Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
I am butchering the saying but you get the idea.
After breaking support intraday, it would be quite “cute” if the market closed at at or very near the 1393-1394 area going into tomorrow’s jobs data. (repeat after me: “the most important data point of our lives!”) That would set up perfectly on a line everyone is watching, going into a bipolar outcome. I don’t like all the emphasis on these single data points – it’s like they have turned the market into a Fantasy Football league. I have always disliked having a lot of exposure going into an individual stock earning reports for the same reason (bipolar outcomes) and these economic reports that everyone keys on, are like an earnings report for the entire stock market.
In a country of 300M+ does 30K jobs here or there really matter? Are we even good enough to measure to that degree on a ~130-140M workforce (no). “They” will make it out like it’s the most important data point in the world – as if it’s an accurate measure. (and it will be revised down the road) The larger picture is what is important – the U.S. is creating a relatively paltry 125-175K jobs a month – some job creation was pulled forward into the late winter/early spring as we had a balmy winter in the north. A ton of people have dropped out of the workforce the past 4 years – some to go to school, some “early retired”, well over a million extra now on “disability” (suddenly), and the rest living with parents or in a black hole (black market?) somewhere. But it has kept the unemployment rate far below what it would be (10-11%) in normal times. It’s not great data, nor is it awful – it’s a continuation of the “meh’ economy supported by 8-10% annual federal deficits and a fire hose from the Fed. 20K jobs in one month or the other means little.
This is an impossible spot to really make much of a call market wise – a number of 170K and people will think all is right in the world (buy buy buy), and a number like 130K and the end of world is coming (sell sell sell). Put another way, 4.2M jobs lost netted against 4.37M created means all is well, while 4.2M lost netted against 4.33M created means end of the world. With the government guessing at a bunch of jobs themselves with the birth/death adjustment. And seasonality factors.
Neither extreme is true – we’ll just be forced to watch the herd overreact one way or the other. People still buy iPads, Nike shoes, drink coffee Starbucks and eat a lot of burritos. It’s best just to get it out of the way, and then for 3 weeks we only need to focus on waking up to the potential of Europe blowing up. Until we do it all over again at the beginning of next month.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
