By Jeff Pritchard, ALTAVEST Worldwide Trading, Inc. www.altavest.com

**1:35 PM PST** Weekly MBA home purchase applications rose 6.3% (but the index is still down 40% from year-ago levels). The MBA’s weekly refinance index fell 3.1%, its first decline in six weeks and coincides with an uptick in mortgage rates. ICSC-Goldman weekly store sales fell 0.4%. The Y/Y pace fell to +1.8%, its lowest reading since May. Redbook reported flat retail sales for an unchanged Y/Y rate of +3.0%. The Bank of Canada raised its key interest rate 25bp to 1.0%. The Fed’s Beige Book Report says that the economy continues to grow “at a modest pace” but “with widespread signs of deceleration.” Consumer credit contracted $3.6 billion, in line with expectations. Stocks opened with strength on Wednesday, but a weak Beige Book report appeared to limit the stock market’s advance.

The S&P 500 is still stuck traversing its nearly 4-month old trading range. Old support and resistance levels have not changed. Below the market, 1040 and 1000 appear to be major support levels. 1100 and 1125 have been barriers for stock bulls on the upside. Wednesday’s Beige Book report simply stated what we already know, U.S. economic activity is decelerating. In fact, the recent trend in GDP data suggests that it is quite possible that GDP growth could go negative before year end. Nevertheless, we are past Labor Day and focus in the U.S. could soon change to the November 2nd mid-term election. Prospects for a Republican takeover in the House and a possible change of control in the Senate appears to comforting for bulls. For better or worse, Wall Street bulls are thought to be dominated by conservatives, therefore the possibility of a more conservative Congress could be encouraging bulls to buy stocks despite disappointing economic data. For us, political uncertainty and weak economic data make a good case for a continuation of range-bound trading. The polls leading up to the election could be a good discounting mechanism for the stock market. As such, we expect the mid-term election result to be discounted in advance.

Thursday’s Reports of Interest
4:00AM PT – BOE Announcement
5:30AM PT – International Trade, prior = $-49.9B, consensus = $-46.8B, range = $-53.4B to $-43.0B
5:30AM PT – Weekly Jobless Claims, prior = 472K, consensus = 470K, range = 465K to 480K


**6:47 AM PST** Even though banks have the ability to borrow funds at near-zero interest rates from the Fed, almost 11 percent of the nation's banks are still on the problem list.

**1:10 AM PST** Early last week I saw Jim Cramer on Mad Money analyzing the formation of an S&P chart. He was specifically pointing out a head and shoulders top formation. Today, I read analysts on Reuters pointing to a reverse head and shoulder bottom formation in the same market. While technical indicators may be a bit foggy, fundamentally the market looks to be ready to head lower, especially if the unemployment rate continues toincrease from last month's report.