Friday, November 6, 2009

Morning Update/ Market Thread 11/6

Good Morning,

Equity futures were up but dove hard on the Employment situation report:

The dollar is up, bonds are up, and VERY interestingly, oil is diving while gold soared initially, but now also reversed.

And the headline came in even worse than I expected at 10.2%, 190,000 jobs lost in the month of October if you believe their numbers. I don’t. And while the monthly number is decreasing, the total percentage of the population unemployed keeps growing as no new jobs are being created. Please witness the U6 “alternative” report…

A jump from 17 to 17.5%! Truly not good. I’ll dig deeper into the numbers and will report either in another post or in the daily thread (don’t miss Point’s analysis either!). Below is the entire BLS report:

Unemploy Oct -

Here's Econoday's report:
The jobs picture in October worsened as the unemployment rate topped double digits and payroll jobs fell more than expected. Nonfarm payroll employment in October declined 190,000, following a revised decrease of 219,000 in September and a revised contraction of 154,000 in August. The October fall in payroll employment was more negative than the market projection for a 175,000 decrease. September and August revisions were up 91,000 net for the two months (the net declines were smaller).

Payroll losses were widespread in both goods-producing and service-providing sectors but declines were sharper in the goods-producing sector. Goods-producing jobs contracted 129,000 in October, following a 114,000 decline the month before. Construction jobs fell 62,000 while manufacturing decreased 61,000 and mining dipped 5,000.

Wholesale trade numbers come out at 10 Eastern, Consumer Credit at 3 Eastern. Consumer credit is tightening as banks conduct their CREDITORY practices of jacking rates and closing accounts, something that is accelerating now that the date for the new credit card laws has been moved up. No credit, no jobs, the consumer is 70% of the economy and therefore no meaningful recovery.

One piece of evidence of that came yesterday when we learned that retail online sales decreased by 2% yoy in the 3rd quarter, the first time in history that we have had two successive quarterly yoy drops in online sales.

From a technical point of view, if you remember I’ve been saying that wave 2 is the “fool ‘ya” wave. I can’t tell you how many people I read last night were talking about new highs. The DOW did make it back to 10,000 retracing 75% of its downtrend, but as I looked around the charts last night I could see that it is the anomaly as the XLF did not even make it back to 38.2%! The market does not go forward without the financials.

Neither the Utiilities nor IYR made it back to the 38.2%, most indices did make it back to the 50% level, the S&P back to 61.8%, and the DOW led as defensive big caps do - initially.

And, just like I thought, we went to the top of the small rising wedge in the S&P, the top of the channels in the other indices, and now we are returning back down. My guess was that we would go to 1,070ish, and the /ES topped out 1,069, a near perfect 61.8% retrace.

This means that my primary wave count is likely correct, and that we may have just begun wave 3 down. I’ll want to see the bottom of the current channels break for confirmation. The action in the dollar will also be very important.

The first pivot in play is 1,061 with overhead at 1,090. The 38.2% fib is at 1,057, the bottom of the SPX channel/wedge is around 1,054, and the next lower pivot is at 1,041. If the 1,061 pivot falls, then momentum will shift back to the downside.

We were overbought on the short term oscillators yesterday, so I would expect this downdraft to have some legs to it, we'll see.

Boy, watching those Texas politicians place multiple votes yesterday just made me more furious than I already was - it was the Fannie house renting/bad asset hiding that really got me fuming. We are continuing to plunder as Bastiat so eloquently stated way back in 1850, we're trading our freedom for security, but losing it all in the process, and as Point was mentioning in our thread yesterday, "Hey, freedom's just another word for nothing left to lose…"

Janis Joplin – Me and Bobby McGee: