Risk Assets Trade in a Tight Range

Good day. And a Happy Friday to one and all! It’s Good Friday for those of us that observe it that way. Good Friday for the markets means that the stock jockeys have headed to the Hamptons already, and the bond boys and girls will close up shop early today, so they can get a head start on getting out of town, too.

All this means is that the markets will be thin today, which could very well cause some wild swings, so be prepared for that, should that occur.

And the wild swings could begin right out of the starting blocks this morning, when the April jobs jamboree prints at 7:30 a.m. CST.

So let’s talk about the jobs jamboree before we get into the currencies and metals (they were boring yesterday). Right now, the “experts” have forecast a net-positive job creation number for March of 205,000, with the unemployment rate remaining at 8.3%, according to the Bureau of Labor Statistics (BLS).

Longtime readers know my dislike for the BLS, because of their “adjustments” that they come up with. Their numbers are useless to me, but the markets get all lathered up over them, and I deal with the markets, so I have to address them. UGH!

I’ve always contended that the way the BLS reports job creation is dumb. They don’t tell you what kinds of jobs were added. So you could have a strong number on the jobs report, but the majority of the jobs were minimum Wage — not that there’s anything wrong with that, but for an economy to grow, that doesn’t help. That’s why I’ve always looked at the average hourly earnings and average weekly hours worked number in the jobs jamboree, for signs of inflation.

But to play along with the silly people that think the BLS numbers are good, I’ll say that the BLS will report more jobs created than the 205,000 forecast. But at some point, the jobs market is going to overheat, and we’ll begin to see these monthly numbers weaken. But that’s just my opinion, and I could be wrong.

But for today, especially given the markets being thin, a stronger-than-expected jobs data number could push the dollar higher, and if it hits any technical levels, the wild swings could begin.

OK, the currencies traded in a very tight range yesterday, with the euro (EUR) able to hold its head above the water line at 1.30. The Aussie dollar (AUD) recovered a bit back to $1.03, but all in all, it was a boring day. Gold and silver tried to mount gains and did for the most part, but they were small in comparison to the size of the drops we’ve seen in the two metals lately.

I would think that the drop in the price of gold has been overdone, but that all depends on what the U.S. government thinks about the whole market. I say that in reference to the WikiLeaks article that I told you about a couple of times in the past. Remember? The memo basically said that the U.S. government manipulated the price of gold, because they didn’t want people selling their dollars for gold and, thus, killing the need for dollars. Hey! I didn’t make that stuff up. It didn’t come from Chuck’s closet of conspiracy stories — it was right there in the WikiLeaks.

Moving on, these are not the droids we’re looking for…

Inch by inch, step by step, the Swiss franc closes in on the 1.20 “floor” that the Swiss National Bank (SNB) put in place for the euro/ franc cross. And in today’s thinned out markets, a full-on breach could be in the cards. And the SNB will have to react or else have their credibility questioned. And if the markets smell blood, they will go after the SNB’s policy and leave it in shreds.

Which means that if the SNB does react by selling francs and buying euros, the franc will lose ground versus the dollar. But IF the SNB sits on its hands and the markets have their way, the franc will rise versus the dollar. And then the final thing is that nothing happens today and we go into the Easter weekend without any movement. I can tell you that I’m sure the SNB is hoping for what’s behind door No. 3.

I know between all the dyeing of eggs and getting your Peeps stale that you’ll want to check to see if China did anything this weekend. The Chinese like to announce things on weekends, and this would be a great weekend to announce something that the Chinese would like to fly under the radar. That something? I’m looking for China to announce a reserve requirement reduction, which as I’ve told you before is just like a rate cut.

Monday is also a holiday for some countries. Easter Monday. I’ve always wondered why we don’t celebrate that as a holiday here in the U.S.

I see where the chief architect of the Twist & Shout, I mean Operation Twist, is going to resign his position as the head of the N.Y. Fed. Brian Sack has resigned. I tell you this because about a month ago, a dear reader sent me a very long list of the central bank heads, the heads of major banks around the world and finance ministers that have resigned or been fired in the past year. The number is quite large and I just can’t help but think that this could be akin to getting out of Dodge. Or getting out while the getting is good. Or any other phrase that fits here.

OK, pushing the envelope there, I do believe, but what the heck, you only live once!

I really got a late start today, so with the currencies in a tight range and nothing new to talk about there, and with the Jobs Jamboree dominating things this morning, I will end the Pfennig quickly today. So let’s all head to the Big Finish!

First, longtime readers of the Pfennig know just how much I admire the great Richard Russell, the “grandfather of market letters” and author of Dow Theory. So Richard Russell was speaking yesterday and had this to say: “My guess is that this is the big money that has been holding off as long as it decently can, and then dumping their goods just before the close. I don’t think that big money likes this market, and I think they have been slowly exiting this market, as quietly as they can.”

He went on to say that “The big money tends to look out six months to a year or so, and there is something out there that they see, and don’t like. Is it a rise in interest rates, is it the power of the Chinese yuan (CNY), is it a further collapse in real estate values? Honestly, I don’t know what it is, but I’m convinced that there is an ominous something out there waiting to materialize. The big money, the institutional money, doesn’t want to be in this market when it materializes.”

Big money is shorthand for “savvy investors.” And doesn’t this play nicely with my call that we are in the eye of the storm right now, and when we head to the other side of the storm, things are going to get scary? You bet it does! Thanks to Richard Russell for his thoughts this morning.

To recap: It’s a Jobs Jamboree this morning, and it’s Good Friday, which means the markets will be thinned out and could cause some wild swings. The currencies and metals traded in a tight range yesterday, with the euro able to keep its head above the 1.30 level. And the SNB is hoping for a quiet Easter Weekend.

About Chuck Butler 105 Articles

Affiliation: EverBank

Chuck Butler is President of EverBank® World Markets and the author of the popular Daily Pfennig newsletter.

With a career in investment services and currencies extending over 35 years, Mr. Butler oversees all aspects of customer service and the trading desk for EverBank World Markets. A respected analyst of the currency market, Mr. Butler has frequently made appearances or been quoted by the national media. These include the Wall Street Journal, US News, World Report, MarketWatch, USAToday, CNNfn, Bloomberg TV, CNBC, and the Chicago Tribune.

Mr. Butler was previously the Chief International Bond Trader and Director of Risk Management for Mark Twain Bank, and has held significant positions in the investment industry since 1973.

Visit: EverBank

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