Sunday, January 9, 2011

Itz Week End Review 1-9-11

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Hopes were raised when ADP reported on Wednesday a gain of 297,000 jobs in December that was 2.5 times the prevailing estimates at the time for a gain of +125,000 jobs. Unfortunately those hopes were dashed when the Non-Farm Payroll report showed a net gain of only 103,000 jobs. Private payrolls rose +113,000 jobs but government jobs declined by -10,000. Over all of 2010 the economy averaged job gains of 112,000 per month in the private sector. After subtracting government job losses the average drops to 94,000 jobs gained per month. State and local governments are facing serious budget shortfalls and the result is a steady stream of job cuts.  Job creation needs to rise to a minimum of 350,000 per month before making any material dent in the 14.5 million unemployed and 8.9 million underemployed workers.
So what does this mean? If the ADP number had carried over to the BLS number, then the Federal reserve would of been at a point, where to go with further stimulus. Grant one month is not a trend, however it appears that this recovery will take a very long time. Ben Bernanke told the House Banking Committee on Friday the employment rate could remain in the 8% range through 2013. He also said employment could take 4-5 years before a full recovery.Will there be a QE3 or 4?
The problems in Europe pushed the dollar to a +3.6% gain against the euro for the week. That was the biggest move for the dollar since August. The rise in the dollar crushed commodities with silver falling -7% for the week along with gold (-$54), copper and crude falling -3.7% each. The CFTC will meet this week to vote on position limits on all commodities, any funds holding large positions may want to avoid the rush to the exits if the vote passes.
Itz Stock Chartz sees the dollar rallying for a few more weeks, but to resume its trend lower as US debt continues to grow. Bottom line is even if the U.S. taxes the rich for every penny, it would not put a dent into it's debt. It needs to reduce spending... how optimistic should one be on Congress being able to do that? Expect the dollar to head lower & commodity prices to resume trending higher. In the near term Itz see gold, silver & crude oil and most commodity prices trending lower for a few more weeks. Suggesting investors have & continue to hedge their portfolios and to raise some cash.
Don't fear a correction/pullback, rather look at it as an opportunity.

The Week Ahead

Commodities Next Week

The lows in commodities is a much needed and sever correction, says Dennis Gartman, The Gartman Letter.

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