Bounce, Test, Bounce . . .

I laid out a probable course of events for the markets on May 18, and the markets appear (at least so far) to be cooperating with that thesis.
























































Indice High Low Close Hi to Low Low to Close
Nasdaq  2378.32 2135.81 2219.41 10.20% 3.91%
Dow 11670.19 11030.47 11247.87 5.48% 1.97%
S&P500 1326.7 1245.34 1288.22 6.13% 3.44%
Russell 2000 784.62 696.06 737.45 11.29% 5.95%



Here’s a look at a few indices to see how that is playing out:


Nasdaq:  High of 2378.32 down to a Low of 2135.81, with Friday’s close at 2219.41.



Dow: High of 11670.19 down to a Low of 11030.47, with Friday’s close at 11247.87.


SPX:  High of 1326.70 down to a Low of 1245.34, with Friday’s close at 1288.22.


Russell 2000: High of 784.62 down to a Low of 696.06, with Friday’s close at 737.45.



Lets see how this all plays out next week . . 

Category: Investing, Markets, Technical Analysis, Trading

Chart of the Week: How This Jobs Recovery Stacks Up

Category: Employment

Greed is back

Category: Psychology

NFP stinks — and Some People Still Don’t Get It

Today’s NFP number stunk the joint up: 75,000. That’s half of the monthly population growth, meaning the percentage of people working (relative to pop) actually went down, if we are to believe this data. 

Astonishingly, some people STILL do not understand the data or the context of the weak job growth within this recovery. To wit, my friend Cody Willard – a telecom strategist – writes:

"Surely, Barry, you’re not seriously trying to rekindle your argument about "job creation is not what it is typically at this phase of a recovery."

That statement has been a cornerstone of your bearish rants for the last couple years. Yes, I know you’ve been a "trading bull" and what not, and rightly so, but this economic argument of yours has been, in my view at least, wrong for the last few years and now that job creation is finally starting to slow — years after your repeated flagging of how this "recovery" (You still call this a "recovery" btw?)"

Ahhh, poor Cody. He is lost in a sea of data, unable to see the truth. He believes the spin.

Rekindle? Just because you close your eyes, the boogie man doesn’t disappear.

Hey Cody, please cite me some data revealing this to be an above-average private sector jobs creation recovery. Hell, I’ll take average.

You won’t, because you cannot.

Cody is engaging in several analytical foibles, but the best way to describe it is "ignore reality." But his subjective error does not change the objective reality for the rest of us: By any honest measure – e.g., NY Federal Reserve or Cleveland Federal Reserve research — this has been the worst modern jobs recovery on record.

This is not a meme I am pushing or a Bear story I fabricated.

It just “is.”

This doesn’t mean you run out and short everything; as I wrote last December, one should Never Confuse Economic Analysis With Trading.

But comprehending the reality of the economic situation is important. Why does this matter?  What Cody fails to consider is the importance of understanding the specifics of how a recovery comes about, and how it compares to prior recoveries. What it means as the massive government stimulus that goosed the economy begins to fade. What happens when the Pig is finally thought the Python?

I expect that as we begin to slow, there ain’t a whole lot of fat to get sliced. As unemployment starts ticking up, it will not be pretty. It suggests the next recession will be more severe than the last one. 

Yes, Virginia, there is inflation. And yes, Cody, this has been the worst Jobs recovery since WWII. But if you want to believe in Santa, who am I to disabuse you of that notion?


UPDATE:  June 2, 2006: 12: 47pm

Cody and I finish the debate below


Read More

Category: Economy, Employment, Inflation, Markets, Psychology

NFP Day — Abandoning the Over?

Category: Economy, Federal Reserve

Media Appearance: Kudlow & Company (6/01/06)

Category: Media

Yahoo Video Goes Live

Category: Technology, Web/Tech, Weblogs

NYTime’s Comment

Category: Federal Reserve, Financial Press, Media

Worst Case Scenarios: Why the Fed Tends to Overtighten

Category: Economy, Federal Reserve, Fixed Income/Interest Rates, Psychology

Volatility History

Category: Data Analysis, Psychology, Technical Analysis