Here is some detail from Gary Shilling's thoughts on the labor market and how it relates to his recession 2012 call. Keep in mind, labor is a lagging or at best coincident indicator … not a leading one. Hence the 'better data' of late does not have much bearing on what is coming down the road. That said weekly claims are at 4 year lows, which is a positive. And, a point I've made many times over the past few years is important to remember – more labor = higher costs. So more hiring is not necessarily good for companies (or their profits) even if it is better for the economy. At least in the short(er) run.
That didn't take long did it? ECB Executive Board member Benoit Coeure was out on the wires this morning discussing the ECB's ability to buy Spanish bonds on the secondary market – something that was once "a solution" (middle of last year) until they needed a bigger bazooka (LTRO). With an oversold market, soothing words are good enough but being pragmatic about it, the ECB would have to undertake massive purchases of the debt to make a serious dent. But as it has been the past 4 years, it's all about intervention and trying to guess when it happens. While Draghi has denied anymore LTRO is coming, if things get bad enough – you know more is headed this way. But it's nothing more than a band aid – stuffing banks with ever more sovereign debt is just a stop gap. …
As I wrote late yesterday, the close was quite shoddy and usually that leads to a poor open. That said we are in a global market and what happens in Europe affects us. So in a quite volatile overnight futures session, markets were up a bit most of the night then spiked as Europe bounced back a bit today. People are pointing to Alcoa as a driver but "puuhllease"… it's Europe.
As mentioned yesterday a down flush type of open would have set up a very nice low risk "trading" opportunity to the long side, but the market rarely makes it easy does it? …
Doesn't usually bode well for the next morning. But they finally came and got Priceline today…and Apple a touch. A painful morning tomorrow would actually be constructive. And it would line up well with "I want to give you free money" Yellen speaking tomorrow night.
The technical picture still looks fine in the long run but with Spain out there, any serious bad news in bonds will overwhelm technicals. And to muck things up further, earnings season begins in earnest Friday with a few key banks. At least it's far more interesting than the past few months.
After the three day selloff in early March – which turned out to be a headfake rather than leading to what has happened in April – discussion of "sterilized bond buying" led to a flurry of buying on the 8th. That morning the major indexes gapped up – for some reason stockcharts.com doesn't show these gaps on the S&P 500 chart, so I will use the SPY ETF chart. On March 6th the market closed at 135.91 – which has just been filled. (equivalent to S&P 1359) It had gone within 0.04 points of that level earlier in the afternoon (135.95) before jumping back up for an hour or so. …