Thursday, May 14, 2009

Morning Update/ Market Thread 5/14

Good Morning,

The market is still in the range where it finished yesterday, but slightly higher at the open:

This action is producing what appears to be a bear flag. If so, and if it breaks in the correct direction, it is worth about 31 points and that would target the 850 area on the SPX. There’s nothing noteworthy in that area, it would be in between the 23.6 and 38.2 fibs. It would be, however, pretty close to the bottom of the tentative channel I have sometime in the next couple of days.

Of course we are oversold on a short term basis already so this is an area to be careful.

Okay, so now that Goldman has decided to sell the market a little, I just happen to think it’s amazing that this jobless claims report is released:
Jobless claims surge

Government says 637,000 people filed for first-time unemployment benefits last week. Continuing claims at all-time high for 15th week in a row.

NEW YORK ( -- The number of people filing initial claims for unemployment benefits rose more than expected last week, while the number of people filing claims on an ongoing basis rose to a record high for the 15th straight week, according to a government report released Thursday.

A total of 637,000 people filed new claims for jobless benefits in the week ended May 9, said the Labor Department. That's up 32,000 from an upwardly revised 605,000 in the previous week.
Economists surveyed by had forecast 610,000 initial claims.

The 4-week moving average of initial claims, which smoothes out volatility in the measure, rose 6,000 to 630,500.

In the week ended May 2, the most recent data available, 6,560,000 continuing claims were filed. That's the highest number since the Labor Department started tracking the data in 1967 and an increase of 202,000 from the previous week.

I’m just going to say once again, that I don’t trust any of the government statistics and if it were up to me I would replace everyone at the BLS and start over with a system that cannot be manipulated.

Speaking of numbers that are manipulated, the inflation reporting is likewise unreliable, especially when looking at month to month numbers. But again, you cannot make long term comparisons because they have changed their calculating procedures so many times over the years.

So, the Producer Price Index, PPI, just came in at .3% for the month of April which is a big increase over March’s -1.3%.

Like yesterday’s import/export prices, here it is more telling to look at the year over year numbers. And that came in at -3.5% versus -3.6% in March, a slight improvement. I would attribute most of the monthly increase to energy, let’s see what Econoday says:
Producer price inflation in April made a comeback – and this time it was not energy causing the price hike. The overall PPI rebounded 0.3 percent, after falling 1.2 percent in March. The April increase was above the market forecast for a 0.1 percent rise in the headline PPI. Leading the boost was a 1.5 percent jump in food prices, following two months of decline. Meanwhile, energy actually slipped 0.1 percent, following a 5.5 percent drop in March. The core PPI rate also firmed – to a 0.1 percent rise after no change in March. The core gain matched the consensus projection.

The 1.5 percent surge in food prices was led by a 43.7 spike in eggs prices with other foods also contributing to a lesser degree. Energy costs inched down 0.1 percent despite a 2.6 percent jump in gasoline prices in April. Residential gas dropped 6.2 percent in the latest month while electricity slipped 0.6 percent.

Helping the core rate to firm were gains in prices for light trucks and passenger cars – up 1.1 percent and 0.2 percent, respectively.

For the overall PPI, the year-on-year rate rose to minus 3.5 percent in March from down 3.6 percent the month before (seasonally adjusted). The core rate year-ago pace eased to up 3.4 percent from up 3.8 percent in March.

This data is probably just good enough to prevent a deflationary spiral, but not so hot that the Fed needs to worry about raising rates. “Just right” which makes my cynical mind suspicious once again. It would not be if the system was transparent and consistent, but it’s not.

Bonds are headed down…

Have a good day,


PS, if you ask me I think Major Tom must be heading up statistics at the BLS, sure is a lot of timely "Space Oddity" in there!

David Bowie - Space Oddity: