiment generated from the data. The S&P 500 gained 0.5% to 1219. Gold fell by $2.

The Swiss government unveiled a stimulus plan to counteract the squeeze on growth due to the strong CHF. The SNB announced no new measures in the currency forwards market after making an announcement on three of the past four Wednesday’s. The moves signal a change in tactics for the Swiss toward learning to live with the strong franc, rather than fighting it.

The euro fell on a rumour about Greece hiring a New York law firm to explore leaving the Eurozone.

Canada’s GDP report was mixed as the economy contracted 0.4% (annualized) in Q2 compared to the +0.1% expected. CAD initially declined but rebounded on some of the details of the report. The negative reading came on the heels of 3.6% growth in Q1 and is partly due to a number of factors, including the Japanese disaster and temporary shutdowns in the energy sector. Trade was a large negative drag due to the strong Canadian dollar but domestic demand rose at a 3% annualized rate and business investment rose 31%. A recession is unlikely but it can’t be ruled out either due to shocks from the US. The chief CAD risk is that we see the BOC taking a more accommodative stance.

Month End

JPY was the top performers in August while NZD and CHF lagged. The S&P 500 fell 5% in August in the fourth consecutive monthly decline. Gold gained 12.7%, silver rose 5.75% and oil fell 7.2%.

Glancing at the monthly charts, the downward trend in USD/JPY appears well-intact while a reversal appears to be underway in USD/CHF. The EUR/USD and GBP/USD chart shows very little direction. In the commodity currencies (especially CAD) signs of a change in trend are apparent but it’s more likely to be sideways than down.

Asia-Pacific Preview

July Australian retail sales at 0130 GMT are expected up 0.3% after a 0.1% contraction. At the same time, private new capital expenditures are expected up 4.1% in Q2 after a 3.4% prior rise.

China’s August manufacturing PMI will be released at 0200 GMT and is expected at 51.2 in Aug after a 50.7 reading in July. Earlier in the week, HSBC’s flash PMI was stronger than expected so the market has likely priced in a reading higher than the consensus. Expect to see a 30-40 pip reaction in AUD to this report.

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German retail sales unchanged, Eurozone CPI and unemployment in line with expectations. GBP weakens as BOE Posen hints more QE. Market turns to US ADP, factory orders, Chicago PMI and Canadian GDP.

German retail sales remained unchanged in July after June’s sales were revised lower from 6.3% to 4.5%. This indicator exhibits high volatility and revisions are often significant. Euro strengthened as analysts expected a contraction of 1.5%.

Annual Eurozone CPI stayed in August at 2.5% in line with expectations. The story was the same with July unemployment rate that stayed at 10%.

GBP dipped after Adam Posen, a Monetary Policy Committee member, was quoted by Reuters that G7 should do more QE to support growth. Next MPC meeting is on September 8th and GBP would be hit should the Asset Purchase Facility be increased.

The New York session will start at 8:15 am ET with August ADP report that is seen at 102K from previous 114K. Lately the ADP indicator proved not to be the best predictor of the NFP but it is still worthy to watch out for a large positive or negative surprise that could potentially indicate the direction of Friday’s NFP.

Canadian June GDP comes out at 8:30 am ET and it is expected to improve to 0.2% from a decline of 0.3% seen in May. Should the GDP contract again, the CAD would likely sell off and weaken especially against currencies that have been strong lately such as AUD or NZD.

At 9:45 am ET Chicago PMI is due and it is expected to decline in August to 54.3 from previous 58.8. July Factory orders come 15 minutes later and are seen at 1.8% from a previous contraction of 0.8%.

Europe CPI in focus after Trichet comments earlier this week, German retail sales set to fall, with unemployment set to remain unchanged. Japanese industrial production slows, FOMC minutes show further indecision ahead of US ADP.

This week's s comments by ECB President Trichet about the bank reviewing the risks to price stability suggested that the ECB could be on the verge of softening its recent inflationary tone. Today’s Euro zone CPI data could well offer further clues in that regard and keep a lid on the recent rise in the single currency. Expectations for August are for the rate to remain unchanged at 2.5%. In Italy August CPI is expected to rise 0.2% after the 1.7% drop in July, with the year on year figure remaining constant art 2.1%.

Investors will be hoping that yesterdays evidence of disappointing slump in business and economic confidence doesnt translate across into Germany'ss retail sector, after yesterday's Italian retail sales data saw a much bigger drop then expected. German July retail sales are expected to drop 1.5% down from a 4.5% rise in June.

Good news on the unemployment front is not expected either with German unemployment expected to remain at 7.7% and Euro zone unemployment expected to just stay under the 10% level at 9.9%.

Japanese industrial production continues to struggle to recover from the aftermath of the problems caused by the March earthquake and its after effects with July industrial production rising 0.6%, much less than June’s 3.8% rise, and well below expectations of a rise of 1.4%, as the strong yen continues to hobble the recovery in productive capacity, and global demand continues to slow. New Prime Minister Naoto Kan clearly has his work cut out in getting the beleaguered Japanese economy back on track.

Last night's release of the FOMC minutes showed that the committee remains divided over the next steps with respect to the ailing US economy. Yesterday’s plunge in US August consumer confidence to a 28 month low was shrugged off by the markets on the basis that it probably makes further easing more likely. Even so given that the last tranche of QE has delivered little in the way of tangible benefits it is debatable how much use further stimulus could be. In any event we will soon find out if today’s releases of August ADP employment report and Chicago PMI also miss to the downside.

Gold continues to find support after its recent plunge after Chicago Fed president Charles Evans said that he was “somewhat nervous” about the US economic recovery, and favoured further stimulus to support an ailing economy.

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Earlier this month we saw the hawks at the Bank of England throwing the towel, & today the FOMC minutes revealed the hawks losing ground to the doves hinting at more easing measures. NZD, AUD and JPY led the market; GBP and CHF were the laggards. The Asia-Pac session features Japanese industrial production and NZ business confidence.

The differing opinions in the minutes were expected due to three voters dissenting but what came as a surprise was that "a few members"members favoured a more substantial move than just keeping the Fed funds rate exceptionally low through mid-2013.

The dovish talk heightened anticipation about QE3 and other policy action. The USD fell after the minutes and precious metals were the big winners. Gold gained $49 to $1804 and silver rose 2% to $41.43.

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FOMC voters in the opposite camps also appeared on Tuesday. Evans said he favours "aggressive" policy accommodation. Kocherlakota said he "doesn't believe" in further action unless disinflation returns.

The consensus is shifting toward action at the Sept. 21 FOMC meeting with JPMorgan joining Goldman Sachs saying that a portfolio duration extension is the most likely outcome.

Sentiment data from August continues to be stunningly weak. Consumer confidence hit a two-year low in August, down to 44.5 from 59.2 in July and much worse than the 52.0 expected. Expectations for the next 6 months fell a massive 23 points to 51.9.

Hard data on US economic performance for August has not been released but if it’s anywhere near as bad as consumer and manufacturing sentiment THE TONE IN MARKETS WILL SHIFT COMPLETELY. The test begins tomorrow with ADP jobs data followed by ISM manufacturing Thursday and non-farm payrolls on Friday.

S&P 500 closed up 0.2% to 1213 but fell 7 points in the last five minutes of trading. The index has gained in six of the past seven sessions and the highs on Tuesday were just shy of the 50% retracement of the fall from the August highs.

Asia-Pacific Preview

At 2350 GMT Japanese industrial production for July is expected to rise 1.6% after a 3.8% climb the month before. In year-over-year terms, production is expected down 1.9%, showing that most of the impact of the earthquake is behind us. Yesterday’s retail sales report easily beat expectations and another beat in this report suggests some upside in Japanese economic performance.

The other report to watch is NZ business confidence at 0100 GMT. There is no prior but the prior was 47.6. We think NZD is vulnerable here after a nine-day run up and a soft reading here along with a change in risk sentiment could lead to a swift selloff.

This may be a holiday shortened week, but euro price action is already showing some negative dynamics. Our euro focus, however, is not via the usual price charts, but the 1-month volatility chart, which we shared with our Premium members on June 17. The latest volatility action (equivalent to VIX on EUR) reveals some important patterns. We bring to your attention in today’s Premium trades (9 of them) the EURUSD monthly volatility chart, whose bottoming pattern spells vital clues for the spot FX rate. Our 9 trades include EURUSD (2), EURJPY (2), GBPJPY (1 hit all targets), S&P500 (1), Dow-30 (1), Gold (1) and silver (1). Direct access here: http://www.ashraflaidi.com/products/sub01/access/?a=485 Non-members can click here: http://www.ashraflaidi.com/products/sub01/

USD is stronger across the board in the ongoing session. Eurozone data disappointed again, UK mortgage approvals rose. Market turns to Consumer confidence and FOMC minutes. Ashraf's latest Premium trades are up; 2 on EURUSD, EURGBP, EURJPY, GBPJPY gold, silver and more.

The Eurozone Business climate indicator dropped in August to 0.07 from 0.44 and the Eurozone Economic confidence fell to 98.3 from previous 103. Both indicators showed the weakest print since March 2010. This drop is blamed on continued anticipation of a slower growth and debt worries that plague Eurozone.

In the UK, Mortgage Approvals increased to 49.2K in July from 48.5 in June reaching the highest level since May 2010. Building Societies Association noted “an encouraging trend”.

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S&P Case-Shiller composite index is due at 9:00 am ET and seen coming at -4.6% after dropping by 4.5% previously. The selling price of a single family home has been declining each month since July 2010.

Consumer Confidence in August is seen lower at 52.1 after 59.5 in July.

At 2:00 pm ET the Fed releases Minutes from its August meeting that could provide insights as to how strongly FOMC members view the opposition to announcing additional easing measures and what tools would the Fed implement should the economy deteriorate to a point when the use of such tools would be warranted.

Euro remains resilient despite Trichet comments in reviewing price stability, Japan retail sales, Australia Building Approvals, FOMC minutes

Yesterday’s comments by Trichet that the ECB is reviewing the risks to price stability, failed to dent the single currency, which is somewhat surprising given that reading between the lines, could well suggest that any further rate rises could well be off the table in the near future. It could well also mean that the next move in rates could well be lower, given the problems in southern Europe. The euro also received a boost after EU officials rebuffed IMF chief Lagarde’s call for bank recapitalisations, saying that they were unnecessary.

In economic data released later this morning Euro zone consumer confidence for August is expected to remain in negative territory at -16.6 while Italian retail sales are expected to rise 0.2% for June.

Italy also stays in focus as it looks to issue €8.5bn worth of 3,7 and 10 year bonds as its yields start to creep higher again.

Japanese retail sales for July continue to pick up as the country continues its long climb out from the after effects of the March earthquake and tsunami. Large retail sales rose by 0.8%, reversing the 0.5% decline in June, while household spending while still declining is recovering after May’s 4.2% decline, declining 2.1% against an expectation of a decline of 2.9%. Japanese unemployment also rose more than expected to 4.7%.

Finance minister Yoshihiko Noda looks set to become the next Prime Minister of Japan as he looks to take on the poisoned chalice of problems of the Japanese economy that have eluded five previous incumbents, over the last five years.

Building approvals in Australia improved slightly in July after June’s 3.5% fall, rising 1% but they were below expectations of 2%. The figures for July showed a year on year decline of -15% suggesting high interest rates continue to weigh on the sector.

Later this afternoon the minutes from the August FOMC meeting are expected to give further details on the extent of the splits on the committee and the level of opposition to further stimulus measures.

A tie-up between the second and third largest banks in Greece sparked a rally in risk assets to start the week. AUD and NZD were best performers, CHF and JPY lagged. Japanese retail sales and employment are the highlights of the Asia-Pacific session.

Greece’s Alpha Bank agreed to buy Eurobank Ergasis in a move that sent Greek’s main stock market index up 14%. The merger sent a signal that the worst of the crisis in Greek banking may be over as the industry starts to re-organize. The announcement helped push EUR/USD to the highest since early July. The gains were capped and later faded, in part, due to Lagarde’s weekend comments suggesting banks urgently need capital.

Comments from Trichet were somewhat cryptic. He said he expects inflation to remain above 2% in the coming months but noted that the inflation outlook is “under study.” He also omitted the comment from the Aug. 4 ECB press conference about “upside risks to price stability.” It’s a dovish shift but an expected one.

The Swiss franc lagged on risk appetite and the declining need (at the moment) for a banking haven. The S&P 500 gained 2.8% to 2010 and USD/CHF touched above 0.8200. The gain in stocks was an important technical breakthrough as the close was above the Aug. 17 high and the highest since Aug. 5. One caveat was that the gains came on the lowest volume of the month.

Economic data also boosted sentiment. US personal spending rose 0.8% in July compared to the +0.5% expected. Critics attacked rises in autos as a false skew and also noted that the spending came before the US downgrade. Pending home sales fell 1.3%, as expected.

Asia-Pacific Preview

Japan’s unemployment rose to 4.7% from 4.6% while retail sales rose 0.8% from -0.5%. Household spending fell 4.2% after a 2.1% decline in the prior month.

German CPI is still being collected but indications are that it will be as expected. Fundamental releases in NY session include Core PCE price index, personal spending and income and housing data.

USD trading lower against all majors with the exception of CHF. One of the largest moves is seen in USDCAD that has been steadily declining since Asian open. USDCAD currently trades around 9760 which is a few points below the previous range.

German CPI is expected to reach 2.3% on annual basis, slightly lower from previous 2.4%. Month over month CPI is projected to show a decline by -0.1% from previous increase of 0.4%. CPI data is still being collected in several states but the already published results suggest that there will not be any significant surprise. So far, most states have showed annual prints 1.9%-2.4% while monthly numbers show a decline between -0.1% and -0.2%.

Euro is supported by European Commissions comments that there is no need to recapitalize European banks. These remarks come in response to Christine Lagardes speech in which she called for urgent recapitalization of Europes weakest lenders. Lagarde is the managing director of the IMF.

The New York session will bring various data from July. At 8:30 am ET Core PCE price index is due and is expected to increase to 0.2% from previous 0.1%. The annual figure is seen at 1.4% from 1.3%. Given the latest increase in producer and consumer inflation the possibility for a higher print certainly exists. This indicator is Feds preferred measure of the overall price level. A figure on the upside will further add resistance to any QE3, thus maylead to renewed downside in equities.

Personal Spending is expected to rise to 0.5% after dropping to -0.2% in June and Personal Income is projected to increase to 0.3% from 0.1%. Both indicators measure the financial health of American consumers. Given how important consumers are to the US economy, disappointing figures would imply continued deterioration.

At 9:00 am ET J. C. Trichet is scheduled to testify on Eurozones debt crisis before the Economic committee of the European parliament so high volatility is likely.

At 10:00 am ET the National Association of Realtors will release its latest Pending Home sales figures. Sales are expected to decrease by -0.8% from a 2.4% jump in June.