Is Good News Good?

March 9th, 2015
in contributors

by Pebblewriter,

Futures responded to last week's jobs numbers by promptly selling off on Friday.

2015-03-05-ES 60 0615

Follow up:

Look for ES to complete the little H&S Pattern targeting 2052. Whether it'll be allowed to play out is another matter altogether. USDJPY ramping is in full swing...

2015-03-06 USDJPY 60 0615

...with the pair approaching our upside target of 121.12 - the .886 retrace of the drop from the December highs.

2015-03-06 USDJPY daily 0640

But, CL is falling off the wagon once again - seemingly on its way to tag 47.66.

2015-03-06 CL 60 0640

Needless to say, the jobs picture is problematic for the FOMC. Having balked at reducing market support when unemployment fell below 6.5% and then 6.0%, can they rationalize ZIRP at 5.5%?

Whether or not we think they should, they no doubt will. Simply put, the US cannot afford higher rates. With $18 trillion in debt, a mere 1% increase in rates translates to an extra $180 billion in annual interest payments. That would increase interest payments as a share of annual government expenditures from the current 6% to 11%.

If rates increased to a normalized 6%, annual interest payments would soar to nearly $1 trillion - about 26% of the nation's budget. It would exceed every category of spending, including military, social security and health care.

Screen Shot 2015-03-06 at 7.42.43 AM

That's if we were miraculously able to hold the line at only $18 trillion in debt. And, it completely ignores the impact of off-balance sheet financing which most estimates put at another $50 trillion or so.

UPDATE: 1:00 PM, Friday.

Heck of a day for our charts. This one that we posted on Wednesday...

2015-03-04-SPX 60 0652

...turned out to be fairly predictive!

2015-03-06 SPX 60 1004

New targets coming up.

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