Market comments for Aug. 11, 2011 (UPDATE)

It's a big day for data release at 5:30am PST for Initial Jobless Claims. In addition, we broke below of 11,000 on the Dow. So far we have not held above 11,000 and so as each day goes by, one must conclude the market is at risk to test Dow 10,000 eventually.

From the Dow charts below, you will see we did rebound after the sharp decline and then the rebound followed by the retreat to a lower low. The Dow closed Wednesday at 10,719. The low for the day was at 10,686.


Volume was high again with a 520 point drop. If you look at the chart below, I took readings on volume for the Dow starting around 11:30am PST and recorded the reading of the Dow at the same time as I recorded the Volume. From the intraday Volume/Dow chart below it is clear that as Volume increased the Dow drop accelerated. So there was a lot of selling behind this market again Wednesday.

My expectation for Thursday is that if the Initial Jobless Claims shows a sharp increase to say 420K or more, the market may sell-off again! However, if the Initial Jobless claims come in at 400K or less, we may have a rally and retest the 11,000 level. Remember there is a predisposition for the market to decline rather than recover right now.

But let me be clear here, we are headed lower, as I have stated many time here, this past week. Just check my previous Blog posts for the last 7 days.

UPDATE: 5:31am PST Aug 11th

Of particular note this morning is that France's CAC 40 Index has slipped below 3,000 while Britain's FTSE is now below the important 5,000 level as we awaited our Initial Jobless Claims data. Our Nasdaq Index is getting to testing the 2,400 level as well, after its decline yesterday. All of these are major psychological levels for investors. Our Dow Futures have been down about 140 points since our premarket opened at 5:00am. Gold Futures Margin requirements have been raised by the CME (CME is the world's leading and most diverse derivatives marketplace).

The Initial Jobless Claims number came in at 395K for week ending 8/6. That's down 7,000 from the previous week. It is a better number, but only slightly. The question is now whether the market will rally on the news. Our Trade Deficit came in at $53.0 Billion in June compared to $50.8 in May.

And finally, leaders of the Senate and the House have selected their representatives to form the Committee, which is charged with the task to come up with Spending cuts and any revenue (tax) increases by November 23rd. Many point to the fact that none of these people chosen in the Senate were members of the Gang of Six, who worked for 10 months and came up with many recommendations for spending cuts and tax increases in a bipartisan way. They knew where the money was as they studied much detail in the budget numbers and were quite familiar with where to get the money from. So there doesn't look like much hope these members will come to an agreement in time.

Market comments for Oct. 14th, 2010

Data released this morning shows that Initial Jobless Claims were higher at 462,000. Expectations were of 450,000. Last week the numbers reported were only 450,000, so this spike is in the wrong direction. However, as usual, they adjusted the prior week's data up from 445,000 to 449,000. Continuing Claims came in at 4.399 Million vs 4.511 Million the prior week. But the 4 week moving average is up to 459,000. When you really think about it, Americans are losing jobs to the tune of greater than 450,000 a week and have been doing so for a very long time! How sad for American workers and their families. This is not a good report for President Obama going into the elections in a few weeks.

On another note, the PPI came in at +0.4%. This was the same data as reported for August. The Core PPI, year over year increase, is up only 1.6%. The Trade deficit came in at -$46 Billion versus -$43 Billion last month. Expectations were for improvement to being down to -$40 Billion, so this too was in the wrong direction. With China's currency resisting world pressure to appreciate because they have an unfair advantage I believe they will continue to defy the world and will keep their currency as low as they can. Why not, they are in the drivers seat and they know it. Even if the whole world dropped their currencies they couldn't get it low enough to match where China's currency is because their population works for under a $1 a day. We just can't compete with them nor can anyone else.

Foreclosures reached a record 100,000 last month, and the background story, which emerged a week ago, was that an investigation of Banks and their foreclosure process is being conducted. Bank of America had stopped all foreclosure processes in 50 States pending an investigation by them.

Futures are close to unchanged or slightly lower after the release of the data.

It is now clear that with the sizable debt this country has, that the way we are dealing with it is to devalue our currency so that the value is half of what it was so we can pay the debt off in cheaper dollars to China, who holds our debt, as does Japan. That is why Japan is trying to lower its currency as well so they get paid eventually relatively equivalent dollars and why China will not inflate its currency. The major world powers are in a Currency war right now. This game is going to end very badly as wealth is being transfered out of the United States.

But we are all happy now because the stock market appears to be rising, right?! How naive the American public is. That is the price we all pay for a poor education of our kids who someday grow up and are fooled by the talking heads in Washington and vote against one's own personal interest.. Education is the one answer to get this country back on track and we haven't even begun to get serious about improving education yet. That is why we get the Government we deserve.

Market comments for Sept. 9th

Data released on Initial Jobless Claims improved as the numbers came in at 451K Initial Jobless Claims. Expectations were for 475K, so clearly an improvement over expectations. Last week the number came in at 472K. Continuing Claims fell to 4.478 Million compared to last week's data of 4.480, which was revised up from 4.456. All in all the numbers for Continuing Claims were about what was expected with al the adjustments.

The Trade Deficit Balance came in better than expected at -$42.8 Billion vs expectation of -$46.5 Billion and prior month of June's data at -$49.8 Billion.

Futures rallied on the news.

It is most difficult to predict what wil happen today on the news in terms of how high the markets will go. The reason is that while the news is better than expected it is still not what we need to happen as far as jobs is concerned. It is just less bad.

Market comments for Aug. 11th: Reality is about to catch up!

The Futures market shows the Dow down 126 in pre-market and the European markets down 1.5% or more. The reality of the recent economic data appears to be catching up to the reality of the hefty prices in the stock market and company valuations. The warning bell has been rung many times over th past 3 months and the rings are getting louder. Oil has broken below $80/barrel for the first time in a while. Then Yen is now down to under 85 to the dollar. Top line Revenue growth has not been the fuel of this past quarters earnings achievement. It has been cost cutting. But that too may be near its end as well as Unit Labor Costs are starting to rise, reported yesterday at +0.2%, and Productivity is starting to wane, reported yesterday at -0.9%. The Trade Balance for June has come in at -$49.9 Billion while it was expected to come in at -$43.0 Billion. The prior month it came in at $42.3 Billion. So this is definitely not going in a good direction. Gold is up over $10/ounce this morning. Exports were down -1.3% and Imports were up 3.0%.

We also expect Initial Jobless Claims to rise again this week. The number expected tomorrow is 465,000 compared to the previous week's expectation of 460,000 but actually came in at 479,000. And on Friday CPI and Core CPI numbers are reported, as well as Retail Sales and the Michigan Sentiment index. So much more news to come this week.

S&P Futures down -16 in premarket and the Nasdaq Futures are down -30. It looks like we may be finally merging reality with the value of the stock market. We are going lower.