Thursday, July 28, 2011

Morning Update/ Market Thread 7/28 – Kabuki Theatre of the Absurd Edition…

Good Morning,

Equity futures turned slightly positive this morning following a Weekly Jobless Claims Report at 398,000, a dip slightly below the psychological 400k mark. The dollar is higher, bonds are higher, oil is higher, gold & silver are flat, while food commodities rise enough to make one choke.

The Department of Labor reported that Weekly Jobless Claims fell to 398,000 from the prior 418,000 – which was revised higher of course. Econospin has no problem making this sound as good as possible, but even if it were believable, which it’s not, it’s still a jobs losing proposition. If this raises employment expectation, then prepare to be disappointed (again) as mass layoff announcements have been steady over the past couple of weeks. Here’s Econoshill:
Initial jobless claims dropped a very sharp 24,000 in the July 23 week to 398,000 for the first sub-400,000 reading since early April (in a partial offset the prior week was revised 4,000 higher to 422,000). The four-week average of 413,750 is down a steep 8,500 in the week for a nearly 15,000 improvement from the month-ago reading, a comparison that points to improvement for the monthly jobs report.

Continuing claims have also been coming down, down 17,000 in the July 16 week to 3.703 million. The unemployment rate for insured workers is down one tenth to 2.9 percent.

One factor that may cloud today's report is uncertainty about retooling in the auto sector, a factor where timing is always hard to gauge and where uncertainty is even greater this year due to ongoing production cutbacks tied to Japan. Minnesota, where the government is shut down, is also a special factor though the state did not provide any related details this week. Yet given that the Labor Department isn't citing any special factors, today's report offers badly needed good news for the stock market.

Oh, then there’s this not reported unadjusted gem from the DOL, “The total number of people claiming benefits in all programs for the week ending July 9 was 7,645,601, an increase of 320,152 from the previous week.” Oh yeah, go long the phony stock market based upon phony data – that’s a winner of an “investment.”

Pending Home Sales are released at 10 Eastern. Tomorrow brings the first guess at Q2 GDP. A whopping 1.9% is the group of clown’s guess. I say that real GDP is very negative and has been for more than a decade now.

Yesterday the VIX shot up and closed over the top of the upper Bollinger Band, that sets up a potential market buy signal once we have a close back inside the bands:

The major indices are all getting close to the bottom Bollinger, with the Transports closing beneath it yesterday.

If there’s one positive about this debt ceiling Kabuki, it’s that it’s giving the debt much needed attention. If only that attention was based in reality… sigh. The involvement of the rating agencies is putrid. That group of clowns is as conflicted as the day is long. If they were even close to honest they would admit that America is already in default, that is exactly what Quantitative Easing is. Our “rating” certainly would not be triple-A. Thus the rating agencies are complicit in allowing the government to run a shell/Ponzi game – had they taken action to downgrade our debt long ago, then perhaps the math would have never become so impossible. Everyone was silent for far too long, that’s because the system depends upon their complicity. Calling this “debate” Kabuki is an insult to the Asian art – let’s face it, we’re talking about the theatre of the absurd.

Back to doing and investing in something REAL.