Sunday, September 4, 2011

A long labor-less weekend for all

Was last week exciting enough for you folks? From Aug. 26th close of 1,176 in the ES, we ramped up about 55 handles in 2 trading days, just to give it all back and more to 1,173 by Friday. Let me stress this again, nothing has changed. We can clearly see that with the three dismal jobs reports we got out, especially the +0 Non-Farm Payroll number on Friday, that we still have some problems that are not going away in the near term. The 55 handle move up was as one would say the “post Bernanke” rally that faded into oblivion. When Quantitative Easing 1 was announced, we saw a huge ramp up, that ended and QE2 followed. During this time, we were actually seeing “some” very little if any job growth, just to calm those perma-bulls down. Now Bernanke has come out saying they could take action (cough QE3 cough) if needed. The people who bought into the QE happiness in the past have now realized that it was a bad decision. Printing one more dollar devalues the previous one, soon enough we will be driving pick-up trucks to the store full of worthless dollars to buy a box of cereal. Investors have lost confidence and the zero job growth for the month of August was the nail in the coffin. Take the Birth/Death adjustment of +87K and we have a -87K job loss. In the past year, Birth/Death has added 491K jobs, with the biggest increase coming in January ’11 (via ZeroHedge).

Let’s look at a chart of the ES:

Below is a 2 yr chart showing S3 downside pivot of 1,170, no doubt we will smash through that we are already down about 9 handles pre-market for the open Tuesday (markets closed Mon. for Labor day). I still stress the 1,050 level or “begging QE 2 level” as being pretty close to fair value for now. At this level, P/E for the S&P will be below 15 but I believe it belongs to be around 10 until we see job growth.

I did some trading this week, bad result, probably never doing it again (I always say that) but I bought 300 $CWTR @ $1.00 limit before the earnings report, sad to say I got smashed on that call, lost about 60 bucks so far, for now will wait it out, not a big concern.

$CWTR chart gap down after report

I am a bit concerned with my holdings in my long $IVR fund, have lost about 20% since I put $$ in a month ago @ 19.75 (now @ 16.41) being a REIT it does pay a huge dividend of 23%, so I will wait this one out and get paid in the process. Below is a chart of $IVR, notice the gap down on the 18th on heavy vol, secondary offering diluting the shares took place that day.

Second week of classes begin tomorrow, first week went very well, I am really going to enjoy this semester, new interesting professors with different backgrounds to help me along the path to my dream job. Pretty quiet earnings front this week, so very unlikely I will be trading. Have a good labor-less holiday weekend everyone, always buy protection!

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