We opened up about 35 on the Dow.
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Monday, November 9, 2009
Friday, November 6, 2009
Watch for Mid-Day Weakness
By Rev Shark
RealMoney.com Contributor
11/6/2009 10:33 AM EST
The thesis I stated this morning was that the dip-buyers would buy the pullback on the employment news and take us into the green but that they would struggle to gain further momentum. We have the green on the screens, and now we'll see if the buyers have the juice to keep on chasing them higher.
I've made a couple of smaller buys, but I'm having a very difficult time finding new long setups that I like. We have a lot of broken charts with big bounces back to resistance that look more like potential shorts than buys, but obviously this is a market in which shorts get little respect.
I think we have the potential for the market strength to fizzle, especially as the bulls become overly euphoric about how wonderful everything is, although the jobs report really wasn't so hot. The market has had a tendency for mid-day weakness lately, and I'll be watching for that pattern again.
Goldilocks, We Hardly Knew Ye!
By Ron Insana
Portfolio Manager
11/6/2009 10:11 AM EST
Just yesterday, the market surged on a jump in productivity and declining jobless claims. This morning, a slight miss on the October employment report and we're set to tumble once again.
As I have said in recent radio reports, this market has all the emotional stability of John & Kate Plus Eight!
When combing through October report, it is not as bad as the market response would suggest. True, the unemployment report has jumped to 10.2%, the highest since April 1983. And the economy lost 190,000 jobs.
Still, prior months were revised upward, making the three-month average show improvement.
What today's data reinforce is the notion that the Fed is on hold for the foreseeable future, an argument I have been making for months, despite numerous protestations among the inflation hawks to the contrary.
Stock-index futures are pulling back, though I wouldn't be surprised to see a rally by the end of the day, given the market's recent history.
What is most interesting is the new and pronounced divergence between gold and oil. Gold is closing in on $1,100 an ounce, while oil is dropping more than 2%.
The break in the oil-gold linkage underscores another point I have recently made. Gold is rising as a safety play, or a hedge against financial or paper assets, not as a harbinger of future inflationary pressures.
This is a key distinction that gold bugs simply refuse to make, suggesting that gold is discounting hyper-inflation that will eventually, some day, some way, result from the Fed's accommodative monetary policies.
This is simply not the case, otherwise all commodities would be following gold's lead. Soft commodities, like grains continue to collapse amid bumper harvests, while other raw materials prices are advancing on faux Chinese demand. (Stockpiling commodities is not the same as using them. The Chinese may be spending money on importing raw materials, but it does not mean there is end-user demand for the goods. Simply consider Beijing a "buffer stock manager" for the world's industrial metals.
(By the way, when I first started in financial journalism, there was a "buffer stock manager" who was charged by international governments to control, or manage the world supply of tin -- as his job. He would add or remove tin from world supplies to maintain a steady price for the metal. His ability to maintain prices diminished and the effort collapsed in October of 1985, leading to a collapse in the price of tin. Don't think it can't happen again without a fully fledged worldwide economic recovery to support prices of key commodities! But that is really another story for another day!)
As I write, the stock market is clawing its way back toward unchanged, pre-open, as investors realize that trendline improvement in employment should, according to economist Robert Barbera, quoted on CNBC this morning, produce positive jobs numbers by the spring.
Goldilocks took a two-year walk in the woods. She was sighted walking down Wall Street yesterday, scaring the bears away.
The bears may be back for the moment, but Goldilocks seems to have gotten her mojo back, today's data notwithstanding. I'd expect the bears must be wondering who was sitting in their chairs, yesterday. They may find a waking and more confident Goldilocks in the days and weeks ahead. Main Street will spot her about 6-9 months after the bears departed Wall Street ... also just as the flowers start to bloom.
Ignore the Jobs Report? Not I!
By: Doug Kass
thestreet.com
11/6/2009 9:24 AM EST
The jobs report is a bad report -- let the talking heads and investors/traders who worship at the altar of price momentum disregard it or rationalize it away.
But I won't, because in the fullness of time, fundamentals always trump the market's price momentum.
The prices on Wall Street remain ahead of the conditions on Main Street. The increased certainty and consensus of a smooth and self-sustaining economic recovery as well as a $72-$73 a share in 2010 S&P earnings should be tested in the period ahead -- in all likelihood, the unemployment rate will remain elevated at levels far higher than assumed by most. And with this will likely come disappointing personal consumption expenditures and higher savings, and, most important, lower-than-expected business confidence, expenditures and profits.
I remain of the view that the U.S. is experiencing a structural change in employment in the current cycle. (Just speak to company managements (as I do every week) and ask them what their hiring intentions are -- even if the revenue delta improves.)
Today's report showed a 55.1% structural loss of jobs not coming back, duration of unemployment was at a high of nearly 27 weeks and temporary workers experienced its largest jump in two years.
I wanted to repeat something I spoke about on "Fast Money" Monday night and that I wrote as a follow-up, in my opening missive on Tuesday morning:
It is truly is different this time.
America is about to experience a transformation from a nation with debt growing faster than incomes to a nation in which incomes will grow faster than debt. And it's not because incomes are growing especially quickly. They are not; they are trending lower. It is because of the expected large contraction of consumer debt, and the great debt unwind is the obvious byproduct of the credit crunch just passed. Past cycles, businesses have consistently been the driver of consumer incomes and spending.
I learned in my economics classes at Wharton that this phenomenon is known as Say's Law of Production. Say argued:
against claims that business was suffering because people did not have enough money and more money should be printed; and
that the power to purchase could be increased only by more production.
But -- and this is the big BUT -- over the last century, the consumer was in far better health than today.
Consider the following facts:
In the past, corporations didn't engage in the draconian cost-cutting that they have embarked on in the past several years.
Globalization wasn't the mainstay condition that it is currently, so previously we didn't see the wage deflation and the magnitude of the decline in disposable incomes present today.
Finally, consumers were not as tightly wound and leveraged in any of the previous cycles. Just look at the record level of household debt relative to incomes that exists today.
As a result of the above factors (and others), the U.S. currently has 10% unemployment, and if you count in part-time workers that can't get full-time jobs and those that have given up looking, the number almost doubles to one-fifth of all Americans. The consumer is in dire straits, and, for the first time in history, it is the consumer that is going to drive business' growth, expansion plans and confidence, not vice versa.
Sorry, monetarists and optimists, Say's Law might be dead -- and we face a structural rise in unemployment that the markets have not yet accepted.
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