Friday Roundup: Commodities, Emerging Markets

<< Go to Part I: Ask Alice, I Think She Knows

The previous week any hint of weak employment data sent investors scrambling to the exits. This week employment data was more than just “mildly disappointing”. But with interest rates low, printing presses running overtime and cash piled in low yielding instruments, any excuse to buy will do. Most rational bears were chomping at the bit to short this morning; but, before the ink was dry on their sell short ticket, markets quickly stopped them out.

Other than Street upgrades of some select companies, nothing much good could be discerned from today’s news other than the end result.

Again Jesse’s Café Americain has the employment data well reviewed.

It seems bulls, and those who need to, are trying hard to prop markets here to the year end. This could mean a well managed trading range until then since there’s a lot of fees and prestige on the line. Turning a deaf ear to poor news such as witnessed today is a signature of such an effort.

What’s taking place in currency markets is a mystery but in short order we’ll know the situation. Perhaps there is some central bank intervention in the works to prop the dollar. It doesn’t work long-term but in the short-term it definitely hurts those leaning the wrong way.

Have a great weekend!

Let’s see what happens and you can follow our pithy comments on twitter.




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Comments

[untrusting ...:]

Interesting, nice touch with the White Rabbit clip. Who would ever have thought that Alice and the White Rabbit would become the operative mode of Wall Street and Washington and the Fed in 2009.?

Nov 07 02:00 AM

[Michael Clark:]

Two days ago I thought BAL, Cotton ETF, was going to blast off. But the chart has changed. I'd get out now and wait for a better entry point.


seekingalpha.com/insta...

Nov 07 02:59 AM

[rick12345:]

I am beginning to see a pattern. One that favours the contrarian while annihilating short positions. The positive reading in PMI has a lot to do with market sentiment at the moment, since many believe it could well improve the employment situation. Also, inventories are getting severely low which is another bellwether for GDP growth.

I'd like to bring the following to peoples attention and defy anyone to prove that the US economy, whilst far from ideal, is not improving.

"Total nonfarm payroll employment declined by 190,000 in October. In the most recent 3 months, job losses have averaged 188,000 per month, compared with losses averaging 357,000 during the prior 3 months. In contrast, losses averaged 645,000 per month from November 2008 to April 2009. Since December 2007, payroll employment has fallen by 7.3 million. (See table B-1.)

Construction employment decreased by 62,000 in October. Monthly job losses have averaged 67,000 during the most recent 6 months, compared with an average decline of 117,000 during the prior 6 months.

Manufacturing continued to shed jobs (-61,000) in October, with losses in both durable and nondurable goods production. Over the past 4 months, job losses in manufacturing have averaged 51,000 per month, compared with an average monthly loss of 161,000 from October 2008 through June 2009. Manufacturing employment has fallen by 2.1 million since December 2007."

The government has said from day one that unemployment will continue to rise even after the economy shows signs of improvement. Was there some kind of surprise in Friday's figure, albeit a little higher than some expected? Were people expecting unemployment to magically fall only 3 months after GDP turns positive?

Nov 07 04:10 AM

[Alex Trias:]

How to explain Friday?
(1) Stock market is forward looking, has already discounted high unemployment and sees brighter days ahead that the rest of us mortals cannot see.
(2) US Macroeconomics have become irrelevant to US equities prices because US companies are basically all multinationals.
(3) As with every bubble, this one is widely acknowledged, but investors are happy to buy as long as they think a greater fool is out there, and they can hit the sell button fast enough when the end comes.
(4) Markets are above 65 day exponential moving average, so traders buy. Period, simple as one-two-three.
(5) Central banks are pumping liquidity and telling their client banks to manipulatively bid up asset prices in the hopes of averting deflationary depression.
(6) Buy the rumor, sell the news has now turned into sell the rumor, buy the news.
(7) Maybe central banks are pumping Zoloft and Welbutrin into the water supply? Hey, come to think of it, I'm feeling pretty chipper... maybe I'll go buy some stocks.
(8) Some combination of (1) through (7).

Nov 07 09:28 AM

[granger:]

Good info as always, cool video too

Nov 07 11:29 AM

[bluebare:]

technician with an attitude -- LOL

the "hold on to the end of the year" rationale makes sense to me, David. perhaps then the push for and passage of stimulus 2.0 takes center stage?

Nov 07 12:52 PM

[April May:]

Please set stop losses! Don't let your gains disappear again!

Nov 07 02:47 PM

[bob dempsey:]

be your head iflation is inevitable ask alice we cannot pay our debt lots of baby boomers coming for social security the next 5 years the printing presses will never stop smokin

Nov 07 03:14 PM

[Northern Da...:]

Wow! Sing to me Grace Slick. Man, does that bring back good memories.

For all readers, just for the heck of it, for about 60 seconds of lovely light music, here's a link to Jefferson Airplane's site. It'll make you feel happy:
www.jeffersonairplane.com/

David, thanks again for the charts. I keep lots and lots of charts of my own, but I usually find that I can still glean something useful by looking at what you offer. Sometimes your perspective is a different time frame, or maybe your notes will get my open mind thinking from maybe a slightly different angle. Much appreciated.

Nov 07 03:44 PM

[tripleblack:]

Shhhhh, don't spill the administration's brilliant secret plan!


On Nov 07 12:52 PM bluebare wrote:

> technician with an attitude -- LOL
>
> the "hold on to the end of the year" rationale makes sense to me,
> David. perhaps then the push for and passage of stimulus 2.0 takes
> center stage?

Nov 07 06:57 PM

[User 240063:]

2 quick comments:

Great seeing the vid of Gracie at Woodstock--but her performance seemed...vaguely....Sc... Liked her vid better in "Gimme Shelter"...although her solo couldn't compare to that of Melvin Belli! Seriously, the cut of White Rabbit they put on "The Worst of...." album is, I think, the best. Also, Gracie's "Somebody to Love" (on the same album) was absolutely inspired, although the Airplane's first female vocalist Signe Andersson's ("It's No Secret") voice was nothing to sneeze at either! Either could have been an Opera singer, had she wanted. [Weird image: how many LSD tabs would Gracie have had to slip a tubby like Pavarotti to have any effect?!]

Second, remember, Gracie Slick and Tricia Nixon were classmates at the very small, very, very exclusive Finch College in NYC---there must have been some very interesting lunchroom chats!

Nov 07 11:02 PM

[aarc:]

The markets are devilishly incomprehensible most times.

That is just the way it is; otherwise Dow Jones could be at 100,000+++ by now or be close to zero if it was so predictable or too easy to understand.

Another analysis could be this:

The SnP500 has a high side of 1300 at the start of July-Sept 2008 quarter. Before the earnings season started in Oct 2009, it was able to reach 1100. A 15% difference YOY high on a QxQ comparison.

Viola! SnP500 is on tract for a 15% YOY drop in earnings.

Big investors had been pricing in the 15% difference before the start of the earnings season or was it co-incidence? And on the high side of July-August 2008 quarter?

This bodes well for the next quarter stock market run from an investor's point of view.

Going forward:

If they believe that the Oct-Dec 2009 quarter will get better; then move the parameters back YOY going back into April-June 2008 QxQ SnP levels which has a high side of 1400. Then SnP could be at the 1300 area just assuming the 15% profit differential will narrow down to half or be at 1400 if their estimates show full recovery within this year.

Then SnP could be at the 1300 to 1400 area before the start of the earnings season in Jan 2010.

On the downside; if something realy bad happens like that of 9/11 episode. Then backtract YOY going forward to Oct-Dec 2008 QxQ then SnP could drop hard to the 800 area before the next earnings season starts in Jan 2010.

Does this analysis makes sense or what?

Nov 08 01:55 PM

[ebworthen:]

Perhaps the anticipation of a dollar rally is an anticipation of a big leg down in the markets.

Look at the dollar index July '08 to December '08; an almost perfectly inverse chart to the markets.

Nov 08 03:46 PM