Another day when everything changes at 8:30!
Oh well, I’ll try to pass the time between now and then…
Luckily Asia is awake, unluckily they are down across the board. Japanese consumer numbers were weaker than expected and October machinery orders were half of what was expected. On the whole, Japan’s economic growth was revised down from 1% to .8%.
CHL continues to break down, calling a lot of assumptions into question regarding Chinese growth as well.
Europe is about as flat as flat can be ahead of our jobs report. I am very distressed that so much weight is being given to a number that was revised last month by 22% in August and (I kid you not) 190% in September!
So we could get a payroll number of, say +80,000 jobs, but it could be revised in January to “actually” be +220,000 jobs or, possibly, -70,000 jobs – we just won’t know until the “real” number comes in. Meanwhile the markets will react (or overreact) to whatever number we get as if they were carved on stone tablets at Mount Sinai!
I’m concerned we’ll get a big disappointment but that’s not very likely in the holiday season even though the government shoved every job they could into the pre-election report and we are likely to get a revision to the very fake sounding November numbers and that will be pivotal.
As long as “unit labor costs” are down (a nice way to say you work more for less money) I think a lower jobs number will actually help more than it hurts but we’ll find out in an hour.
The VIX is threatening to attackand we’d better have the market pointing in the right direction if it goes off! If we get the usual overreaction and correction in the markets from the jobs number, it will fuel the VIX and bring it back to a level we haven’t seen since early September, when this rally first started.
Will we end with a bang or a whimper? Stay tuned…
We’ll have modest goals for today and see if we can retake some key levels:
- Dow 12,300 is a must! Failure at 12,250 or less.
- It’s not going to happen without Transports at 2,650
- S&P needs to get back to 1,410 but 1,400 had better offer some very solid support we will be officially back in the pull of gravity!
- NYSE will show strength at 9,050 with 8,999 indicating big trouble…
- Nasdaq is very unlikely to break out 2,450 but will be a relief it it can hold 2,425
- SOX need to show us the money over 480 – despite the weak NSM earnings
- RUT has failed at 800 and retest 790 with some authority
If I were a betting man, I would say a SOX failure would lead to a Nasdaq failure which will drag down the Russell and the NYSE, pulling the S&P over the line, triggering a major drop in the Dow – so let’s hope the SOX holds up today!
Oil should be on the move today with the weekend coming and an OPEC meeting scheduled for next week, we may take a few more calls in the morning but I’m certainly going to wait to see which way the open goes. All our December puts are off the table thank goodness and we can afford to be a little bit patient.
There should be a huge push to retest the $63.09 mark in early trading, and perhaps the end of day pump as well as next week is almost certain to have at least one day of panic selling by speculators who don’t actually want to accept delivery.
“Several senior OPEC officials said the cartel remains bent on reducing those inventories and will produce even less oil than the market is seeking, if needed. OPEC’s logic: Fatter stockpiles weaken the cartel’s influence over prices. Instead of buying fresh crude from OPEC, consumers can get oil from holders of inventory. Many in OPEC say they fear that overly large inventories could lead to a price crash. A similar dynamic played out in the late 1990s. Prices fell after a dip in demand during the Asian financial crisis, then collapsed after oil piled up in storage.”
“The main proponent of targeting inventories is OPEC’s top producer and de facto leader, Saudi Arabia. “We need to take 100 million[barrels of crude] out of the market” to offset an inventory surplus, Saudi oil minister Ali Naimi said over the weekend. That figure represents the increase in industrialized countries’ commercial-stockpile levels from a year ago and represents two days of consumption for the 30 members of the Organization for Economic Cooperation and Development.”
I guess they must be readers!
So any week they do not achieve a drawdown of inventories of 2M barrels is a policy failure for OPEC – let the games begin!
Gold is suffering from way too many bets being placed on an even bigger dollar slide than we got but it remains to be seen how long we will be able to garner support at 82.5.
India’s economy may be growing but that’s about all according to this article (and I apologize to India but it’s too funny not to show you!).
Hedge fundMarshall Wace will float an $2.2B IPO in Londonand it will be interesting to see how it does as KKR is still down 10% from its May $25 open.
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8:30 Update: Wow! Great SOUNDING jobs numbers! Really great, so great we will get concerns about Fed tightening!
132,000 jobs added this month, 30% better than expected and another upward revision to September to 203,000 but a slight downward revision to October to 79,000. This means if you don’t have a job, you must be lying!
Perspective: In October, that September number was originally reported as 51,000 and was revised last month to 148,000 (up 190%) and today they are telling us it is up an additional 55,000 (up 300% total) – 4,000 more than the entire number of jobs they originally reported!
Is the administration manipulating the reports or are they genuinely grossly incompetent at gathering critical economic data?
Unit labor costs were up a manageable .2% for a yearly 4.2% increase which I think is a fair number if we can keep it up (it hasn’t been that high in a long time).
Yep, I remember the 60s and 70s when we used to get raises? Ahhh, good times… The initial 1980’s dip was caused by massive and healthy productivity gains during the computer revolution but, unfortunately for you, corporations got used to getting more for less each year and it has now become employment policy.
Unemployment did tick up to 4.5%, which is a good moderator against the strong jobs – Goldilocks thinks this report is just right!
Notice the above picture of an Asian call center. It’s not just that they work for $2 an hour, its the fact that you can put 6 workers in the space occupied by a single US worker!
- No wall calendars
- No goofy joke pictures passed around
- None of those silly noise walls – deal with it!
- Sadly, it doesn’t look like a birthday party day…
- You don’t need a place for your coffee cup when you don’t take a coffee break
I hate to say it but, as a consultant, I’m looking at that picture and trying to figure out how to squeeze a little more efficiency out of that model!
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I’d rather see how today plays out than make guesses.
The jobs numbers were good but that may fuel inflation concerns (unfortunately, not all of us can be replaced by call centers… yet) and give us some blowback.
If we can recover back to my levels I’ll be thrilled and take my bullish attitude into the weekend. I am so glad we used the Q and DIA puts to cover our long positions yesterday otherwise we would be forced to dump at this open. This rally may still have room to roam but it will take another Merger Monday to finally send us off into space.
On the rumor mill (and right in line with my banking premise), $235Bn BAC is interested in acquiring $90Bn BCS in a deal that will concentrate so much money under one roof that I am actually scared!
It will cost BAC top dollar so I like the May $52.50 puts for $1.80, just in case it’s true but with a nice $1.50 stop in case it’s not.
Let’s be careful out there today!
I love it when someone does my work for me. Kustomz posted this article on the dollar by David Francis that’s a great example of how a professional writer neatly summarizes all the dollar points I’ve been rambling on about this month.
