The Worst is Not Over and Neither is Fed Easing

Apr. 29, 2008 4:17 AM ETDIA, SPY, QQQ10 Comments
Ashraf Laidi profile picture
Ashraf Laidi

Commentators and pundits alike have erroneously stated that last week's highs in US equity indices broke important levels. The Dow has not only failed to breach above a key trend line resistance of 12,920, prevailing since the October highs, but also failed to breach the 50% retracement from the same high to the January lows. Similarly, the S&P 500's major resistance stands at the 1,410 trend line resistance acting since the October 10 highs. We remind our readers that these recurring failures are no coincidence but instead a technical failure that is largely in synch with prolonged economic uncertainty.

The near bankruptcy of Bear Stearns (BSC) has become a benchmark of market risk and fear, desensitizing market participants from what is likely to be a slow and long deterioration in US labor markets and an increasingly retrenched US consumer.

Friday's Jobs Report to Elucidate Economic View

We remind readers of the following facts in US labor markets. In the 2000-02 recession, there were as many as 15 consecutive months of negative payrolls between March 2001 and May 2002 producing a monthly average of 148K. In the 1990-91 recession , the longest streak of losing payrolls was 11 consecutive months --between July 1990 and May 1991-- producing an average of 147K. In the current slowdown (not yet officially declared a recession), we're only in the third straight monthly decline in payrolls, with the monthly average standing at 59K. Thus, to be consistent with previous recessions, payrolls will likely register negative readings for the rest of the year into Q1 2009. This also means that the unemployment's recent rise to 5.1% is here to stay and the rate is most likely to climb to as high as 5.9-6.0% by year end.

  • The Fed cannot refer to improved macroeconomic conditions or an increase

This article was written by

Ashraf Laidi profile picture
Ashraf Laidi is an independent strategist and trader, founder of Intermarket Strategy Ltd. and author of "Currency Trading & Intermarket Analysis". Ashraf is the former chief global strategist at City Index / FX Solutions, where he focused on foreign exchange and global macro developments pertaining to central bank policies, sovereign debt and intermarket dynamics. Ashraf had served as Chief Strategist at CMC Markets, where he headed a global team of analysts and led seminars and trainings in four continents. His insights on currencies and commodities won him several #1 rankings with FXWeek and Reuters. Prior to CMC Markets, Laidi monitored the performance of a multi-FX portfolio at the United Nations, assessed sovereign and project investment risk with Hagler Bailly and the World Bank, and analyzed emerging market bonds at Reuters. Laidi also created the first 24-hour currency web site for traders and researchers alike on the eve of the creation of the euro. Laidi's analysis of currency markets stand out based on his distinct style in bridging the fundamental and technical aspects of the markets. Laidi's expertise in dissecting Federal Reserve policy, unraveling the cyclical relationships between yield curves, economic indicators and equity market performance has enabled him to predict the Federal Reserve cuts of summer 2007, four months prior to their occurrence at a time when the majority of economists, strategists and traders had anticipated interest rates to be hiked or not changed. He went on to call the record highs in gold and the dollar's break below parity against the Swiss Franc and the Canadian dollar. In June-July 2008, Ashraf persistently predicted the Federal Reserve would continue its rate cuts at a time when Fed funds futures were pricing 95% chance of rate hikes in fall 2008. Ashraf Laidi's market analysis extends to the study of major equity indices, gold and oil, shedding light on the appropriate signals emerging from these markets and their implications for currencies. His specialty in synthesizing commodities, with risk appetite, market sentiment and Fed policy has won him numerous plaudits. His currency predictions placed him at the top of the 12 and 1-month ranking of FXWeeks currency forecasts and at the top of Reuters monthly Foreign Exchange Poll. Laidi regularly appears on CNBC TV (US, Europe, Arabia and Asia/Pacific), Bloomberg TV (US, Asia/Pacific, France and Spain), BNN, PBSs Nightly Business Report, and BBC. His insights also appear in the Financial Times, the Wall Street Journal, Barrons, the New York Times, Marketwatch,, Futures, and a host of other international publications. Besides his habitual media appearances and seminars in English, Laidi has given numerous interviews in Arabic, French, and Spanish to audiences spanning from Canada, Central America and Asia/Pacific. THE VIEWS IN THE PREMIUM INTERMARKET INSIGHTS ARE STRICTLY THOSE OF ASHRAF LAIDI AND NOT OF CITY INDEX / FX SOLUTIONS OR AN ENDORSEMENT FROM THESE ENTITIES. His book, Currency Trading & Intermarket Analysis: How to Profit from the Shifting Currents in Global Markets (, Web site: (

Recommended For You

Comments (10)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.