Friday Jobs Report Discounted: Why the Rally Will Continue

By Bob O'Brien

I have to admit last week, I was little skeptical about this stock market. I was thinking that when the un-employment numbers came out Friday we could see a big sell off in stocks. The stock market has been off the charts lately, and everyone is trying to figure out whether or not they are under invested in it.

Regardless of whether or not the unemployment numbers are off a little or come in better than expected the effect on this rally will be minimal. There maybe a little sell off, but the rally should continue.
A lot of people have tried to call this market and economy a “W”, a “V” and an “M”. I think for now it is an “IV” (pun intended) an “Inflationary V” This bull market started when “Big Ben” Bernanke made it clear that we are going to print our way out of it. We went from the “Greenspan Put”, to the” Bernanke Printing Press Put” Whatever works right?

The bottom line is we are going to see growth in the third and fourth quarter of this year, and while much of the fiscal stimulus has not kicked in yet, the monetary has kicked in.

What does this mean for stocks?

Stock will continue to go higher probably through the 3rd quarter on asset allocation money and inflationary trades, and perhaps the end of the year.

How about the Dollar? The dollar will continue to weaken and only when we see rates rise perhaps we will see the dollar start to strengthen.

How about oil? Oil appears to have calmed down, but is still going up. Historically it has been said that copper has a PhD. In economics, but what about oil? Oil really has become a temperature gauge for the global economy and when it spikes up radically, the prices cool down because it knows it is not sustainable.

And the yield curve? This is pretty much all the banks have got going for them right now, and it is big. The banks have rallied this week and it should continue.

Original article

Comments

[Roger Knights:]

Yeah, but so's the market!

Aug 06 04:41 PM

[Obi-Wan:]

Jasper must be shorter than Danny Devito!! LOL

And sweatin' bullets......as are all shorts right now. Don't question, just enjoy!

Aug 06 04:48 PM

[FXedu:]

Jasper, are you always so specific and to the point?

Good luck my friend!

Aug 06 04:51 PM

[WhoisJohnGalt:]

The Fed's excessive pumping only defers our our greater downfall from debt. If you're right about second half "growth", I'll see you at the top of the mountain ready with my skis and shorts (pun intended as well).

Aug 06 05:36 PM

[anarchist:]

Jasper, were you the one calling Cetin "the village idiot"? Poor Cetin was called every nasty thing in the book back when the DJI was 7000 and he was predicting a rally. I don't know for certain where this market will go but I think with all the negative sentiment here the guys at my myWealth.com might be correct.


On Aug 06 04:38 PM Jasper M wrote:

> Wow . . . this author is about as far from correct, on Everything,
> as one can ge.

Aug 06 05:55 PM

[John Bowman:]

"The bottom line is we are going to see growth in the third and fourth quarter of this year, and while much of the fiscal stimulus has not kicked in yet, the monetary has kicked in. "

The only thing growing are those dang green shoots. Man, they are getting moldy around here....
And the fiscal stimulus? I can't wait till that kicks in. I don't know what it's going to kick, but if it's the economy, it will be the final blow to it's head.

Aug 06 06:43 PM

[DaveW:]

"The bottom line is we are going to see growth in the third and fourth quarter of this year, and while much of the fiscal stimulus has not kicked in yet, the monetary has kicked in. "

Error! Should read:
"The bottom line is we *will be dished fake numbers suggesting* growth in the third and forth...."

Don't worry, I'm not fighting the trend any longer, but come on, let's call it what it is!

Aug 06 06:53 PM

[Turbonium:]

No offense intended, but this article was supposed to be about "Why". Instead it's a superficial assessment of where we are now and what market inertia "should" bring our way in the near future.

This is a classic case of "predicting the present". (i.e., if the sun is shining today, it should shine tomorrow, and if the sky is cloudy today the sky should be cloudy tomorrow.)

Aug 06 09:50 PM

[Turbonium:]

No offense, but this article was supposed to be about "Why". Instead it's a superficial glance at current markets, and what market inertia "should" bring our way. No news here.

This is a classic example of "predicting the present". (i.e., if the sun is shining today it should shine tomorrow, and if it's cloudy today, it should be cloudy tomorrow.)

The fundamentals still stink out there, and most people will be surprised when some company disappoints big to the downside. The 'smart money' will quickly take profits on this rally and the whole thing will collapse in on itself like a house of cards. If the rally continues for one more day I suppose you can claim victory here, but the rally is going to peter out soon... because the fundamentals still stink out there, that's why.

Aug 06 09:55 PM

[Moon Kil Woong:]

Momentum players play the momentum and then pull the reasons out of the hat regardless of rationality. That is the way it always has been and always will be. However their logic has one thing correct going for them, the belief that, "The market upside will continue until it ends."

Aug 06 10:02 PM

[nmelendez:]

Truth be told the market will rally...until it no longer goes up. No one knows how far this uptrend will go. Could go to 20000 on the Dow or drop to 50 on the S&P. This market is no longer based on fundamentals, only on the trade.

Aug 06 11:17 PM

[Belome:]

Print your way out with no consumer following is difficult for me to comprehend, go ahead and restock no one will be there to buy it, inflation is a non issue for 6 months to a year so how will companies expect revenue growth? H1N1 is gonna "kill" this market in a few months with the WHO looking for it to affect over 2 billion people..yep thats a B... granted its not gonna kill many, we hope but I don't want that shit in my family of five. It should kick up to a fever pitch right around October....hmmmm I remember October thats typically a good month for equities right? Gimme another 100 pts in the S&P so i can short the shit out of it.

Aug 07 12:20 AM

[Al-USA:]

Ok, interesting article, now here's my two cents, which might balloon, with my IWM OTM puts, to much more than that, if what I say below comes to pass.

My study of Elliot Wave patterns shows each wave has a personality. The first wave down is scary but it takes a while for people to recognize that the market is in trouble.

The 2nd wave bounce (the rally from March 2009) convinces most that the bear market is over and good times are here again. The extremely high bullish sentiment of 88%, matching October 2007, is picture perfect sentiment for this rally. It has accomplished, from a sentiment perspective, exactly what it needed to.

The third wave down is almost always the strongest. It's called the "wave of recognition" as most people begin to recognize that the fundamental problem with the economy is far worse than originally thought and certainly much worse than what the hope-filled rally has been all about.

Tomorrow should be very telling. If the market drops hard, as it's potentially set up to do, it will be the signal that the top is in and I would look to short bounces for at least the next few weeks until we see what develops to the downside. If the market rallies instead (we should get a reaction one way or the other to the employment numbers) then another day or two of rally, watching for potential resistance near SPX 1014, should be all we'll get. Then be ready to play the downside.

Readers, if I'm right, we are near the end of the 2nd wave and about to start the 3rd "wave of recognition" down. Place your bets accordingly.

Aug 07 01:08 AM

[Dave Wrixon:]

It seems the US is a big village with a lot of idiots.

It never pays to murder the village idiot because their are just too many candidates waiting to take over.

In dollar terms, it is possible that this stock market does make sense. To everyone else this is madness. Dollar recovery? Probably not in my lifetime.


On Aug 06 05:55 PM anarchist wrote:

> Jasper, were you the one calling Cetin "the village idiot"? Poor
> Cetin was called every nasty thing in the book back when the DJI
> was 7000 and he was predicting a rally. I don't know for certain
> where this market will go but I think with all the negative sentiment
> here the guys at my myWealth.com might be correct.

Aug 07 01:28 AM

[Dave Wrixon:]

The problem is that I cannot see it being liquid enough for them to hit the emergency exits in time.


On Aug 06 10:02 PM Moon Kil Woong wrote:

> Momentum players play the momentum and then pull the reasons out
> of the hat regardless of rationality. That is the way it always has
> been and always will be. However their logic has one thing correct
> going for them, the belief that, "The market upside will continue
> until it ends."

Aug 07 01:30 AM

[John Bowman:]

I have heard of the Elliot Wave Theory but haven't investigated it. What you describe makes perfect sense.


On Aug 07 01:08 AM Al-USA wrote:
> My study of Elliot Wave patterns shows each wave has a personality.

Aug 07 09:03 AM

[FXedu:]

Turb,

It sounds more like you just agree with me!

A lot of geat comments here and I appreciate them!

Bob O'B


On Aug 06 09:50 PM Turbonium wrote:

> No offense intended, but this article was supposed to be about "Why".
> Instead it's a superficial assessment of where we are now and what
> market inertia "should" bring our way in the near future.
>
> This is a classic case of "predicting the present". (i.e., if the
> sun is shining today, it should shine tomorrow, and if the sky is
> cloudy today the sky should be cloudy tomorrow.)

Aug 07 09:15 AM

[buoy:]

Strong language there.


On Aug 07 01:28 AM Dave Wrixon wrote:

> It seems the US is a big village with a lot of idiots.
>
> It never pays to murder the village idiot because their are just
> too many candidates waiting to take over.
>
> In dollar terms, it is possible that this stock market does make
> sense. To everyone else this is madness. Dollar recovery? Probably
> not in my lifetime.

Aug 07 09:31 AM

[thiazole:]

So how do you explain the fact that inventories have been shrinking every month for more than a year? It seems like simple logic that if inventories are falling then consumption is greater than production. Do you have an alternate hypothesis?

On Aug 07 12:20 AM Belome wrote:

> is difficult for me
> to comprehend, go ahead and restock no one will be there to buy it,

Aug 07 11:40 AM

[Jasper M:]

I apologize for the unspecific nature of my first post: I was just bowled over by the level of error. Author made a Lot of predictions, every one of which I disagreed with. Rather than eating up space, I made a general comment.

Obi-wan, I am 6'0". Oh, you mean, financially? Yes, (except for the $US) but hardly sweating. I have left myself enough margin that it can go up near to 12K (on the Dow) before I get squouzed.

anarchist, I don't think I ever called Cetin "the village idiot", though I did (along with many others) call him "cretin", which, in fairness, is pretty close.
I did not realize at the time that his bullish commitment was skin deep, just a sham to get people to click to his website. His (anonymized) posts have since changed to bearish, and back again.

Dave Wrixon, don't count the $US out too soon. Wholesale credit destruction will wipe out all the Fed is currently making, and then some.

John B., DO look into Elliott Waves. Robert Prechter predicted All of this, made me a Killing last year (near 30% return on risk capital). And 2010 is shaping up to be more of the same.

Aug 10 01:22 AM