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.

Week In Review [$SPX, $COMPQ & $RUT]

Stocks rallied Friday after the latest employment numbers showed signs of a stabilizing job market. The Labor Department report showed 247,000 jobs were cut from nonfarm payrolls last month, less than the 320,000 expected, and the prior two months were revised to show 43,000 fewer jobs were lost from payrolls than first reported. It's been a good run for the market but it is looking a little overbought, but the underlying support is there. I see a brief period of consolidation, the markets will move upwards again.
Caution is warranted here as Mohamed El-Erian, chief executive of bond fund manager Pacific Investment Management Co, said Friday that U.S. stock markets are on a "prolonged sugar high" and that the bull market is unlikely to last. ~read story~

The big news this will be the FOMC meeting on Tue/Wed and their announcement on interest rates. They are not expected to make any changes but there is always the danger that they will modify their statement to include some indication of when they will start raising rates. The bond market is already pricing in higher rates with the 10-year note yield closing on Friday at 3.85% and the highest in nearly two months. The prospect of a rebounding economy is being felt in the bond market. Over $75 billion in debt will be sold this week and interest rates are rising. The Fed could help the Treasury by applying pressure to rates in order to make the auctions go smoother. There are $37B in 3-year notes on Tuesday, $23B in 10-year notes on Wednesday and $15B in 30-year bonds on Thursday.

My observations and call is that individual should take some money off the table on the big gainers like FCX or AA. Keep some cash on hand as I expect a pullback nearterm, where you can redeploy that cash on a longer term play.

*NOTE the S&P500 Percent of stocks above 50, 150 & 200 day moving averages is at overbought levels. Although they can stay there as the market grinds higher, it is a warning sign. ~see chart~ At the bottom of today's blog is a video clip from CNBC of Carter Worth,Oppenheimer Asset Management and the Fast Money team....one of favorite chartist.

*click charts to expand images