Thursday, October 8, 2009

Morning Update/ Market Thread 10/8

Good Morning,

Equity futures are substantially higher this morning following earnings from Alcoa yesterday:

The dollar dropped dramatically, testing the 76 level and even sending a probe down to 75.68. If the 76 level breaks, the next support isn’t until the 72ish range, a large move that could happen fairly quickly. Gold is higher, touching $1,060 overnight, and oil is hovering around the $70 a barrel range, but dropping just prior to the open.

Alcoa's earnings were an improvement quarter over quarter (down 30% yoy), but there's a caution point here in that their increased revenues came solely due to higher prices for aluminum and it looks as though their total throughput of aluminum was actually down substantially. That may indicate weaker demand than the price is reflecting and, of course, most analysts did not pick up on it.

Weekly initial unemployment claims fell to a much cheered level of “only” 521,000, the lowest level in 9 months and yet still a total disaster. Here’s the spin, long live the king:
Fewer workers are filing for unemployment claims in what is encouraging news for the economic outlook. Initial claims fell significantly in the Oct. 3 week, down 33,000 to a 521,000 level that is much better than expectations (prior week revised 3,000 higher to 554,000). The four-week average is at 539,750, down 9,000 in the week. Continuing claims also fell, down 72,000 in data for the Sept. 26 week to 6.040 million. The unemployment rate for insured workers, as high as 5.2 percent in June, slipped another tenth in the week to 4.5 percent. Levels in this report are at their lowest since the first quarter. Initial reaction was very limited, perhaps because improvement in this report during September didn't pan out to improvement for the monthly employment report.

Meanwhile Congress is wrestling with extending benefits a whole 4 weeks as a record number of unemployed fall off the backside of benefits and are simply no longer counted. It always hurts to remember that the U.S. now employs fewer people in manufacturing than we did prior to WWII.

And speaking of wars, the “war” in Afghanistan now has gone on for more than 8 years, TWICE AS LONG as WWII! I’ll never forget listening to Obama give a speech in Seattle, pre-election, where he was talking about ending the wars being his first priority. Once elected, however, his first priority became funneling more money to the central banks to “get credit flowing again!”

From a technical perspective, it would appear that we completed the first 4 subwaves of wave 1 up of 5 up of c up of B up yesterday. The overnight ramp may have been wave 5 up (or it may finish up today), so I expect wave 2 down to begin soon and it should be followed by another strong push higher for wave 3 up.

There was a very small movement on the McClelland Oscillator yesterday meaning that a large move is coming either today or tomorrow. With prices overnight clearing the 1,061 pivot, it becomes support with 1,041 being the next level of support and now 1,090 is overhead. Should 1,080 be breached, then the fifth wave will have made another high taking the failed fifth wave scenario off the table.

Consumer credit came in at minus $12 billion for the month of September. Here is the updated TOTAL consumer credit chart clearly showing that consumer credit is shrinking:

All those credit dollars... simply dust in the wind, lol!

Kansas – Dust in the Wind: