Thursday, April 1, 2010

Morning Update/ Market Thread 4/1

Good Morning,

Equity futures are higher this morning, no it’s true! I wouldn’t fool you just because it’s April Fool’s day, everything in this report is true, no joke. And if you examine the 30 minute chart of the DOW on the left, or the 5 minute chart of the S&P on the right, you will see that I’m not pulling your leg, as hard as it is to believe that the quants could run the market still higher. No, 76% isn’t enough, there are still people who have yet to say “I better get in or otherwise I may not get another chance.”

In the DOW chart, above left, you can see that the no volume overnight ramp took prices above the latest overhead resistance. This puts a run to about 11,100 on the DOW, or to 1,200 on the S&P on the table. There is a turn date on April 7th, we are entering the window for that soon, and the employment situation report comes tomorrow – not that turn dates have meant anything in the past year.

The dollar is about flat after touching the uptrend line from last November. Bonds are down, oil is setting a new rally high near $85 a barrel, and gold has broken up and out of its latest formation, now about $1,125 an ounce. Below is a chart of oil on the left and gold on the right. Oil is making what appears to be a rising wedge and is at the top of that wedge now. Gold is breaking out, it is either from a smaller flag, or it is breaking out of an even larger wedge/ triangle formation:

The Monster Employment Index edged up in March 1 point to a reading of 125.
The weekly jobless claims fell from 442,000 to 439,000. The consensus was 440K, here’s Econoday:
Fewer Americans are filing jobless claims in what is a key signal for underlying improvement in payrolls. Initial claims for the March 27 week came in at 439,000 vs. 445,000 in the prior week (revised from 442,000). The four-week average fell 6,750 to 447,250 and is down roughly 20,000 from levels in February. There were no special factors in the week.

Continuing claims for the March 20 week fell 6,000 to 4.662 million with the four-week average, at 4.680 million, down roughly 100,000 from a month ago. The unemployment rate for insured workers is unchanged at 3.6 percent.

Claims levels are the lowest since late 2008, reflecting improving economic demand and the need for firms to expand their output of goods and services. Stocks are rising in reaction to the data, data which should bolster confidence for a strong employment report tomorrow.

What, no weather excuses?

From the Department of Labor’s report, “States reported 5,894,337 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending March 13, an increase of 267,012 from the prior week. There were 2,172,852 claimants in the comparable week in 2009.”

That’s an increase in Emergency Unemployment Compensation of only 267,012 people in just one week! And it’s an increase of 3.72 MILLION in the past year. No joke.

And how about the the Challenger Jobs Cuts report? Oh, it only rose a whopping 61% in March… no joke. Note the lack of comment from Econoday:

Challenger's count of layoff announcements rose to 67,611 in March vs. 42,090 in February. Layoffs at the postal service accounted for the majority of the month's layoffs. Hiring announcements rose in the month, to 13,994 vs. 8,300 in February.
Let’s see if we can put a little more color on that, shall we?
Job cuts surge 61% - Challenger

NEW YORK ( -- Job cuts accelerated in March, driven by planned reductions on government payrolls, a report released Thursday showed.

Employers announced plans to cut 67,611 jobs in March, according to outplacement firm Challenger, Gray & Christmas Inc. That's up 61% from February, when 42,090 jobs were lost, the lowest level in nearly four years.

"Unfortunately, many people are still jobless and many businesses still shuttered," said John Challenger, chief executive officer of the firm, in a statement. "This combination is having a significant negative impact on state and local tax revenues and, in turn, leading to continued downsizing in this sector."

Government job cuts led March's surge, accounting for nearly 75% of the total jobs shed. Year to date, government job losses have made up about a third of all announced cuts.

There were 50,604 announced government job cuts in March, and the United States Postal Service alone plans to reduce its workforce by 30,000 workers this year through retirement and attrition. The rest of the government jobs will be shed by state and local agencies suffering from budget shortfalls.
Aha! Remember how the primary creator of jobs for the past two years has been the government? Well it appears that’s finally coming to a screeching halt – as you knew it had to. It was inevitable because government revenue has been crashing while at the same time their expenses are skyrocketing. States and many levels of government are running huge deficits and simply need to be shrinking their size, not growing it.

Can you see the economic path of destruction? Credit bubble, subprime, housing collapse, stock market collapse, commercial real estate collapse, massive unemployment, and now the crisis is rippling into government. No more Saturday delivery, but we can send $450 Billion directly to the bankers to pay for the privilege of using our own money system, and we can spend trillions more cheating interest rates lower.

Remember, the chart of government spending is parabolic, it is heading straight up:

Now watch, as governments are no longer able to keep that rate of growth going, they will be pressured into interrupting the exponential rate of growth and that curve will begin to roll over. It doesn’t have to collapse to severely impact the economy, all that has to happen is for the rate of growth to diminish. The bankers were able to take their insolvency (they are still insolvent at market prices), and they pushed their insolvency onto the public.

Who has the money to make the rules?
Wall Street cabal seen derailing serious swap reform

(Reuters) - A major crisis is building in the derivatives market yet a cabal on Wall Street is blocking the formation of a clearing house that could stop the next financial meltdown, a senior official with the Kauffman Foundation said on Tuesday.

The need for disclosure in the swap markets is enormous, yet the will to act is missing because of a small cadre of special interests, said Harold Bradley, who oversees almost $2 billion in assets as chief investment officer at Kauffman.

"There is no incentive from the moneyed interests in either Washington or New York to change it," Bradley told the Reuters Global Exchanges and Trading Summit in New York.

"I believe we are in a cabal. There are five or six players only who are engaged and dominant in this marketplace and apparently they own the regulatory apparatus," he said. "Everybody is afraid to regulate them."

U.S. and European officials are trying to craft new rules to regulate the $450 trillion private derivatives market in broad efforts to avoid another financial crisis.

Policy-makers generally agree that most standardized derivatives should be traded on exchanges or cleared through a clearinghouse, which would assume the risk of a default.

Bradley said those efforts fall short. There needs to be a national market system for fixed income and credit with displayed prices and the posting of open interest and market positions, he said.

Instead, he said regulators have found a boogeyman in high-frequency trading, which has taken the focus off the highly levered derivatives market. After falling in 2008, the nominal value of derivatives is now greater than ever at about $204.3 trillion, according to Ned Davis Research Inc.
Let’s face it, any way you slice it, the joke’s on us. Happy April Fool’s. Support Freedom’s Vision and become an active member of the Swarm!

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