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Friday, July 2, 2010

Friday Morning Update

NFP came in this morning, and man is it ugly. The good news is +83k private sector jobs, the bad news is -125k total jobs. In what may have been at first glance good news (and could have been the reason for the early market spike up), the unemployment rate has dropped to 9.5%, but upon further review we discover that that is due to the labor force participation dropping by a whopping 625k. That mean that there are 625 thousand people this month alone who have not been able to find employment, have no more unemployment benefits, and are no longer considered,, for some bizarre reason, unemployed. I can't wait to check the CNBC videos this morning to see how they are spinning this as a positive. The drop in labor force participation is about the worst possible news we can get, because we have an increasing number of people who have nowhere else to turn. Sort of like Germany in 1932.

The market got what can be charitably described as a weak bounce on the NFP release, getting as far as 1032 before pulling back. I have pivot points at 1038, 1034, and 1010, but you can probably give or take a couple of points. I would be very surprised to see us challenge the 1040 pivot today, but if we do it would be an incredibly bullish development. I also don't expect a drop below 1010, but if that happens it's bombs away. Most likely we will stay somewhere between 1020 and 1030. XLV is leading by a mile, but XLE, XLU, and XLK have some relative strength, and XLF is leading to the downside. I didn't notice yesterday, but XLF did break 14, which was a fairly important psychological level. Treasury yields gapped up at the open, but are pulling back in, and TNX never got back above 3. Oil uis up marginally, gold down marginally, and the Euro jumped up against the Dollar at the open.

I have 8 (that is not a typo) new highs today, with 2 breakouts, DLTR and INCB. Once again there is nothing to report on the earnings front.

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