Anger, Upset, Gnashing of Teeth

In all the years of reading financial news and analysis looking for a trading edge, I think the bitterly scathing comments on various financial blogs this weekend was the worst I've ever seen. The topic? Last Friday's Employment Situation report which made so many "experts" look like they don't know what they are talking about.

Once again the US government was blamed for manipulating data, creating jobs via statistical adjustment. The street expected 140,000 new jobs and the government reported 243,000 new jobs. That is not a small miss in expectations. The unemployment rate fell from 8.5% to 8.3%. Stocks as you know soared on the news.

I am not about to enter this debate. At the end of the day, “it is what it is.” These numbers are always revised (usually downward), and all the hot air comments will not affect the momentum the market is showing us. Do not get sucked in to this argument. Let it pass. Like the Chinese, the US government has certain statistical gathering techniques considered proprietary. Unless a Congressional oversight committee demands public accountability of how the statistical adjustments were made, we should expect the machinations over the validity of last Friday’s report to blow over.

Separately, as I remarked in the video sent Sunday evening, this climbing market reminds me of the early fall of 2006. At the time folks started calling the market’s rise a “Teflon” market. In other words, all the negative news in the world could not stop the market’s rising momentum. Non-directional traders were slaughtered because they could not change their paradigm. We expected a market pull back and received a very shallow pull back. I maintain that a larger pull back is expected…but as mentioned last week, we are in a “hold your nose and buy” market. I am referring primarily to equity futures indexes and individual stocks. We currently have both directional and non-directional trades. (We are also holding our position in cotton and sugar expecting lower prices or at least price not rising).

I must admit a little twinge of unease with these commodity trades when I see the US Federal Reserve, by their actions, are attempting to keep price inflated in commodities and work on beating down the US dollar. The US dollar rose with Friday’s Employment Situation report on the strength of the job market. This Thursday is very important for the currencies because of the Bank of England and European Central Bank monetary policy meetings. The Bank of England is expected to issue additional quantitative easing (printing money) and the ECB might lower interest rates. Nothing has changed with Greece. 10-year interest rates in Portugal hit 17%. Unemployment continues rising in Spain.

In the past if a country lowered interest rates the currency fell as money sought higher rates elsewhere. However, current central bank practice is a race to the bottom for interest rates. If the ECB lowers interest rates charged to banks, the effect might be considered positive assisting countries mired in debt and austerity mode. This would mean the currency climb on a rate cut. I suggest caution watching the initial “action” followed by the “reaction to the action” on Thursday morning. The action starts around 7:45AM ET.

On Sunday I sent the weekend Trader Weekly Review by video rather than print. The video was sent in two parts…review of the macro charts followed by our new picks for the week and update of current positions.

To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.