Friday, March 4, 2011

Is A Trend Developing?

Despite the ramp job at the close (Dow gained 85 points in the final 40 minutes of trading today, stocks still looked pretty weak this week.

In answer to our headline, we call upon our best sarah Palin voice, for a You Betcha! moment. Thursday's wicked "buy the rumor" advance was followed Friday by a "sell the news" decline, of equally wicked proportions, despite very positive numbers from the BLS regardin February employment.

According to the new Ministry of Truth, the US economy created 192,000 net new jobs in February, with 222,000 of those coming from the private sector, as state and municipal governments shed precisely 30,000 employees. These numbers are difficult to believe, especially when the BLS engages in numerous revisions, approximations and their notorious birth/death modeling, by which we are supposed to believe that new businesses created something on the order of 119,000 of those new jobs.

Were that the case - which I assure you it is not, because nobody is taking risks these days, especially when it comes to hiring new employees or starting new business endeavors - the we should expect similar numbers for the remainder of the year, with the caveat that the vast bulk of these new hires by new businesses will be gone within a year.

Small business failure rates over time suggest that 50% fail within the first year, so we should have a double dip of small business failures and antecedent job losses a year from now and continuing through 2012. Joy, joy, joy!

What was probably more important to investors, traders, scammers, scalpers and thieves were developments in the Middle East, where reports suggesting that troops loyal to Lybian president Muammar Khaddafy had set ablaze a large oil production facility. Also, word has leaked out that all is not well in the kingdom of Saudi Arabia, which is the real McCoy when it comes to big players in the oil business.

Not only does Saudi Arabia export 10 million barrels of the liquid goo a day, they maintain extra production facilities for another two millions should the world require more oil.

Those scary scenarios sent prices for crude skyrocketing on all exchanges, with WTI breaking through resistance at $103/barrel. For otherwise more common concerns, American motorists are becoming quite annoyed at the constant rise in the price of fuel at the pump. Unleaded regular has shot to an average of over $3.50 per gallon nationally. It's cheapest in Montana and Utah, at about $3.18 per gallon, and most expensive in California, where prices under $3.78 cannot be found state-wide.

All of this oil-related shock tended to make traders a bit nervous heading into the weekend, save for those short-covering maniacs who boosted the close and shaved roughly half off the session's losses.

Dow 12,169.88, -88.32 (0.72%)
NASDAQ 2,784.67, -14.07 (0.50%)
S&P 500 1,321.15, -9.82 (0.74%)
NYSE Composite 8,413.05, -52.40 (0.62%)

The late-day rally did little to assuage the internals, however, as decliners trumped advancing issues, 4175-2315. On the NASDAQ, there were 110 new highs and 23 new lows. The NYSE saw 152 stocks make new highs on the day, while only 14 registered new lows. Volume was still rather moderate, considering all the ground covered during the session.

NASDAQ Volume 1,941,966,250
NYSE Volume 4,839,070,500

Commodities had a banner day. Crude oil futures on the front end NYMEX contract were up $2.51, to $104.42, the highest finish since 2008. Gold ramped another $12.20, approaching the fresh highs of earlier this week, closing at $1,428.60. Silver gained an even dollar, closing out the week at $35.33 per ounce in New York.

In the long view, the good-but-not-great jobs number was outflanked by pressure from oil and once again the main beneficiaries were holders of physical gold and silver.

After all the flailing about, the major indices barely budged on a week-to-week basis, but commodities finished strongly higher.

Sometimes, it's better to just sit back and enjoy the show, as that was the case this week for owners of precious metals. A good deal of energy was spent pushing equity prices hither and fro, to little avail, though Tuesday's key reversal looks like it will produce a real correction of 10-15% some time soon.

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