Jobs' Report Up Next

Thursday’s stock market opened with a thud as the major indexes took a hit on the interest rate news out of Europe.  The ECB, European Central Bank, raised rates but that was pretty much a given; but, the Bank of England also raised their rates and that wasn’t expected.  The European bourses didn’t like the news because investors there had the notion that central banks were in the business of tightening.  

This news caused our own futures to drop going into the opening bell and the indexes opened on what turned out to be the lows of the day.  The news out of Starbucks (SBUX) and Sprint Nextel (S) helped to discourage buyers at the bell as both of these stocks got hit hard.  Both stocks did recover some of their price declines as the market rallied the rest of the day.  Only a quick selloff at the end of the session managed to keep the indexes from closing on their best levels of the day.

We think the SBUX’s news was right down our alley.  The company provides high buck coffee to many people and some of those people may be deciding to switch to cheaper or no coffee in order to pay for another expensive liquid, you know, what we call gas—it really is a liquid even though they call it gas.  The SBUX news solidifies our position that the consumer is under duress due to the housing market and whatever fancy mortgage they are stuck with.    

This rally brought the Dow and the SP 500 back to what we have been calling the ceiling.  Both of these indexes tried to break through but didn’t manage to do that on Thursday.  So, what’s next?

Friday morning brings the July jobs’ report.  The Update has been waiting for this report for about three weeks.  We should listen to our own words when we went long a couple of weeks ago.  Back then we said the market would probably rally into the July jobs’ report or maybe even to the Fed’s FOMC meeting next Tuesday.  But, no, we changed our minds based on the poor trading in the market late last week.  So far, though, our decision to go short last week has not been a big mistake.  We had thought the NASDAQ 100 might return to the 1550 level and so far it has only managed a return to about 1518.  Yes, you’re right, it still could go there over the next few days but let’s concentrate on the jobs’ report for Friday morning.

We have talked about the “Fed is Done” rally number…whatever, and wonder if there are a couple of more of them.  We think there is a great probability that the Fed will Pause next week when it decides what to do.  Some of it depends on the Friday jobs’ report and what it will show.  We are in the camp that says that the number will be weaker than the 150K expectation.  In normal circumstances this would instantaneously produce a rally in the stock market but we are not so sure for Friday.  It would provide us more interesting thought processes if the jobs’ number was higher.  The Fed would have to scramble to find a way to say that it didn’t really matter and that they were going to Pause anyway.  This would at least cause some uncertainty in the market place.

Anyway, it’s Thursday evening and we are thinking that we are glad to have a little dry powder to maybe short some more over the next few days.  This period of time will be very difficult to trade and will be easy to lose money if you do trade.  We do think that at the end of the day of the Fed Pausing, August 8th, the market will be ready to head down in earnest.  

Have a great weekend.  We will post late Sunday evening and then we’ll see you here next Monday morning.  

Dow Industrials:  11,242.59  +42.66
QQQQ:  37.12
RYVNX:   23.42
RYAIX:  25.01
RYCWX:  42.35
TLT:  85.80
BEGBX:  13.59