Friday, December 4, 2009

Morning Update/ Market Thread 12/4

Good Morning,

Futures skyrocketed right back up to the old highs on the “employment situation” report. It’s actually quite funny if the deception wasn’t so bad. Yesterday we had the White House spokesman, Gibbs, “slipping” that the rate would be going up and then later recanting that remark. Of course the rumors started flying that the report would be bad, and then it comes in much better than expected, so you have to wonder if the White House has become Goldman’s set up man? I guess that’s too harsh, I didn’t really mean to say that, so just forget that I did, okay?

A VERY interesting thing just happened on the way to spike the markets that needs to be watched closely… the dollar is ramping upwards along with equities! Bonds are shooting downwards (higher rates), oil momentarily spiked higher, but is already bleeding back down, while gold dropped sharply. Hmmm. Not all is what it appears.

To the report – the headline number is that for the month of November there were only 11,000 jobs lost nationwide, and the jobless rate fell from 10.2 to only 10%! Do you believe that? Ummm, let’s see, each week we had 450,000 to 500,000 new claims for unemployment, ummm, that means that someone was doing one hell of a lot of hiring over the month of November to compensate, hmmm, I wonder…

What I really wonder is how high to raise my BS flag.

But here’s Bloomberg’s fine report on the report:
By Timothy R. Homan
Dec. 4 (Bloomberg) -- Employers in the U.S. cut the fewest jobs in November since the recession began and the unemployment rate unexpectedly fell, signaling the recovery is lifting the labor market out of the worst employment slump in the post-World War II era.

Payrolls fell by 11,000 workers, less than the median estimate of economists surveyed by Bloomberg News, figures from the Labor Department showed today in Washington. The jobless rate declined to 10 percent.

The Obama administration, under pressure after almost half of the 7.2 million jobs lost during the recession occurred since the president’s inauguration, is considering additional measures to boost job growth. Ben S. Bernanke, chairman of the Federal Reserve, has pledged to maintain record-low interest rates until joblessness subsides, even as a recovery takes hold.

“We’re getting closer to the point where companies will need to hire back workers,” Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report. “We’re going to see an improvement in hiring just because firms have cut so much.”

Revisions added 159,000 from payroll figures previously reported for October and September. The October reading was revised to show a 111,000 drop in jobs compared with an initially reported 190,000 decline.

Payrolls were forecast to decline 125,000, according to the median estimate of 82 economists surveyed by Bloomberg News. Estimates ranged from decreases of 30,000 to 180,000.

The jobless rate was projected to hold at 10.2 percent. Forecasts ranged from 9.9 percent to 10.4 percent.
Increase in Hours, Wages

The smaller-than-expected decline in payrolls was accompanied by gains in hours worked, wages and staffing at temporary employment agencies, signs companies may soon begin to hire full-time workers.
The number of temporary workers increased 52,000 in November, the biggest since October 2004 and the fourth straight rise. Payrolls at temporary-help agencies often turn up before total employment because companies prefer to see a steady increase in demand before taking on permanent staff.

The average work week grew to 33.2 hours in November, the highest since February, while average weekly earnings rose to $622.17.

Some companies are adding workers. Infosys Technologies Ltd., India’s second-largest software exporter by revenue, plans to add 1,000 employees in the U.S. in the next four to five quarters, said Chief Financial Officer V. Balakrishnan.

Government Employment
Government adjustments subtracted 91,000 jobs from the unadjusted November payroll number, about in line with the historical figure. This indicates the seasonal adjustment issue may not have played much of a role in last month’s data.

Today’s report showed factory payrolls fell 41,000 after decreasing 51,000 in the prior month. The median forecast by economists called for a drop of 45,000. The decline included a drop of 6,300 jobs in auto manufacturing and parts industries.

Boy, this is terrific! Everything in this economy is fixed. No recession, no depression, deficits don’t really matter, debt saturation is okay and everything is fine! Now get back to work all you loser bloggers! LOL, well, I guess we should actually look at the report first, but that would be just us acting all crazy like, you know questioning their “birth/ death model” and all.

Below is the alternate data table that shows the real numbers, U6, that are closest to how unemployment was measured during the Great Depression. The seasonally adjusted number dropped from 17.5% down to 17.2% but the non seasonally adjusted number actually increased from 16.3 to 16.4%.

Not that anybody really cares, unless of course, you are one of the more than 9,000,000 people who are debt saturated and unemployed. Keep in mind that this job report is accomplished via a survey, the data of which is heavily adjusted. As I get more time, I’ll go into the data some more and pull out some of those adjustments and we’ll compare that against data that’s a little more hard, so please stay tuned.

In the mean time, I want to point out the Rail Traffic Report that came out yesterday:
The Association of American Railroads today reported that freight rail traffic was down for the Thanksgiving holiday week ended Nov. 28, 2009. U.S. railroads reported originating 246,133 carloads for the week, down 3.9 percent compared with the same week in 2008 and down 29.3 percent from the same week in 2007. The comparison week from 2008 included the Thanksgiving Holiday, while the 2007 comparison week did not. In order to offer a complete picture of the progress in rail traffic, AAR will now be reporting 2009 weekly rail traffic with year over year comparisons for both 2008 and 2007.In the Western U.S., carloads were down 3.8 percent compared with the same week last year, and 23.9 percent compared with 2007. In the East, carloads were down 4.3 percent compared with 2008, and 37.3 percent compared with the same week in 2007.

Intermodal traffic totaled 165,856 trailers and containers, down 6.4 percent from a year ago and 32.1 percent from 2007. Compared with the same week in 2008, container volume dropped 0.9 percent and trailer volume dropped 27.2 percent. Compared with the same week in 2007, container volume fell 26.2 percent and trailer volume dropped 51.9 percent.

Here we are showing freight traffic within the U.S. down 4% year over year, but down 29.3% from what would be near the peak two years ago! I think that’s probably a pretty fair and accurate assessment of the true level of economic activity, however imports and exports are down considerably more, so the overall activity maybe slightly less than the internal rail figures here. How does that compare to the propaganda? Hmmm. Sorry, but just about every statistic that is coming out of our government is simply not accurate.

We’ll get factory orders out at 10 Eastern.

Technically, the market is already at a complete extreme in bullish sentiment. At this site , you will find the Investor’s Intelligence chart that poster Jeff showed us yesterday:

Here you can see that the % bullish is at levels last seen near the peak in 2007, and that the % bearish is zero, even lower than at the ’07 peak! Now that’s complacency. It also says to me that nearly everyone who is in is already in, we are now scrapping the last of dollars from the pockets of those about to be fleeced.

Now that we have broken to new highs, just remember that there’s an obvious bull flag that obviously won out over the expanding top formation and it is targeting 1,200 on the SPX. That could come very quickly, or with the extreme in sentiment, it could also run out of fuel rather quickly. The resistance is at 1,121, which on the SPX is approximately the 50% retrace level of the entire bear market. 1,133 is the next pivot on the way up, and 1,227 is the 61.8% retrace line, the next heavy area of resistance. You can also see that level is above the rising wedge but that 1,200 is near the top:

So, I’m not sure where this ends, I think it’s likely that we now proceed to 1,200, but you have to be bothered by a strengthening dollar on this jobs report following what happened with the rumor yesterday of Japan beginning to sell U.S. Treasuries. Rising rates will pressure the Fed further and since the credit pushers are still pushing credit, with each cycle higher the burden of debt gets heavier.

Whew! But I guess I shouldn’t be worried anymore, no need to come up with fixes for anything, everything’s okay, heck, let’s dance the night away!

Van Halen - Dance the Night Away:

PS - Just be careful who you dance with, you don't want to wind up like this: