New Week, New Challenges

I guess the big news today, although not really a Wall Street item, is the tornado that hit the Evansville area. The national news carried some of the story today as we continue to see the weather do unusual things. An F3 tornado is not something that normally occurs in the wee hours of the morning in the middle of November. We hope that everyone there is ok.

The jobs report on Friday was quite weak and well below expectations. Some of us would have expected that to help the bond market a little but it continued its Bernanke retreat. The dollar jumped for some reason but it wouldn’t seem that the jobs report would have caused it. A weak reading from the jobs should translate to a weaker interest rate environment but when the dollar didn’t get sold after the jobs report, they seemed to just go ahead and buy it.

Precious metals, taking their lead initially from the jobs report by jumping on the weak data, dropped in response to the dollar’s exceptional strength. Gold was initially up about $3 on the jobs and ended up dropping $9 from there, down about $6 on the day and ending down about $5. The currency markets (forex for foreign exchange) and the precious metals showed the most response to the jobs market. The stock market was subdued.

We start a new week and with it we start to deal with new challenges. There seems to be much bullishness in the press over the weekend about the prospects for the rest of the year. We do not hold the same opinions due to the lid we see the market has built for itself over the past couple of years. There is always a chance that the market can break out from here but since it hasn’t we must remain bearish. Yes, we missed this latest move out of the October lows but the October highs are still in place for most of the major indexes. Most, except for the one we are short in the RYVNX which has broken below our entry point. We think it a matter of a couple weeks before we are back to the lows of the October in the major indexes. This week’s trading will be telling.

By the way, Erick, please share the picks that you alluded to in your latest comment. We do want to be ready for a bit of a rally out of the lows we are expecting here in the next couple of weeks.

Dow Industrials: 10,530.76 +8.17 (10,500 still)
RYVNX: 20.01
TLT: 88.12