We are in a very interesting spot this morning.
At 8:30 we get the Non-Farm Payroll report and the whispers are all positive while the "offical" expectation is that we drop another 100,000 jobs so are expectations too low or too high? We are also almost dead center between late April's 1,220 top on the S&P and late July's 1,020 bottom with the S&P closing yesterday at 1,225. We had a huge "gap" as we flash-crashed from 1,200 to 1,100 in just 4 sessions in early May and we jumped off the July 1st spike at 1,010 all the way back to 1,100 in the next 7 sessions. So we are at the 1,100 middle of the range we've been tracking all year but we got here VIOLENTLY from both directions, establishing neither a proper bottom or proper top on the 10% outside edges of our range.
The bulls will be pointing out that 150,000 of today's job losses will be census workers whose jobs ended and the bears will be pointing out that we need to gain 300,000 jobs a month for the next 3 years before we even rehire the people we've lost over that past two years so who the hell cares about any jobs number under 200,000? If the payroll report is weak, then we are more likely to get QE2 (and maybe QE3 and QE4) and the Fed will remain on hold so the Banksters should be happy too. If we get a "strong" report it will be harder to push through more stimulus and scary for the Republicans as it may give people the impression that the Government is accomplishing something so good is bad and bad is good today from that perspective.
None of this matters because Andy Zaky says we are all doomed – and he makes a pretty good case fo it too! We've certainly had a boring and generally bearish week as we have been protecting our gains off all those crazy bullish bets we made back when I called the dead bottom of the market on on June 6th in "Turnaround Tuesday – Will CNBC Apologize to America?" Of course, that was a rhetorical question because, rather than apoligize for their non-stop end of the World proclamations, to listen to, for example, Cramer now – you would think he was chasing people INTO stocks at the time, rather than out of them.
Oh well, what can you do? At the time I had published "5 Plays That Make 500% if the Market Rises" and those are already done, well over 300% (why wait just to make 200% more?) and, of course, I put up our Q2 Buy List with my top 20 picks on June 7th so, all in all – we can't complain and we're not greedy so we took the money on our unhedged positions and ran and we don't really care what happens today, although we, as I said, generally bet short – simply because the odds favored us on the short side for reasons I've been outlining all week.
By the way, this is THE last Weekend that subscriptions to PSW will be offered at the current prices. We finally finished moving and upgrading our servers and we'll be launching new products in September but we are no longer going to be accepting Basic and Premium Memberships as those, as well as our newsletter fees, will be very different (and more expensive) products in the fall. We've mentioned this since June – this is ACTUALLY the last 3 days at the old prices.
8:30 Update: Woopsie! We LOST 131,000 jobs. Worse than the worst expected and so far below whispers that my 2.5% drop prediction from yesterday (10,450, 1,095) is looking on the money. As I said above, bad news is really good news so we'll be taking the short money and running this time and getting neutral into the weekend.
Looking at the NFP numbers, it seems that another 181,000 people dropped out of the labor force altogether, which explains how unemployment stayed at 9.5% in July despite the additional loss of jobs (and don't forget we need to add 100,000 jobs a month just to keep up with population growth!). Private payrolls were up 71,000 jobs, also a disappointment while government payrolls fell 202,000 jobs so you'd think the Conservatives would be out celebrating the shrinking of Government they've been whining for… Manufacturing was up 36,000 but service sector payrolls fell a disturbing 164,000 – which makes no sense in light of a positive ISM report so maybe the data is flawed (no big shock if it is).
We still have Consumer Credit data at 3pm to slog through today and we should get some false support at the open as the dollar drops like a rock on expectations of more money drops from the Fed should punch the Yen back down to 85 with the Euro back to $1.33 and the Pound testing $1.60. Will that be enough to get copper back to $3.40 and oil back to $82.50? If not, then there's no real strength to the market. Fortunately, we stayed away from EWJ longs yesterday because a strong Yen will send them back to 9,500 very quickly and, once again, we are testing that 1,000-point tether between the Nikkei and the Dow.
So woo-hoo on our shorts – what a fantastic way to close an otherwise boring week. Now let's see what there is to buy on the dips and we'll see if 1.25% holds to the downside or if we punch down the full 2.5% today (which would be more bullish if we hold that and recover). Fun, fun, fun!
Have a great weekend,
– Phil
