Here I Come to Save the Day!

At 8:15am, the ADP payrolls report disappointed. See the red arrow on this chart of the S&P 500 futures (click to enlarge):

The market gapped down at the open and stayed underwater all morning until 11:30am when Barry Ritholtz published my withholding-tax data in “Payroll Withholding Taxes Surge in March” (blue arrow). The market then rallied for 21 straight minutes (blue line), exceeded the ADP level (red line) and finally broke into the green.

Not bad, huh? Is Barry’s blog big enough to move the market like this? On a sleepy day with light volume, I think so.

Note to bulls: I can push your market up into the green, but you can’t expect me to hold it up there all by myself. I am only one man after all.

The improvement in the data crept up steadily throughout the month until it finally amounted to something substantial enough to surprise everybody when they finally saw the total. I think that it is notable that even though this data was shocking enough for a CNN/Money reporter to call me, the market still rolled over as we were talking, and finished down on the day.

Has a potentially very-strong jobs report already been priced into the market by the egregious February-March rally? Maybe so. Don’t forget what happened back here:

I’m thinking that we are set-up for a classic “sell the news” reaction. If it begins to materialize next week, don’t just sit there staring in disbelief.

Note: while I made a mistake in one of the calculations in the post on Barry’s blog, it was in the favor of the bears. In addition to that, I used the raw data to measure the March 2009 to March 2010 growth percentage. And since that does not account for the payroll-tax credit that is still in effect, the real growth percentage is stronger still. So, the data supports job growth in excess of my original 300,000 guesstimate. On Larry Kudlow’s CNBC show tonight, Joe LaVorgna of Deutsche Bank, who has “adopted” my method gave an estimate of 350,000. And still, the futures are lackadaisical as I write this.

Wednesday’s Trading – 3/31/2010

ADP released a disappointing number this morning, and the market looks like it will gap down at the open. The market has been rallying for weeks in anticipation of a strong jobs report Friday morning. And while it will indeed be strong, ADP is saying that it will be all government jobs. If that turns out to be true, I would expect some rather nasty red gashes to appear on the charts. Bulls can send their complaints to the Census Bureau which could have been posting their staffing levels all along, but instead has decided to keep it secret until they hit us with it all at once in the NFP report when the market is closed on Friday. Thanks for nothing Census Bureau!

Nevertheless, keep an eye on Barry Ritholtz’s the Big Picture blog this morning, as he may post a withholding-tax study that I did which should provide some solace to the bulls during this unpleasantness.

Tuesday’s Trading – 3/30/2010

VIX Squeeze Intensifies
The VIX’s Bollinger Bands which I showed on my chart from Sunday squeezed even tighter on Monday. They are only 2.92 points apart now, which is the tightest they have been since June 6, 2007. The next day, June 7, 2007, the SPX dropped 26 points (from 1517 to 1491).

Frack Attack
Natural-gas drillers are trying to head-off expensive and restrictive new federal regulations on their “fracking” methods. This didn’t stop UNG from getting a 6 handle today though.

Monday’s Trading – 3/29/2010

Greek Bond
The Greeks are auctioning off a 7-year bond this morning. According to news reports, it seems to be going well, but the futures are 4 points off their overnight peak.

Question: How many people were living or staying in this house, apartment, or mobile home on April 1, 2010?

Answer: Zero. April 1, 2010 is in the future, and the population of the future is always zero until proven otherwise.

VIX Squeeze

The VIX rallied a bit last week, but not enough to prevent it from inching closer to the Death Cross on the weekly chart. Nevertheless, the Death Cross may have to wait a few weeks because the VIX is now in a “volatility squeeze” – and a rather egregious one at that. Take a look at this daily chart of the VIX (click to enlarge):

In the upper panel is the VIX with Bollinger Bands. Notice how tight the bands are. The blue histogram in the center marked “BBRange” is an indicator that I invented to make it easier to see how tight the Bollinger Bands are. All that it does is plot the difference between the bands. Right now, the bands are 3.20 points apart, which is about as tight as it gets.

In the lower panel is the SPX, and the three purple vertical lines mark the last three times that the VIX squeezed this tight going back to July. In each case, the squeeze presaged a pullback in the SPX.

BBRange hit 3.05 on August 24th, so it would not be unprecedented for the bands to tighten more. And perhaps they will do so as the market holds steady or rallies in anticipation of Friday’s jobs report which will be the first one to show a large number of new jobs.

On the other hand, the market is closed on Friday, so perhaps it will have its sell-the-news reaction prior to the news event.

CNBC: America Doesn’t Need More Jobs

In this video from Friday morning on CNBC, you can see Trish Regan and Jimmy Pethokoukis make the argument that “manufacturing jobs are dumb and the USA doesn’t need them.” At 3:24, you can see Pethokoukis say flat out “we don’t need assembly jobs.”

As the USA continues to enjoy “Depression Style” double-digit unemployment, you might wonder why people on the talking box are trying to tell us that we don’t need any more jobs. The answer is that they are shills for Corporate America which makes large profits in the “exporting jobs” trade.

You may also be wondering how Jimmy Pethokoukis still has a pundit job after writing one of the most idiotic columns in economic history: “Dude, Where’s My Recession?” on April 20, 2008. That’s right; Pethokoukis was mocking the bears on the eve of one of the worst economic collapses in history. The S&P 500 closed at 1388 that day, so if you followed this buffoon’s advice, you would still be deep underwater two years later.

What advice does “Jimmy P” have for us now? He wants unemployed factory workers to go to work writing iPhone apps for IDEO. I’m sure that IDEO is a fine company, but I wonder how many former factory workers they have on their staff?

According to Pethokoukis and Trish Regan, all of our problems would be solved if everybody “would just be smart”. But obviously not everybody is smart. What is the minimum IQ required to work at a company like IDEO? What kind of IQ do you need before embarking upon a career in software development? I don’t know, but I’m guessing >100, which means that half the population, 150 million people, are not qualified.

I’m sure that there are sirens going off at Political Correctness Police headquarters because I mentioned IQ. But guess what? You can try all you want to banish IQ, but it ain’t going away. You are born with an IQ, and it does not change. Deal with it!

The great thing about “dumb manufacturing jobs” is that the most complicated processes, such as building a transmission, can be broken down into steps that anybody can do. In an auto factory, you have very smart engineers working together with less-fortunate people. It’s a beautiful thing: no matter what your IQ is, you can find a niche on the staff.

Note to Detroit: You heard “Jimmy P”. What are you waiting for? Get off your lazy butts and start writing code, curing cancer, and sending a man to Mars! Anybody can do it!

Friday’s Trading – 3/26/2010

SPY, QQQQ, and IWM all printed bearish engulfing candles on their daily charts Thursday. And while its financial components kept the Dow from turning red, the XLF printed a gravestone doji on its chart.

All these bearish sticks don’t mean that you should plunge in short at the open. That would have been suicide on January 19th. Take a look at the January top on the QQQQ. The Q’s printed a bearish engulfing candle on January 15th, but then rallied to a new closing high the next Monday. On Tuesday, it rolled over. The moral of the story is that before the market takes a dive, it likes to do its fiendish best to squeeze out the shorts.

During Thursday’s trading, your hero (that would be me) posted one comment. But it was a doozy, right? At 12:35pm, I warned that the market might be ready to stall out. Look at the red arrow on this 5-minute SPX chart (click to enlarge):

How’s that for timing? Even better – the market was rising at that moment, and I was thinking that it would take a run at 1182, which is the third Fibonacci level in the TARP Box. I could have waited a few more minutes before posting, but I knew that my readers don’t get comments immediately, so I wanted to get it out there as soon as possible. Otherwise, the timing would have been even more awesome. And that’s just the kind-of guy I am; sacrificing my own glory for the sake of my readers.

Thursday’s Trading – 3/25/2010

It appears that Fitch’s downgrade of Portugal yesterday has caused the Germans to crack and abandon their hard-line toward Greece. Futures have broken to a new high in the pre-market, so stocks seem to like this development. However, it is a loss of prestige for the euros since they have abandoned their stringent fiscal policies and gone hat-in-hand to the IMF. The FXE is gapping up this morning, but is still far below the gap-down that it made yesterday.

Wednesday’s Trading – 3/24/2010

While discussing Monday afternoon’s bear raid yesterday, I wrote:

“When I have seen this sort of thing in the past – when it looks like the gorilla got beat – he usually gets his way the next day.”

And even though the market broke to a new rally high, I think the gorilla got his banana, if not that big bunch that he was looking for. Take a look at this 1-minute chart of the NASDAQ-100 futures (NQ) (click to enlarge):

If you look at the volume during the raid (red box), you will see that it was very light. So, it probably didn’t take very much capital to knock the market down to 1946 (green line). The next morning (Tuesday), we got terrible housing news, and the NQ plunged down to 1941. I think the gorilla took that opportunity to cover up, probably with relief. Volume was heavier there, so he may have been able to exit his entire position with a decent profit.

After that, the market rallied the rest of the day with the shorts nowhere in sight. So, the moral of the story is that a light-volume market such as this can be slapped around by large players. But without a strong negative catalyst, it’s hard to keep the market down. The China trade war may prove to be a good catalyst for the bears, but we need to see the big guns fired. That would be something along the lines of the Treasury Department designating China as a “currency manipulator”, Congress passing a tariff bill, etc.