Thursday, July 23, 2009

Morning Update/ Market Thread 7/23

Good Morning,

Futures are mostly flat this morning, dollar up. Here’s a snapshot of the overnight action:

Ford reported a smaller loss than expected, “only” $638 million. Now, losing 2/3rds of a billion dollars in one quarter might sound bad to you and me, but evidently to the people on CNN it’s a terrific thing and the opening line there is that Ford reported a profit! The profit, of course, is net minus one time “special” charges. This is the latest gimmic to give the marketing and media something to spin, and it’s ridiculous in that it is feeding the economic mass psychosis. Ford stock jumped 11% on its report. Ebay also jumped as they beat estimates with higher earnings – another trend this earnings season is that profits at companies that were aggressive with cost cutting are producing better results despite year over year sales shortfalls. My question would be, what will happen to earnings going forward when sales do not bounce back and the easy cost cutting has taken place? We’re going to find out.

Weekly jobless claims rose to 554,000 last week, up from the revised higher 522,000 the week before. Here’s Econoday’s report:
Initial jobless claims rose 30,000 in the July 18 to a slightly lower-than-expected 554,000 (prior week revised slightly higher from 522,000). Initial claims swung lower in prior weeks and now appear on their way higher as seasonal adjustment problems unwind, problems tied to earlier-than-usual summer layoffs in the manufacturing sector specifically in the auto sector. The Labor Department told Market News International that claims should return to trend line in the next few weeks, a warning hinting at 600,000 levels once again. Continuing claims fell for a second straight week, down 88,000 in the July 11 week to 6.225 million. Continuing claims have also been affected by adjustment problems and also, unfortunately, by workers exhausting their benefits. Market reaction was very limited though the dollar did weaken slightly while commodities firmed, reaction consistent with an increased appetite for risk.

Well, at least they are acknowledging that workers are dropping off the far end of their benefits. But please read Point's recap in the comments below for a dose of number reality!
Total UC benefits filings for July 4 (the latest week for which complete data is available) again climbed over the 900k mark, to (yet another) new high-water mark of 941k. This includes 581k initial and 360k extended claims.

Total UC recipients for July 4 reached (yet another) record high, just over 8.8 million, an increase of 200k over the prior week. This included 6.174m receiving regular benefits and (yet another) record number of Amerikkkans collecting extended benefits, 2.632m.

Twenty-three (23) states reported week-over-week initial claims increases of at least 1,000, with 12 states coming in over 4,000 and three with 10,000-plus. New York led the way with 12,500 new claims, while both North Carolina and Florida came in just north or 10,000.

(*Note - both these charts reflect unadjusted data - thank you, Point, for producing those charts and taking the time to dig a little deeper!)

Existing home sales come out at 10 Eastern and tomorrow we get the consumer sentiment reading.

From a technical perspective, the market is extremely overbought. Yesterday the SPX did manage to put in an intraday new high by reaching 959 which is just below the very powerful 961 pivot. The Transports tried, but failed to put in a new high and thus we have yet another short term potential for a Dow Theory non-confirmation.

Since both the DOW and S&P have made a new high, it is a done deal that wave b down of B up is over. Again, it’s also the first time in this bear market that a standard Head and Shoulders pattern has failed. Still, I believe we’re primed to see some pullback especially if the 961 pivot holds, and I think it likely will for now, depending, of course, on what the Goldman computer programs desire!

Oh, did I say something bad about the kind and generous Goldman Sachs people? Why they are so kind to live up to their word and to redeem their toxic warrants at the full price that they were lent… of course that was spun to full effect and the mainstream media is attempting to paint them like they are doing the taxpayers a favor. You have to give their spin machine credit, what they deserve is to be behind bars, certainly not lauded.

Dire Straits - Sultans Of Swing: