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A thoughtful Sloper put together a chart, shown below, showing that virtually every time the jobs report comes out (marked with the white lines in the chart), a reversal from the current trend takes place. The next jobs report is before the opening bell this Friday, and given the strong uptrend, it could prove interesting.
My antipathy toward the market has reached such a point that I actually woke up after the opening bell this morning – virtually unprecedented! I glanced over at the desk clock, and it was 6:50, which was about two hours after I normally get up. Egads!
In any case, things are steady this morning, and I wanted to take a moment to pat my biggest position – XLU – on the back. Not that it's done anything spectacular, but it's the one short position in which I have the most faith. Even during yesterday's New Year Bullishness, it only crept up a small fraction of a percent. Let's look at the chart:
This chart has everything going for it – – a very clean stop, a well-formed top, and way more potential reward than risk. Plus, in this environment, I'd prefer going for something mellow like XLU as opposed to the looniness in IWM-land.
Let me preface this by saying I think Amazon is a fantastic company. My household does an ungodly amount of business with them – I won't tell you the figure – and every aspect of my interaction with them is top-notch. They deserve every morsel of their incredible success.
Having said that, I will say that the stock price looks on the very high end of what appears to be a pretty regular channel. Indeed, the stock even fell today – which borders on incredible, considering the market as a whole.
In spite of today's bull-love-fest………..I read an interesting article today on ten reasons not to be optimistic about 2010. Here they are:
1. Global bank balance sheets remain loaded with toxic assets. The real banking crisis has not started. Government bailouts have delayed the day of reckoning, not eliminated it.
2. Stock markets rebounded ‘too far, too fast’ in 2009 and are overdue for a big correction, see the Bradley forecast.
3. Chinese exports fell around 20 per cent in 2009, and have not recovered. Global trade continues to reel from the worst crash since the 1930s.
4. US consumer and commercial lending is sharply down. The banks still are not lending for spending.
5. Property values continue to deteriorate around the world putting new financial pressure on owners and banks. US mortgage resets are the sub-prime crisis part two.
6. A double-dip recession like 1980-82 is the most likely scenario with a further leg down in the second half of 2010. The 2009 downturn was too short following a major financial crisis.
7. Emerging markets like India and China are faking their growth – Chinese exports for example are in a deep depression. These markets are anyway too small to lead global recovery.
8. Oil prices are too high, and generally depress economic activity.
9. The record gold price indicates that smart investors are expecting the worst.
10. In past major global financial crises a bond market crash has always been the final phase, and we have not seen that yet. This will bring much higher interest rates, and a boom in the gold price.
Many times over the past year I've mentioned my "1937 to 1942 analog". The market's rally is starting to exceed the bounds of this analog, but I'm still watching closely.
That's why Paul Krugman's article in today's Times grabbed my attention. Here's an excerpt:
The next employment report could show the economy adding jobs for the first time in two years. The next G.D.P. report is likely to show solid growth in late 2009. There will be lots of bullish commentary — and the calls we’re already hearing for an end to stimulus, for reversing the steps the government and the Federal Reserve took to prop up the economy, will grow even louder.
But if those calls are heeded, we’ll be repeating the great mistake of 1937, when the Fed and the Roosevelt administration decided that the Great Depression was over, that it was time for the economy to throw away its crutches. Spending was cut back, monetary policy was tightened — and the economy promptly plunged back into the depths.
This shouldn’t be happening. Both Ben Bernanke, the Fed chairman, and Christina Romer, who heads President Obama’s Council of Economic Advisers, are scholars of the Great Depression. Ms. Romer has warned explicitly against re-enacting the events of 1937. But those who remember the past sometimes repeat it anyway.
