Generally this week of data is what I term the most important week of each month in terms of data flow as global Purchasing Managers Indexes, U.S. ISM's, and U.S. monthly employment data is released but it seems as if each week the past month has been "newsworthy" whether FOMC meetings, European rescues, or what not. That said normally holiday weeks are "good times" – although those who experienced last Thanksgiving week would be forgiven if they doubted that. Most of the big hitters are in the Hampton while junior traders man the desks – volume is light and usually speculation levels rise. This week is tricky due to the news flow however.
Today we have ISM Manufacturing at 10 AM – expectations are for 52.0, a substantial decrease from last month's 53.5.
Tuesday the market's close a bit early at 2 PM so expect very light trading.
Wednesday the U.S. is off for holiday.
Thursday the ECB meets and the expectation is for a 25 basis point cut to 0.75%. ASP Employment is released premarket with expectation of 95,000 – down from 133,000 last month. ISM Non Manufacturing is released at 10 AM with an expectation of a 53.0 reading, down from 53.7.
Friday is the all important monthly employment report (I only say that because it's a data point the market overreacts to). Expectations are for 90,000 jobs added, up from the 67,000 jobs last month.
What you can see above is aside from the monthly employment data, economists have substantially brought in expectations. And Wall Street is all about the expectations game – even if a number is poor, as long as it beats expectations the market celebrates. The outlier is the monthly employment report but that is because last month's data came in substantially what was expected based on the weekly unemployment claims. These claims have been in the 380Ks which normally gives you a 70-100Kish type of employment growth figure. But this is a country of well over a hundred million workers with millions leaving and entering the work force each month so the fascination with a report that gets revised multiple times, has a bunch of assumptions in it, and the like – and expecting to be accurate with 10K or 20K is silly. While it is important in direction, the obsession with the figure in any 1 data point is one of the major pitfalls of investing nowadays.
I'd also like to point out the ECB this week – they have stated many times they wanted to see fiscal/government action before they continued to backstop in new and accelerated ways. They did get that Thursday night so maybe there will be some goodies out there aside from the 25 basis point cut which is now assumed by the markets. The big question is did we put Europe back to the side now for a few months as in previous years, or is this a temporary respite?
As for the market we had a monster move Friday which was mostly focused on a big gap up in the opening minutes and a short squeeze in the closing 20-30 minutes. Many of the hardest hit stocks ran the most – those centered in "growthy" sectors, and we saw oil make one of the biggest moves in years. The S&P 500 ran back to the highs of the previous week and right at the 100 day moving average and 61.8% retracement. As expected IBD went back to market in uptrend after Friday's session – but we have a massive gap now to fill just below. But ironically just about every sector had been demolished as of Thursday – so we have an index that looks more constructive but a lot of bad charts. In many ways just like early January 2012.
Technically we are in between S&P 1340 and 1370 which are 2 areas that continue to repeat as key levels throughout 2012.
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