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Market in June always a waiting game

The DJIA broke down 323 points on Friday after the miserable US May payrolls number, and declined 115 points yesterday. It is at 9,833, up 17 right now (it was up 75 an hour ago).
 
It has been volatile all day, as the market seeks direction.
 
The euro touched 1.2000 briefly, and then retreated to 1.1923. The word is the EU leaders want the euro to soften. It’s the classic beggar thy neighbour route to economic stimulus.
 
Therefore, the strong USD has deflated equities and commodities. We forecasted this on December 31/2009 and it has been wrong to go against this deflationary trend so far this year.
 
I am still scratching my head over the poor May US private payrolls creation number, as it showed only 4,000 in goods-producing jobs created in May.
 
The report said 10,000 jobs were created in mining in logging, 39,000 were lost in construction, and 25,000 were created in manufacturing.
 
Most of the private sector weakness was in construction, which is understandable given market conditions in non-residential real estate.
 
But what happened to the fabled Obama stimulus package (the American Recovery and Reinvestment Act of 2009) which was supposed to provide a motherload of road and bridge and transit projects starting a year ago? I think this has been a dud.
 
I’m starting to think most of the spending was keeping Fed and State budgets glued together with chewing gum (May US government payrolls were up 415,000 federally (that’s the census) and negative 15,000 (State and US Postal Service) or up 390,000 net.
 
It certainly didn’t show up in the month of May.
 
We’ll have to wait until the June jobs report, coming mercifully early on July 2, to get a better idea of how accurate that depressed May number was.
 
The DJIA hit an intraday low 9,757.55 today, and therefore broke the intraday low of last month (9,774 on May 25).
 
That isn’t a particularly good sign, and I was perhaps premature to get bullish last Thursday.
 
One could say the Good News is the Panic is Over. The bad news is, it has led to a Bear Market.
 
But long experience has shown me that June can be a tough period for advances in the market, as investment people go on vacation, and there are no earnings reports up until mid-July.
 
The Summer Rally might be on hold for a few weeks.
 
We’ve done some “damage control” and sold some profitable positions in the hope the cash can be redeployed at cheaper levels later this month.
 
We sold our all our Telus NV yesterday on the pre-ex date @ $38-$38.10 as clearly, these are equities first and dividend plays second. And we sold a lot of our BCE @ $31.68-70 as well.
 
With the Conservative Party of Canada acting as a modern day Robin Hood (let’s take profits from the rich telecom incumbents and give it to the unproven no-name new entrants), the Canadian telecom sector is under pressure.
 
We also made money on Cascades, having first purchased the stock in the $6.06-10 area and selling it at $6.90.  
 
This stock market looks fragile and vulnerable to further downside. The high USD is putting pressure on commodities, something we forecasted at the beginning of the year.
 
We tried to call the bottom on fertilizer stocks and were swiftly handed our head on a platter with a 14% drop in CF Industries since we purchased it in the $68 area.
 
Luckily, disciplined trading skills cut the loss to much less than that.
 
It’s wait and see until late June. Until then, remember Jesse Livermore’s saying:
 
The way to start being Right is to stop being Wrong.
 
It has been wrong to be long lately, and we were quick to liquidate.
 
We’ll see if it is worth getting short at some point, but I believe most of this correction has been a currency adjustment. If the USD strengthens, then US corporate profits shrink.
 
But it’s a stock picker's market until Independence Day.


Disclosure: US REIT's and Canadian stocks and REIT's