I was long the /ES last night but closed the position at 1063.25. This morning, when I fired up the screens, I was curious to see what the retail and jobs reports had done to the market. I was expecting anything, include a much higher /ES.
Both the jobs report and the retail report were good for the bulls (or "less bad", as is the case in this economy- there's no such thing as true "good" anymore). Jobless claims were substantially below even the lower range of the consensus, and almost all stores reported sales drops – – again, "less bad" – – than expected.
The /ES doesn't seen to have cared. As I'm typing this, it's up 7.75 as opposed to being up in the double digits as it was last night.
In addition, it seems that the dollar's pummeling, which it suffered all night, is abating somewhat as of this writing. So Alcoa's – – sigh – – "less bad" earnings effect, which set the market on fire yesterday evening, seems to have been the principal driver of the strength.
One other item which did occur to me is this………..if you're in charge of a government, and your success depends on your popularity with the people, and you could choose to either (a) kill the dollar or (b) kill equities, which would you choose? The wise choice in the short term (which is all that matters if you're an American politician) is the dollar. Why? Because hardly any citizen understands it.
If the stock market loses 40% of its value, that effects a lot of Joe & Marge Sixpacks out there. And most of them will understand it, because their 401-k will be turned into a 201-k (hyuck hyuck hyuck hyuck ). The idea that something they own is now worth 40% less actually gets through most of the skulls out there.
But what if I challenged you to walk down a random American street and ask the first adult you saw to explain in even the most basic terms what it means to have a falling dollar? How about if I asked you to query 100 different adults? How many do you think could do a reasonable job explaining to you even what a cross-currency valuation represents, and how it affects the economy?
My guess is probably 2 people could explain, and that is a kind estimate.
In any case, another day is before us. I see my post last night has nearly 1,000 comments (!), so welcome to a new day.
