Economics

   This Week’s Data

    October nonfarm payrolls declined by 190,000 versus expectations of drop of 175,000; unemployment rose to 10.2% versus estimates of a 9.9% rate.
    http://www.calculatedriskblog.com/2009/11/employment-report-190k-jobs-lost-102.html

   Other

    Ford’s main problem (medium):
    http://mjperry.blogspot.com/2009/11/fords-main-problem-uaw-job.html

    Preliminary bank stress test show improvement (medium):
    http://www.ritholtz.com/blog/2009/11/early-look-at-q3-2009-preliminary-bank-ratings-show-improvement/

    Rate hike odds following the FOMC meeting (short):
    http://www.ritholtz.com/blog/2009/11/rate-hike-odds-and-inflation-expectations-update/

    A contrary view of the dollar (medium):
    http://ftalphaville.ft.com/blog/2009/11/06/81936/dollar-rise-alert/

    Monetary base reaches record high (short):
    http://www.zerohedge.com/article/monetary-base-hits-record-ratio-mb-fed-assets-approaches-10x-excess-reserves-fast-overtake-c
   
Politics

  Domestic

  International War Against Radical Islam

The Market
    
    Technical

    The Averages (DJIA 10006, S&P 1066) are trading in a range, the upper boundary of which we know (10130, 1102) and the lower boundary of which we are uncertain.  In yesterday’s powerful pin action, the DJIA closed right on the lower boundary of the former up trend off the March lows; the S&P remains below the comparable trend line. 

    I am writing as though it is a given that stocks are in a trading range.  Clearly, it is just a function of how I approach technical analysis.  To be sure, there  reasons to believe stocks are still in an up trend defined by a different set of criteria.  For one, both indices’ last low was higher than its prior low. Not a bad point. Second the VIX traded down big yesterday and closed back below the down trend line off its October high after five days above it.  I suppose one could argue that this penetration was an aberration and can be over looked.  Maybe but, I don’t think so. 

    Of course, even if my technical analysis is correct, there is nothing to say that stocks won’t blow right through their last highs thereby re-establishing an up trend.  True enough; but I have always insisted that stocks must prove the trend that they are in.  Right now, they have broken their up trend which puts them in a trading range.  Until they prove that they are not in a trading range by successfully challenging their last high, then they are by definition in a trading range.

    Nevertheless, periods in which the pin action is similar to the present drive me nuts because I made a decision (raise a little cash) and the Market is daunting me.  Not saying I’m wrong just dragging out committing to a direction and all the while dangling the prospect that I may incur opportunity costs related to having raised cash on a break and then a short time later be forced to put it back to work.  All that said, I would not change the discipline because its worth ultimately can be seen when selling on the technical break of a important trend line anticipates a turn in the Market--like what we went through after September 2008.

    I am doing some serious rationalizing here simply because, as I said above, periods like this drive me nuts because I don’t yet know if our stock sales earlier this week will turn out being right.  We will know soon enough; and if I am wrong, I’ll adapt.

    The latest from TraderFeed:
    http://traderfeed.blogspot.com/2009/11/further-look-at-market-laggards.html

    And Trader Mike:
    http://tradermike.net/2009/11/november_5_2009_stock_market_recap
   
    Percentage of stocks above their 50 moving average:
    http://bespokeinvest.typepad.com/bespoke/2009/11/percentage-of-stocks-above-50day-moving-averages.html

   Fundamental
   
    A positive write up on gold (long):
    http://www.zerohedge.com/article/fred-hickey-gold

    Headlines

    Five choices for what drove stock prices up yesterday:

(1)    Cisco’s positive earnings and guidance after the close Wednesday.  Technology stocks have been Market leaders in the rally off the March lows.  Cisco is a bell weather. So investors were naturally exuberant at this report. Nah,  No evidence in this earnings season that investors were focused on profits (revenues, guidance).

(2)    great productivity and weekly jobless claims numbers [see yesterday’s Morning Call]. Nah. Everyone already knows that the economy is recovering; more confirmation of that is not going to help valuations.  In fact, an argument could be made that the better the productivity data, the worse the employment stats will be.  So at the least yesterday’s data were contradictory, not affirmative.

(3)    dollars are going to keep raining from heaven, so the dollar/reflation trade is back on, baby.  Dollars will almost certainly keep raining from heaven and, perhaps, yesterday was a direct result; but why didn’t the dollar get  crushed (it was up slightly) and gold smoke (it was flat)?  Does yesterday’s pin action mean that a continuation of easy money will push stocks up but not gold?  Uhhhhh, I don’t’ think so.

(4)    Tuesday’s election results have taken universal healthcare off the table, gridlock rules.  But ms Pelosi says that the House will vote on its bill on Saturday and that it will pass.  To be sure, it still has to clear the Senate; but the willfulness of the Democrats gives me the willies.  I am not going to bet additional money on gridlock.

(5)    nobody has a clue as to what the next six months are going to look like in our economy, but no one wants to be short the Market going into the jobs report this morning..

I like (5); but I am doing nothing until the Market tells me that either it is or isn’t going to re-establish an up trend.  If it does, I’ll admit that I was wrong and put the money our Portfolios took out Monday back to work.  If it doesn’t, our Portfolios will Sell more stocks and reinvest the funds in gold and foreign ETF’s.

          Thoughts on Investing--More excerpts from The Money Game

    ‘In short, there is not a company anywhere who income statement and profits cannot be changed, by the management and the accountants, by counting things one way instead of another.

    Generally--but no always--a real; sleuth of an analyst who doesn’t have to spend time answering his own phone, talking to customers, selling stock to pension funds, and attending meetings, can crack an income statement  and balance sheet in a couple  of days.  This means real donkey work, digging out notes, making comparisons, finding the tunnels, and in general unpainting the carefully painted picture.  But most analysts do have to answer their own phones, sell stocks, attend meetings--and still cover all the developments in their areas.  So there are not many who can do the job.  Even if every analyst could do his job, there are ten times as many brokers as analysts, and 200 times as many eager customers as brokers, so you can see the odds against Truth at any given instant, when your phone rings and a voice says, “Zilch is earning one dollar and selling at only twelve times earnings.”  On the other hand, as we have learned, Truth will not make Zilch go up, but the Crowd’s general feeling about Zilch just might.

    Most accountants are honorable men, trying to do a job.  But they are hired by corporations, not by investors.  Not only are they professionals hired by corporations, but they are frequently further involved in company affairs as tax and management consultants.

    The accountants have my sympathy.  But not much of it.  I have a lingering skepticism about reported numbers, because I have lost money accepting the reports of accountants, and there is nothing like losing money to burn a lesson.