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Bears Pantsed On “Less Bad” Jobs Report
As I’ve stated before, the rally is likely to fizzle out unless the economic data begins to improve or at least create the impression of improvement. I theorized that the data would need to evolve from “less bad” to “more good”. Today my theory was proven to be on the pessimistic side as the “less bad” jobs report – 247K canned to economist’s expectation of 320K – powered a 1.34% or 13.4 point rally in the S & P 500. Dow Industrials and Nasdaq rallied 1.23% and 1.37% respectively.
The world’s largest confidence game is fitting the blueprint to a t:
- TARP injection to stem the tide of bank runs.
- Clandestine monetization of Treasury issuance to pressure rates lower in the face of record deficits.
- Banking interests encouraged to deploy monetization windfall into stocks to resuscitate sagging pensions and 401Ks and boost confidence generally – “the stock market is the economy” – creating the appearance of recovery.
- Supported by a rallying market, the major media is encouraged to spin everything as positive or “less bad”, assisting in the manufacture of the illusion of new-found prosperity and risk-taking to the population at large.
- Economic data is fudged to comport with the illusion and support an edifice justifying rising market valuations.
Alas, the last few weeks has proven that on this Great Space Coaster, all Gnews Is Good Gnews with Tim and Ben at the controls.
Of course, the actual illusion may be the illusion of manipulation on a grand scale; that we will be greeted in a matter of months to a revived economy driven by real factors instead of gushing liquidity. I call it out-thinking yourself.
The (GOR)y(ED) Details
The Standard and Poors 500 surged at the open, gapping up to just under 1000. Price immediately responded to the gap higher by rallying nearly an additional 1% before selling off 8 points in a zigzag formation as traders contemplated the appearance of an expanding triangle on the charts
. Recalling that bearish patterns are signals to buy, traders responded by jamming the market nearly 1.5% higher off the 10 AM low over the course of the next hour. The market spent most of the midday churning higher before arriving at what would be the high of the day of 1018 just after 1:30 PM.
With limousines now gassed up, Dom on ice, and traders ready to head out for a weekend of raucous celebration, positions were trimmed causing prices to decline into the final two hours of trading. As the trading floors sat empty, an attempt to boost prices into the final half hour by automatic trading programs was stymied and the SPX closed seven-tenths of a percent off of the day’s high.
Rising Wedge Jammed Into Bears’ Bum
The often mentioned bearish rising wedge was – sigh, predictably perhaps – rendered moot today as price blasted firmly past the apex. The pattern was definitely there but now stands along a long line of busted bearish signals littered throughout the duration of the rally. Busted bearish patterns are the hallmark of a strongly manipulated, er, enhanced, market. And so it goes. To add a dash of salt to already stinging wounds of the gored bears, the market spent part of the midday stroking the upper boundary of the rising wedge.
Prince Turned Into A Frog As Rally Strikes Midnight
Most interestingly, the one-time leadership group, technology stocks, – while up the most percentage wise on the day among the major indices – are now lagging behind a broad array of market indices. As the Russell 2000, Wilshire 5000, S&P 500, Dow Jones Industrial and Transportation Averages all surged to fresh highs for the “new bull market”, the Nasdaq Composite, Nasdaq 100, and Philadelphia Semiconductor Index failed to print new highs today. In fact, the SOX was, gasp!, down nearly half a percent, led by moderate declines in National Semi, Texas Instruments, Broadcom, Novellus, KLA-Tencor, and Linear Technologies. The AMEX Biotechnology Index, which has surged 40% over the last four weeks, was also lower by nearly half a percent on the day. It, and the SOX, actually closed down for the week. The rising tide is no longer lifting all boats. Uniformly, that is.
While trading off bearish signals has proven foolish and costly throughout the term of the rally, perhaps there is something to the bearish engulfing candlesticks that appeared Wednesday on the charts of the COMPX and NDX (Tim, Ben, Larry – please exercise some decorum, I can hear your chortles from here). Financial stocks can only pull the market higher by so much. Eventually the tech heavy indices will need to break out as well or everything may come tumbling down at once.
Check back this weekend for some chart observations. There are noteworthy developments that will likely play into next week’s action.
Chart of the day is…
Market Is A Methamphetamine Lab, Could Blow Up Anyday
Speed US surges 284% on Underwriters Laboratories certification of compliance.
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