THE WORLD EQUITYMARKETS ARE LOWER THIS MORNING:
Asia for the most part was‘flat-to-lower’, with the German DAX and UK FTSE trading lower by -0.4%.Outside of this – bonds are ‘flat’, while the USD is ‘mixed’– it is higher against the Japanese Yen and lower against the Europe. We attributethis latter circumstance to ‘spread trading’ related to the ‘hopedfor’ Chinese currency revaluation; but for the most part the capital marketsarerather ‘calm’ after Friday’s US employment situation report.
THE US ADDED 274K JOBSLAST MONTH...REALLY!
As has been widely disseminated, the jobs report was far stronger thananyone with an estimate; however, the question is whether it was a statistical quirk ornot pervades the investment community. We turn to the Liscio Report as they have been‘spot on’ in their analysis for the US employment situation for quite sometime;they argue that this April’s report was much the same as the April-2004 report inthat the report ‘surprised’ to the upside by a large amount. But those amountswere due primarily to the ‘birth/death rate’ adjustment of 257k and 207krespectively; and that a more muted jobs picture will reassert itself in the months ahead.Hence, we will put our hats in their ring given their recent success with the jobsfigure…a wholly incredible circumstance given the enormous volatility in the numberkeeps us from even trying to forecast it. All we will say is that the recent announcementby IBM and HP to cut jobs supports their viewpoint.
JUNK/TREASURY BONDSPREADS ARE NOW ABOVE 400 BASIS POINTS:
This is quite important per se as anything abovethe 155-day moving average in this spread has accompanied a US equity bear market. Thecurrent spread is near 405 vs. the 155-dma at 363. Hence, this indicator shows the trendis higher in the spread…which decreases the level of risk many are willing totake on and will in fact ‘support’ bond prices given the unwinding of thispervasive trade in the past 2 years. But make no mistake – we want to sell all equitymarket rallies as they begin to weaken and ‘roll over’.
TODAY’S ECONOMIC AGENDA IS‘CLEAR’; WHICH REALLY GOES FOR THE ENTIRE WEEK:
There is nothing of consequence today in terms of reports, withWednesday’s March Trade Balance and Thursday’s April Retail Sales being the onlyones of real consequence this week. This presumes technical trading patterns will dominatetrading, of which we will continue to put out our S&P 500 technical‘line-in-thesand’ at the 1163-1165 zone. If violated…then program sellingwill develop – as long as we remain above it…dips will be bought. Therefore,this week should do nothing more than ‘confound’ both bulls and bears; we preferto focus upon the bull crude oil and oil-related share charts.
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