Morning Update: Market Thread Dec 2, 2009

I have to tell you, every morning I get up at about 5:00 AM, put on a pot of coffee and start reading the news. What I read absolutely stuns me… not just today, but nearly every day. Ben Bernanke on the top of the list of greatest modern thinkers? Bombed out Dubai stocks a bargain? 30,000 more troops to Afghanistan? Truly we are living a life of complete illusion and delusion.

Equity futures are flat as they sit just beneath what has so far been an impenetrable ceiling at 1,011ish. Here is the overnight action in the DOW and S&P futures.

The dollar is flat, bonds are up slightly, oil is down slightly and gold set another record while continuing its parabolic move, this time reaching $1,218 an ounce before pulling back just a little.

The now completely delusional MBA purchase application index, designed intentionally for illusion, rose 4.1% last week following a supposed 9% ramp job the week prior, both of which come on the heals of about six weeks of large declines. I have absolutely no idea what that means and, no, you don’t either, as with their adjustments and lack of raw data there is simply no way to know. I would drop reporting it entirely, but then you wouldn’t know the brainwashing that all the fools in Wonderland are receiving:

Highlights

MBA’s purchase application index rose 4.1 percent in the holiday shortened Nov. 27 week. The refinance index rose 1.7 percent. Low rates are a big plus for mortgage demand with 30-year loans averaging 4.79 percent, down 3 basis points for the lowest rate since May. Indications on the housing market are picking up steam.

Whatever. I’ll get my view of the real world elsewhere.

The Challenger job-cut report came out with fewer announced layoffs, here’s Econoday’s report:

Highlights

Challenger’s count of layoff intentions slipped to 50,349 in November vs. October’s 55,679. In a reminder of how much layoffs have eased, the year-ago total for November was 181,671. But a bad sign is a lack of hiring intentions, totalling only 10,076 in the month vs. October’s 57,520. ADP’s payroll count is up at 8:15 ET.

So, if you ask me, we are simply no longer cliff diving with new layoffs, meanwhile those who are unemployed remain unemployed for so long that they simply fall off the roles. Count yourself as lucky if your family has been unaffected, as real total under and unemployment continues to rise.

Meanwhile, the ADP employment report says that 169,000 jobs were lost in September. Here’s Bloomberg’s take on the number, while this number was lower than prior months, the supposed experts were expecting 150K. This is another report that has little basis in reality, in my opinion:

Dec. 2 (Bloomberg) — Companies in the U.S. cut an estimated 169,000 jobs in November, according to a private report based on payroll data.

The drop, the smallest since July 2008, compares with a revised 195,000 decline the prior month, data from ADP Employer Services showed today. The figures were forecast to show a decline of 150,000 jobs, according to the median estimate of 32 economists in a Bloomberg survey.

The report signals the job market is still deteriorating and unemployment will probably climb further even as the economy is emerging from the worst recession since the 1930s. After overestimating payroll losses by 103,000 on average in the five months to September, ADP’s initial estimate for October was in line with the government’s payroll figures.

And what, exactly, were you being told about “Black Friday” store sales? That they are up year over year by .2%? Is that right? If that illusion is true, why are the hard things we can measure way down still? You know, things like tax receipts, imports, shipping indices, etc. Could it be that what we are receiving in the media is simply nothing more than MARKETING SPIN? Let’s see what Gallup says about it:

Gallup’s Thanksgiving week results tend to confirm fears of a weak holiday sales season as consumer spending was unchanged from the prior week, even though it included Friday and Saturday of the Black Friday weekend. At the same time, Gallup’s Economic Confidence Index and its Job Creation Index were essentially unchanged from the prior week. A rather gloomy consumer mood and consumer spending — trailing last year’s financial crisis-depressed comparables by 25% — may not be unexpected, but are surely a disappointing way to start the Christmas sales season for the nation’s retailers. (emphasis added)

Oh, oh. Is this reality? The week that contained supposed “Black Friday” had the SAME level of sales as the week prior? Those sales are down 25% year over year, against what was a horrid year last year? I simply don’t know who to believe, do you? I can tell you this, though… the hard data supports Gallup’s thesis more than the other statistics I’ve seen. Like Howard Davidowitz says, companies who claim that foot traffic was way up are simply making their numbers up! Not that foot traffic matters (only amount of goods purchased really matters), but who is collecting that data, and how is it being collected? I’ll tell you who has good data, that is the credit card companies, and they are being rather quiet, aren’t they? That’s because the amount being charged on cards is WAY down. The media says it’s because the consumer is spending more cash instead. While that’s probably somewhat true, what if they just aren’t really spending that much at all? Hmmm…. Let’s go to the source, shall we. If you own a retail business and are willing to share your numbers, would you please do so in the comments section? I have received a couple of emails from business owners who are claiming sales that are off in the Gallup’s 25% range. I honestly don’t know where the truth is, most often the truth is somewhere in the middle of extremes.

The petroleum report comes out at 10:30 Eastern, the beige book at 2:00.

Technically the market is at an important inflection point. It either breaks out higher here (dollar lower), or it fails again. The indices have created a set of conflicting new patterns with yesterday’s rise. The SPX has created what looks like a bullish flag (red). If that pattern breaks the upper boundary of the flag, the target would add 85 points onto the break and would shoot for 1,200ish, the original large inverted H&S target from months ago.

Meanwhile, the DOW Industrials set another new high yesterday with yet another divergence when the other indices failed to follow. It’s motion over the past few days has created a sloppy looking expanding megaphone, potentially a bearish topping pattern.

If the markets do decide to run further into Wonderland, the 1,200 target also now fits with an overthrow of the top of the rising wedge. Frankly, that would be an amazing run, one that would certainly cause many more to capitulate and join the buying panic that’s transpired over the past 9 months.

If we break 1,113, the next area of resistance is 1,121, then the 1,133 pivot point. I’m thinking anything over 1,121 probably means we’re running to 1,200, but for me the risk is not worth it, I am very content to simply laugh. Should the market decide to turn down, support is at 1,101, then 1,090.

The short term stochastics are overbought and thus a decline would not be unexpected. The VIX filled a large portion of its gap yesterday, watch it, bonds, and the dollar for clues. I hope everyone has a great day, and that you are not being suckered into a marketing induced life of illusion!

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