September 7th, 2012
in Gary's blogging
Opening Market Commentary For 09-07-2012
Premarket numbers were up a couple of points awaiting the NFP figures at 8:30 and briefly fell like a rock after they were announced. Several commentators remarked that it was a big miss as the NFP came in at 96K far under the 130 K expected. The unemployment rate came in lower at 8.1 while expecting 8.3 surprising many analyst with these mixed signals of a low NFP and a declining unemployment rate. The premarket corrected itself almost immediately by trading within a few cents of where it was prior to the announcements but with a bearish slant.
As the markets opened the averages, well, did nothing. Volume was green at the opening, but again almost unmeasurable signaling little investor participation and probable disbelief the market is still standing. The SP500 inched up to new highs of 1437 by 10:45 but that appears to be the work of the HFT computers as the volume was anemic.
As we approached the 10 am mark the markets seemed to have paused to gather steam to either continue push upwards or teeter at the spring board edge awaiting the plunge awaiting below. The initial bias after the opening was bearish with small spurts of green as the brave 'dippers' took their chances. Followed by some profit taking, but nothing signaling the market was going one way or another. By 10 the action seemed to subside for a while.
Rarely have I seen such slow trading periods like this. Typically, in the old days, volume would be up and probably the markets too as investors jockeyed for a favorable position.
It is difficult to believe everyone is awaiting for the German High Court to make their decision, but it is more likely Mr. Market has already priced in that factor coming down next week on the 12th.
The change in NFPs for June was revised from +64K to +45K, and the change for July was revised from +163K to +141K.
The Unemployment Rate declined! What mixed signals you're sending us, economy. (Note: the drop was due to a smaller labor force, not an increase in jobs.)
U.S. Unemployment Rate (Aug) falls to 8.1% vs. 8.3% expected and 8.3% prior.
U.S. Change in private payrolls (Aug) comes in at 103k vs. 142k expected. Prior revised to 162k from 172k.
U.S. Change in manufacturing payrolls (Aug) comes in at -15k vs. 10k expected. Prior revised to 23k from 25k.
Commenting on those payroll figures, Annalisa Piazza at Newedge Strategy says the employment report is the last important piece of information ahead of next week's FOMC (Federal Open Market Commitee) decision:
At the Jackson Hole Symposium last week, Bernanke gave limited hints on the Fed’s future policy steps but – at the same time- he made clear that the slow pace of improvement in the labour mkt is one of the major reasons of concern for policymakers. Whether or not the FOMC will embark another round of QE next week, the Fed is set to maintain an extremely accommodative mode in the foreseeable future.
Today’s data might be the trigger for additional assets purchases next week. If not, the Fed is still expected to deliver further accommodation with the alteration of its communication tools. Indeed, policymakers might extend the timing of the removal of accommodation in the fed funds target until mid to late 2015.
The RRR** was very narrow at the opening bell and any trades will probably end up on the unprofitable side as long as this market remains flat and with low volume. Swing trading is at your own risk and being the market is at a crossroads of sorts, I would prefer to sit on my hands rather than risk guessing incorrectly.
The DOW at 10:00 is at 13291 down 1.60 or -0.01%.
The 500 is at 1434 up 2.19 or 0.15%.
The $RUT is at 839.74 up 1.79 or 0.21%.
SPY is at 144.03 up 0.28 or 0.19%.
The trend is up and the current bias is neutral.
WTI oil is at 94.28 trading between 94.12 and 96.60 and the bias is negative.
Brent crude is at 112.43 trading between 112.32 and 114.68 and the bias is negative.
Gold is up today at 1727.84, trading between 1689.20 and 1733.13 with a positive bias.
Dr. Copper is at 3.59 up from 3.51 earlier.
The US dollar fell from 81.45 earlier to 80.35 and is currently trading at 80.40.
More on NFP: The broader U-6 unemployment rate falls to 14.7% from 15% last month and 16.1% a year ago. 2.6M are counted as "marginally attached" to the labor force, unchanged from a year ago. As has been the trend for several months, government employment is a net negative, falling 7K in August after -21K in July.
Curious why the unemployment rate dropped from 8.3% to 8.1%, even as just 96,000 jobs were added?
The labor participation rate declined from 63.7% to 63.5%, the lowest since 1982. It means that somehow in August the labor force declined by 368,000 people, which is a paradox since according to the household survey 119,000 jobs were lost in August.
The combination of these two factor magically resulted in a drop in the unemployment rate.
The U.S. dollar weakened against its most major counterparts on Friday following a report showed that employment in the country rose by much less than expected in the month of August.
The report showed that employment increased by 96,000 jobs in August following a downwardly revised increase of 141,000 jobs in July. Economists had expected an increase of about 125,000 jobs compared to the addition of 163,000 jobs originally reported for the previous month.
Despite the weaker than expected job growth, the unemployment rate dropped to 8.1 percent in August from 8.3 in July amid a notable decrease in the size of the workforce. The greenback is now trading at 78.55 against the yen, compared to yesterday's close of 78.87.
The next downside target level for the greenback is seen at 78.00. The greenback reached a 1-week low of 0.9508 against the franc with 0.95 seen as the next support level. The pair closed Thursday's deals at 0.9539.
** RRR = Risk Reward Ratio
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Written by Gary