US ISM: Manufacturing vs Services
Looking at the way the manufacturing ISM (green) has preceded services ISM (white) into the downside, it is fair to expect today's release of July services ISM to come in near 50 than the expected 53. More importantly (and worryingly), the overall downtrend appears unlikely to be reversed without any considerable dosage of stimulus. Watch in Q4 2010 how both ISMs recovered on the anticipation/announcement of the Feds QE3 program. Without the stimulus, the ISMs appeared to have been heading back below 50. Similarly, the rebound in Q2 2009 was partly boosted by the official announcement of QE1 in March 2009. But the move was signalled 3 months earlier by the Feds decision to slash interest rates to zero in December 2008. BOTTOM LINE: QE3 is inevitable. It may not be called QE3, but it will take the form of further stimulus, at which point it will test the resilience of the market bears (not bulls). Stay tuned in our Daily Premium "Intermarket Insights" for directional calls here: http://www.ashraflaidi.com/products/sub01/
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