October 3rd, 2012
in Gary's blogging
Closing Market Commentary For 10-03-2012
About 1 pm the averages rolled over and started to melt back down from the sessions high for the day where the DOW had reached 13536 (+55). By the closing bell the DOW had melted down to +12 points and the others averages also flat and ending the day with a lackluster performance. The HFT computers jerked the numbers around today as the volume remained anemic. Obviously, no one is trading
I read this morning where the ADP said private sector employment increased by 162,000 jobs in September compared to economist estimates for an increase of about 140,000. Think about it for a second before you join the crowd of 'that's good news' folks. It represents about 3,000 jobs PER state, 3,240 actually, and there are still 12.5 million out of work. I guess a gain is better than nothing but in reality it is pathetic.
The economy created a mediocre number of jobs in August. Although the U3 unemployment rate declined to 8.1% and U6 unemployment rate dropped to 14.7%. If the pace of job growth is maintained, unemployment rates won't return to pre-recession levels until after 2016!
So, how do you feel about the economy improving now? Seriously, can we patiently wait for another 3 years on top of 4 years behind us. I don't think so because we are so far into the black hole of no return, something has to be done NOW. Taxing the 'rich', delving into failed green energy concepts and burdening the very Corporations and small businesses that do the hiring with unproductive rules and regulations is counterproductive to real growth and robust hiring.
I am sure that my readers are smart enough to figure this problem out and find a solution.
Mathur said about 43% of the 12.8 million Americans officially labeled out of work fall into the category of the long-term unemployed, “which is huge, we’ve never seen those kinds of numbers in any recession,” she said.
That problem is reflected in the U6 rate.
'Real' Unemployment Rate Shows Far More Jobless
The government's most widely publicized unemployment rate measures only those who are out of a job and currently looking for work. It does not count discouraged potential employees who have quit looking, nor those who are underemployed — wanting to work full-time but forced to work part-time.
Consider: Nevada's U-6 rate is 22.1 percent, up from just 7.6 percent in 2007. Economically troubled California has a 20.3 percent real rate, while Rhode Island is at 18.3 percent, more than double its 8.3 percent rate in 2007.
Election battleground states paint a picture not much more flattering. Florida's U-6 number is an ugly 17 percent . . . The numbers come as the government prepares to release its latest reading, the July nonfarm payrolls number, on Friday. Economists expect the report show about 100,000 jobs created for the month and the traditional "U-3" rate to hold steady at 8.2 percent.
The RRR** has been very narrow since the opening bell and any trades will probably end up on the unprofitable side as long as this market has low volume and remains flat. 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. Like you, I am waiting for a clear signal so I can place my bets.
The DOW at 4:00 is at 13494 up 12.25 or 0.09%.
The 500 is at 1450.99 up 5.24 or 0.36%.
The $RUT is at 838.78 down 1.73 or -0.21%.
SPY is at 145.06 up 0.56or 0.39%.
The longer trend is up, the past week's trend is neutral and the current bias is neutral.
WTI oil is down today and is at 88.00 trading between 91.81 and 88.64 and the bias is negative.
Brent crude is down today and is at 108.06 trading between 111.33 and 107.65 and the bias is negative.
Gold is up today at 1778.08, trading between 1770.71 and 1781.66 with a positive bias.
Dr. Copper is at 3.77 down from 3.82 earlier.
@dailyfx: US dollar is today's top performer as weak Asian growth data weigh on risk sentiment. USD up at least 0.12% vs. all major peers.
The US dollar rose from 79.80 earlier to 80.08 and is currently trading at 80.06.
The 500 at the close.
The DOW at the close.
I have been saying the 'cash crowd' is absent from this market place for months and this article refutes my notion; at least in part. It could be that the smaller group making up the cash crowd has indeed left and is hiding its hordes under the mattress. Another group with larger portfolios, depending on dividends, is still holding on. Somewhere, sometime, the truth will be known for I fear the market is going to make a 'correction' in the near future.
Should the markets fall 25% in the next 2 months the article suggests, it will be a spectacle of wonderment watching everyone with their pants down around their ankles. I would bet, however, the decline would be closer to 15% to 20% as we know a large number of the cash crowd is not in the market.
Despite being told again and again by any-and-every commission-taker and newsletter-vendor that sentiment is terrible, managers will need to high-beta performance-chase, and the 'money-on-the-sidelines' is just around the corner; it appears that reality is different.
The Net Long Interest in S&P 500 Futures (the most liquid equity trading vehicle in the world) is now at its highest since December 2008. The last time investors were this 'net long', the S&P 500 fell over 25% in the next two months.
The bullishness out there is way too much IMO, ripe for a correction. QE3 was a flop as far as moving the markets up, but that may be because there are few cash crowd traders to push the numbers higher. As i have mentioned before, the big institution are NOT going to sell if they don't have to and this is the crowd that makes up the markets right now.
The big institutions do not have a lot of cash sitting around, but if they did AND if they thought the market was going to go up, they would be buying. They are not buying, selling, if anything, in small amounts so they will have cash at a later date.
However, there is still the well-heeled fully invested, or nearly so, that could panic and drive the markets down. What percentage they make up of the markets I am not sure, but I bet it isn't more that 10% to 12% - at the most.
Once the markets start to drop, there is going to be a race to see who can unload the most first.
** RRR = Risk Reward Ratio
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Written by Gary