Yesterday was an absolute sloshing of the stock market with every sector falling on its face. We were able to come out
by the skin of our teeth with some gains, but it leaves me wondering how we can get going again in this market. There is going to need to be some type of catalyst now to turn the market’s direction. Today, it could have come from the ADP’s Non-Farm Unemployment Change numbers released at 8:15 AM or productivity or the world markets or anything.
Unfortunately, anything may be too much to ask for today. The Unemployment index numbers came in much worse than expected with another 298,000 non-farm jobs lost in Q2 2009, while analysts were expecting 250,000. It was an improvement from June’s 350,000+, but the numbers were much higher than expected, signalling recovery is going to be slow and new jobs are going to be hard to find.
At 8:30 AM, the Bureau of Labor Statistics announced that the unit labor costs were also worse than expected in the second quarter of the year with the average unit costing 5.9% less than one year ago, a higher drop than Q1 and way above expectations of 5.3%. This means that the average employee is making less money than before.
The silver lining is that the workers we do have in the non-farm field are still being productive even though they are being paid less and there are less of them.
The futures before the first report came out at 8:15 AM about non-farm employment were just slightly negative with the Dow down around three points. After the report, the Dow dropped down to a 27 point lowered opening and the Nasdaq fell to almost seven points lower. The market did not take the news initially well, but I will continue to monitor that.
Asia and Europe also will not be a catalyst. Every major European index is down over 1%. The majority of Asian indices were down 1-2%, but the Shanghai Composite actually was up above 1%.
On another good note, Joy Global, the coal mining equimpment manufacturer and servicer, reported extremely bullish earnings this morning with an EPS of 1.21 vs. 0.95 expectations. The company, additionally, raised its full year outlook. This should be good for the sector JOYG is involved within, but it probably does not have the type of legs to make any major market movements.
With another bleak day staring us in the face, is there a place to make some money?
I am going to try to find it. This will be my last post of the week because I am setting sail on a small vacation cruise to Cozumel, Mexico. My uncle is getting remarried. Sorry about not being on the last two days of this week. 
Buy Pick of the Day: Bucyrus International Inc. (BUCY)
The smart thing to do would be to pick an inverse ETF. It would be safer, and I would have less anxiety over it. Yet, it also would be less fun to just give into the market everyday. Bucyrus is a maker of coal mining equimpment and very similar in its business to Joy Global Inc., who reported fantastic earnings this morning beating expectations and raising its full year outlook for its profitability. This beat should work as a catalyst for BUCY, and I am not sure the market is ready to have another 2% down day.
Futures, as of 8:45 AM, are starting to move back upwards, which tells me that the economic news might have been short lived and we will have some pretty strong buying interest to start the day. The reason I like BUCY so much is that with the Joy Global earnings in mind, BUCY has a lot of room for upward momentum. Since the company reported its earnings one month ago, the stock topped out and has dropped 12%. The stock, just yesterday, moved below its lower bollinger band, which signals a bounce upward should be occurring in the short-term. Today’s news should provide the small catalyst needed for that pop.
However, BUCY is up only 1% in pre-market trading. The general market malaise and fears has definitely soured the very, very positive news from Joy Global. With this news and the type of movement this stock is capable of with a beta of 2.5, the news should be pushing this thing much higher.
BUCY’s RSI just recently dipped below 50 and stochastics are showing us that the stock is extremely oversold, meaning that the downward momentum is not sustainable and buyer interest should be returning to the stock with the proper reasons. With Joy Global up over 3% in pre-market trading, BUCY should be ready for some solid 2-3% movement that we can cash in on for a nice profit.
Sell Pick of the Day: DIG/DUG
The oil market has been very good to me lately with some ERY and DUG picks in the past week or so as oil has decided it was overvalued. The price has dropped significantly in a short term, which worries me. Today, the market will be getting the crude inventories from the Dept. of Energy. The API overnight reported positive inventories, which helped bring oil prices up in Europe. That does not mean the Energy Dept.’s report will be positive. If it is positive, oil will definitely have a reason to blast off back on its way up to 70.
If it is bad…oil could be just as volatile in the reverse direction. If inventories are not as good as expected, then we could be looking at $65 per barrel this week because after breaking through $68, I see no reason to stop until $65. What we want to do therefore is short sale the ETF that is the opposite of what happens. So, if the news is good short sale DUG. If the news is bad, short sale DIG. Neither have had enough movement down or up recently to mean that they cannot move more in either direction.
A positive report, in my opinion, would be anything that shows a drop of at least 2 million barrels. If there was any growth in inventories that is very bad. That 2 million to neutral range is tough, but I think any drop will be received well in the short-term.
Good luck and good investing,
David Ristau
