Thursday, September 3, 2009

Morning Update/ Market Thread 9/3

Good Morning,

Equity futures are higher this morning, here’s the overnight action in the /YM and /ES:

The dollar is down slightly, bonds are down slightly, gold is up a little, and oil was higher but is now about flat.

Of course the Shanghai market rose 4.8% overnight on fundamentals, right? Not!
Sept. 3 (Bloomberg) -- Stocks in China rose the most in six months, driving the yen and Treasuries lower, on speculation the government will adopt measures to boost equities after the Shanghai Composite Index fell into a bear market.

The Shanghai gauge gained for a third straight day, closing 4.8 percent higher, while the MSCI World Index of 23 developed countries advanced 0.4 percent at 12:50 p.m. in London.

Ha, ha, love that. They grow a bubble, pop a bubble, grow another bubble, pop the bubble, now they want to grow it again. Pilot induced oscillation at its finest. The hand is not so invisible anymore is it? Neither here nor there.

Jobless claims came in at 570,000 for the past week, the same as the week prior:
There has been very little change in initial jobless claims over the past seven weeks, pointing to little change in payroll losses for tomorrow's monthly employment report. Initial claims fell 4,000 to 570,000 in the Aug. 29 week (prior week revised 4,000 higher to 574,000). The four-week average is right at the current week, at 571,250. Continuing claims have been generally moving lower since early July, unfortunately reflecting the expiration of benefits and not necessarily new hiring. But in a bad sign, continuing claims rose in data for the Aug. 22 week, up 92,000 to 6.234 million. The unemployment rate for insured workers rose 1 tenth to 4.7 percent. There was no significant reaction to the report.

Hate to tell ‘em this, but that’s a horrid, horrid number, and this tregedy has been going on for quite some time with no REAL or meaningful help. Millions of unemployed are dropping off the unemployment roles soon.

The non-manufacturing ISM (service) comes out at 10 Eastern.

Below is a close in daily shot of GLD. Yesterday’s breakout was HUGE, and it was on huge volume. Note how it closed far above the upper Bollinger. That’s a condition that will usually correct at sometime to let the Bollinger catch up:

The strange part about what’s happening is at the same time that gold is going up, the TNX (10 year bond fund) is breaking down:

These two charts conflict one another as you would normally expect gold to rise as interest rates rise, not as they fall. The TNX is saying “deflation” and gold is saying something else. So, two choices present us for what’s happening. One is that one of these triangle breakouts is wrong. The other is a loss of confidence. If it’s a loss of confidence, then I would expect that eventually the TNX will reverse and gold will continue higher. Interesting times, that’s for sure.

The markets are oversold in the short term, but there’s room still on the downside with the daily charts. The /ES just snuck back under 1,000, so that area is still resistance and 990 is the support pivot, then there’s support all the way through about 975 or so with 961 being the next lower pivot.

Yesterday’s breakout on gold was very strong. Normally I would expect to see a retest, but with that strength I wouldn’t count on it. The miners also took off. I was looking at some historic silver and gold charts again yesterday and note that the miners tend to do VERY, VERY well following times of credit collapse. They did tremendously well in the mid 1930’s.

Gold and bonds, that’s some kind of strange magic…

ELO – Strange Magic: