By Nicholas Santiago on June 4th, 2010 9:41am Eastern Time
Since the May 25th pivot low the stock market has been buying into the potential good news. This week the current administration was on the stomp hyping the current job report for the month of May. While they were correct as the government jobs soared and the private sector jobs disappointed badly. The U.S. Dollar Index began to soar around 7:00 am EST this morning telegraphing this worst than expected May payroll report. Obviously since the release of the job report news at 8:30 am EST the S&P 500 e-mini futures tanked and are trading lower by 24.00 points to $1080.00 this morning. Those who read the Daily Market Report know that we mentioned this looks like a sell the news type of event, and it was.
The Euro currency is trading down to new lows this morning and that is where the problem remains. Simply put there is not anyone that wants to buy Euro currency. More countries are the verge of bankruptcy and ironically many of the states in the U.S. don't look much better.
This morning gold is trading lower by 3.00 points to $1207.00 an ounce. The SPDR Gold Shares (NYSE:GLD) are trading higher by $0.04 cents to $118.00.
Crude oil is lower by $1.47 to $73.17 a barrel. The United States Oil Fund (NYSE:USO) is lower by $0.68 to $33.58.
As long as the dollar remains strong the market will remain under pressure as stocks deflate. If the dollar declines the market may bounce and inflate. At this stage the dollar remains front and center. The spin masters will be out all weekend trying to paint a rosy picture. Let the dollar do the talking and the talking heads do the walking.
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DONT FORGET CANADIAN JOBS, due in 45 mins (11:00 GMT) expected at +21K from 109K, with the unemployment rate expected down at 8.0% from 8.1%. Positive CAN figures should further prop CADJPY towards 89.70 (61.8% retracement), followed by 90.40. USDCAD remains supported at 1.0335. Downside surprise in CAN figures combined w. disappointing US figs should prop USDCAD back to 1.0450s. ON MONDAY WE SHOWED the Spain-Germany 10-year spread, which was at 1.53%, warning against 1.80% (see Monday chart http://chart.ly/ xprxsy Today, the spread hit a fresh high of 1.80%. The reason we continue showing this chart, is that 1.90% is attractively low compared to the +900 bps seen for Greece earlier this year, which means more upside remains for these spreads and hence, downside for euro.
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By Nicholas Santiago on June 3rd, 2010 12:57pm Eastern Time
As we all know, the major market indexes have held the February 5th, 2010 pivot low. The market tested that low on May 25th and have rallied higher ever since. The talking heads in the media have all turned bullish and many are expecting new highs for the year. It is understandable why they would think that way as there are exceptionally low interest rates and tons of money creation. However, the action in copper is painting a different picture that is not so rosy.
Freeport McMoRan Copper & Gold Inc (NYSE:FCX) is the leading copper stock and used by many traders as a commodity barometer. This stock topped out in January 2010 at $90.55 and has never tested that high since. The stock is now trading at $65.24, which is more than a 25 percent decline from that high. Today FCX is trading down $3.83 to $65.22, declining again on the session.
Another leading copper stock that is dropping today is Southern Copper Corp (NYSE:SCCO). This stock topped out in January at $37.00 and is now trading at $28.35. This more confirms that the weakness in copper is not Freeport McMoRan specific. It is in the commodity itself.
It is well know by many traders and investors that when copper falls the stock market should not be far behind and will also decline. The late legendary trader Jesse Livermore said that copper was the leading indicator in the market. This old market adage still holds true to this very day as copper is the most important industrial metal used for electrical wiring and plumbing. Copper is not looking healthy these days and it could be speaking to us.
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By Nicholas Santiago on June 3rd, 2010 3:40pm Eastern Time
Today the major indexes such as the Dow Jones Industrial Average and the S&P 500 Index have traded all over the map intra-day. The DJIA was higher by over 60.00 points before reversing lower during the lunch hour to go negative by 50.00 points. The index is now positive once again and only 40.00 points from the intra-day high. So what is going here? Simply put, the institutional money is jockeying for position and looking to shake out the small S&P e-mini trader. Days like today when the volume is light ahead of a major economic report trade only the best patterns and support/resistance levels. While it looks like a lot is going on in the market it is just noise and chaos on the charts.
Tomorrow is the highly anticipated government jobs report for the month of May. Most fundamental traders such as mutual fund managers will not get in front of this major report. That is why the volume is so light today. Yesterday President Obama and Vice President Joe Biden mentioned that the job report would be very good tomorrow causing a huge rally in the market yesterday. Today is a pause day ahead of that report with a choppiness lacking conviction. Goldman Sachs Group Inc (NYSE:GS) also increased their jobs number estimate to 600k jobs created from their prior estimate of 500k. Therefore, a very good job number is now being factored in for tomorrow. It will be interesting to see if the May job report is a non-event. In any case there are still a lot of geopolitical problems around the world especially as the European Union problems continue to grow. Sometimes the best move in this environment is simply no move.
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The Euro CurrencyShares Euro Trust (NYSE:FXE) has been consolidating at the lows of the daily chart over the last couple weeks. While it is clearly trying to make a bottom, one must be very concerned it does not break through the support. The major support on the Euro can be viewed on the FXE at $121.50. The Euro is lower again today and under pressure.
The pattern on the Euro is beginning to become bearish. There has been little to no bounce and the movement at the lows of the chart signal a possible short term break down quickly approaching. Should this happen, the markets will continue to remain under pressure after this latest bounce.
In tune with that, the U.S. Dollar PowerShares DB US Dollar Index Bullish (NYSE:UUP) continues to hold near the highs of the chart. Should the Euro break through the support level on the FXE at $121.50, expect the Dollar to rush higher.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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By Nicholas Santiago on June 3rd, 2010 9:55am Eastern Time
Once again the market indexes are starting the day higher at the open as the U.S. Dollar Index trades basically flat on the day. This action comes after yesterday's massive point rally. Simply put when the dollar is strong the market deflates. The opposite is true as the dollar declines the markets inflate and trade higher. It seems that the only time the dollar does not effect the stock market is when the trading volume is extremely light. That was partly the case yesterday as it was one of the lightest trading session's in nearly a month.
Traders and investors that want to trade the U.S. Dollar index to the long side can use the PowerShares DB US Dollar Index Bullish (NYSE:UUP). For the traders and investors that would like to trade the dollar to the downside or short the currency can use the PowerShares DB US Dollar Index Bearish (NYSE:UDN).
This morning spot gold is trading lower by 2.00 points to $1225.00 an ounce as fear subsides. The popular SPDR Gold Shares (NYSE:GLD) are trading lower by 0.49 cents to $119.26.
Oil is trading higher by 1.00 point to $73.58 a barrel. The United States Oil Fund (NYSE:USO) is trading lower by 0.13 to $33.65. Oil and most other commodities stocks will trade higher should the dollar pullback or decline.
Tomorrow is the highly anticipated government jobs report for the month of May. Yesterday the President and Vice President of the Unites States basically said that the report would be stellar. Therefore, one must think how much of yesterday's rally is already factored into the market. However, the U.S. Dollar is still the magic wand behind every move in this market.
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Question:What are the 8 scariest words in the English language?Answer:“I’m from the Government, I’m here to help”Now I do not intend to propagate any political views here, nor am I trying to insult any of our members that may happen to come from the country in question in this blog post...I am simply bringing to your attention a great example of where bureaucratic “solutions” can be far worse than the “problem” they are trying to solve.Greece has been in the headline a lot lately, for all the same reasons...Debt, Deficits...etc etc.But how much do we actually know about what the Greek Government is now looking to do to solve the country’s problems? No doubt you have seen the riots on the streets of Athens against cuts in the public sector and no doubt you have heard about the problem of tax evasion the taxman faces (to be honest, I quite like this)...But have you heard about the sudden magical ability the government in Greece has obtained? Apparently they are now able to calculate what prices should be.Yes folks, Greek bureaucrats have finally been able to crack it! They are now able to work out what the price of medicine SHOULD BE. There is no brain small enough in the Greek cabinet of ministers to not be able to take into account all the individual preferences of the citizens, costs of production and opportunity costs related to the production and purchase of medicine.The conclusion: Prices must be fixed at 25% below their current levels. GENIUS!If prices of medicines are fixed at a lower level... that means people can afford it easily...and they will have more left over in their pockets.... they can spend this money in other areas of the economy... and this will stimulate growth.... and we will be saved!I can see Neo-Keynesian economists patting each other on the back in Athens now as they receive honorary medals for economic achievement... only one small problem.The results are not exactly as they expected.Two pharmaceutical companies have suspended sales and left. "WHAT? THE BASTARDS!"Leo Pharma and Novo Nordisk, two Dutch companies have gotten up and left. Maybe it’s just that the Dutch have some crazy attachment to selling goods for more than they cost to produce? Who knows... but there is probably a lot of head scratching going on in Greece right now.How has the Greek government responded?It has condemned the actions as “unfair”.So what is the outcome? The intention was to provide the people with cheaper medicine and stimulate the economy. The result is that now 2 major drugs companies have packed their bags and left, taking a state of the art insulin product with them. (looks like the government is going to lose the diabetic vote).In reality this is no laughing matter. My fear is that governments worldwide will follow this sort of economic logic and not limit themselves only to medicine.So it looks like now is a good time to pull out my dusty copy of “The Road to Serfdom” by F.A Hayek, sit back and indulge in its warnings published decades ago. The times are certainly changing, but it is highly debateable whether it is for the better.
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