Let’s start with the really scary numbers that you need to know:

• Retail sales were down in July.
• 25% of current home sales are at a loss, which means that the current crappy home sales numbers are actually about ¼ lower than reported, which might explain why Mortgage application volume continues to fall.

Meanwhile in Japan, their economy contracted at a 2.4% annual rate, once again showing that decoupling from the US economy is a failed theory.

Still, the president of the ECB, Jean- Claude Trichet is sending out signals that imply that there will be no Euro zone rate cuts, which would imply that the dollar may not have much strengthening left in it.

I would note that businesses don’t put much stock in the economy right now. Inventories increased, but at a less than ½ the rate than the rebate juiced spending by consumers in June, implying that they are expecting a major slowdown.

The saying that, “When the US economy gets the sniffles, the rest of the world gets a cold,” still applies, and so we are still seeing capital flight into the US dollar, which is why it strengthened today.

In energy, oil rose on thighter than expected inventory reports, and retail gasoline has continued its unbroken downward streak.