Dave’s Daily: http://www.etfdigest.com
BULLS JUMP ON
EMPLOYMENT DATA
August 03, 2012
{ Dave’s Daily Summary with pics/charts – Dave is
always worth a look; a bit too bullish methinks, but realistic in light of the
preposterous churn-and-earn frauds/’valuations’ which folly has gone global and
will end quite badly! http://albertpeia.com/davesummary8312.htm }
‘The
Employment report was better than expected (163K jobs vs
100K expected but prior revised lower to 64K from 80K). Inside the numbers the
unemployment rate rose to 8.3% and it was estimated 195K people dropped from
rolls meaning the so-called U-6 rate jumped to 15%. But algos
chose to focus on the headline number driving stock prices higher for another
end-of-week “stick save” which we’ve seen before.
Perhaps
not so much in the headlines was a unique reevaluation of Draghi’s
comments from Thursday as noted by Bloomberg
whereby it was suggested he was just laying the framework for a bargain.
Further another late article from Bloomberg
noted some inferred weakening within the German ranks which might be more
supportive of Draghi’s efforts. And, this article points to a split
perhaps from the Bundesbank and politicians—always a
potential problem for the bank’s autonomy. Meanwhile economic data from the eurozone continued to decline with the PMI descending to
46.5 and the
Also
of note was the
first repo liquidity injection from the Fed to Primary Dealer’s (banks)
since December 2008. This was a small amount ($200M) but showed the Fed working
in a more subtle fashion to lubricate trading desks.
Stocks
were higher across the board and intra-market correlations were running almost
at 100% allowing for little in the way of diversification. Everything rallied
today except natural gas (UNG), bonds (IEF) and the dollar (UUP) and that’s the
easiest way to sum things up.
Now
you might think from our comments we’re bearish but we’re 60% long equities in
our active portfolio with the balance in cash. Sure, on days like this we’d
like greater exposure but you wouldn’t have said that the prior 4 days. The
bottom line is you can be a skeptic while remaining systematic. Staying with
longer term tech analytics (weekly & even monthly) avoids a lot of the
daily noise despite emotions. So when markets rally when news overall and fund
flows are this terrible that must be bullish or just another bout of
short-covering.
We’re
seeing markets (see SPY chart below) that very much resemble similar periods to
2010 & 2011. Those markets featured significant two-way action which made
for poor trend-following conditions for short-term investors. This is now
enhanced by the presence of HFTs and algos and a good explanation of how these work
which also makes it more appropriate to step away from shorter-term chart
views.
Despite
Friday’s good market action we still face trouble in the eurozone
and with global economic contraction not solved by one data point or rumors and
spin. Now we add elections and accompanying uncertainty to the mix.
Volume
on Friday was light with most of it coming in the last 20 minutes on ETFs squaring up positions. Breadth per the WSJ was
positive but seemed short of a 90/10 day.
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