Market and political comments for July 7th, 2011

Weekly Initial Jobless Claims data came in at 418K compared to last week's data of 428K and an expectation of 425K. This was better than an expected number of 425K and clearly better. The big question is can we get down below 400K again? The answer to that is not if, but when.

According to CNN Money today, " ADP numbers showed a gain in Manufacturing jobs in the Private sector for June of 157,000 new jobs. This is 4 times the number of jobs gained in May. Smaller businesses led the charge in June. Small businesses, defined as those with fewer than 50 workers, added 88,000 jobs in June. Medium-size businesses, defined as those with between 50 and 499 workers, gained 59,000.

Larger businesses, with 500 or more workers, added 10,000 jobs last month."

All US market Futures are up this morning in premarket. It looks like we are making a final push to the previous high of 12,800 before we correct. Clearly a "W" pattern, or Head and Shoulder pattern is forming and may be the last necessary ingredient before the market has its correction. But I have been waiting for that for far too long and I know it.

It looks like the President Obama is blinking by setting a precedent and putting both Social Security and Medicare changes on the table to negotiate with Republicans. This was not a good move at this time as it sets up future hostage situations when the debt ceiling must be raised, as inevitably it will. I am very disappointed in this man on some things and this is one of them. He doesn't seem to have any backbone in him. Very upsetting for Progressives in the Democratic Party. He doesn't have to negotiate on this, when almost 80% of Americans favor leaving both programs alone and untouched. That type of tinkering is best left until after the 2012 election.

To use a biblical reference, he is willing to cut the baby in half. He seems more interested in negotiating that in principles. I hope to God we never are in a situation with this President when we are looking at a military situation where surrender is an option the other side puts on the table.

Housing Prices from 1970 to 2009 in the US vs. California as compared to Gold prices. Oct. 6th

ADP released their payroll numbers this morning for September and they were very disappointing because they reported a loss of 39,000 jobs. This was the first month in the past seven that there was an overall loss of jobs. Expectations were of a gain of 20,000 jobs for September. They said that they now expect the Unemployment rate to be 10% by yearend.

Also in the news this morning was the MBA Mortgage Applications number. It was down -0.2%.

Tomorrow, Initial Jobless Claims will be announced and based upon the ADP report we can expect disappointing numbers here as well. You know what that means? The stock market most likely will ignore the news! We don't want the American Public to feel depressed now do we. It's all about managing their psychology in the biggest experimental psychological game in our lifetime. You feeling better yet?

OK, I have put together several charts you might find unique. I looked up Nominal Housing Prices from 1970 to 2009 on a national basis and also compared California's Housing prices. In addition I calculated the Nominal Housing Prices for US and California versus the price of Gold to come up with a Housing/Gold ratio. Here are the charts below. The first is a comparison of California versus the US. They tracked closely with California always higher but during the peak time, California surged while the drop was even more severe than US overall.

The next chart shows the Housing to Gold ratio:


So comparing how Gold has risen and Housing prices have dropped, it looks as though the real value of Homes has diminished significantly in the past 3 years.

Market comments for Sept. 1st

I am sorry I didn't get to this earlier today. I have much going on the next 2 days. The data released today that affected the markets the most was an unexpected increase in the ISM data. It came in at 56.5 while the prior reading was 55.5 and expectations were for the number to come in at 53.0 for August. The stock market soared on the news and the Dow is now up over 215 points. The fact the market moved up so much was a big relief to the Bulls as they have been discouraged over the month of August that they haven't been able to make any money. Now it's the Bears turn to be discouraged as expectations were of a bad Sept. in the market as is usual for September's past.

I wouldn't count on this rally if I were you. Obviously you can count me in with the Bear crowd. I see this as a tidbit of news to hang a trade on but the overwhelming news is negative out there. To prove my point, the ADP report said that jobs unexpectedly dropped -10K in August and the prior month was revised downward from creating 42K jobs to a revised 37K. Expectations were for no jobs to be created for August, not to lose 10K. But the Bulls want to focus on something positive as we start this volatile month. Bears, take a break and go fishing today. Your day will come very soon. Patience!

Latter today Auto and Truck Sales will be reported and while it is not going to move the market much, it is an indicator of the economy and how Consumers are spending their cash. The number is expected to be released at 11:00am PST. I won't be here so check other sources for this news. I will post it late afternoon as an Update. Dow up now 223 points, the Nasdaq is up 55 and the S&P is up 26 points, a heck of a start for September.