Just as the ‘macro’ picture was becoming clearer with investors starting to feel ‘comfy’, a shocking payroll setback has potentially shaken the apple cart opinion for Q3. Okay, maybe this is the case in most of the headlines you’ll see over the weekend or heard on Friday, but not this cart …Why?.
Earnings season around the bend...
DJIM noted the payrolls would not be a catalyst for market direction due to earnings season around the corner earlier in the week. Still, the stunner number hasn’t changed DJIM’s view. The sudden higher expectations from ADP followed by a horrific NFP# within 24hrs has really whipsawed the now red faced economists, but more importantly, probably kept the sidelined ‘longs’ away for a little longer. As if ‘long only’ sidelined investors haven’t had enough to deal with in 2011!. We saw this theme play out Friday … ‘longs’ stayed away vs. aggressive selling into earnings.
The ridiculous discrepancies between ISM employment components, ADP and at last NFP# is conflicting enough to possibly give hope due to the market literally shrugging the event off. Some 'shrugging off' was seen in the late day bounce, the precursor was written all over the Shadowlist wall as single stocks were hardly damaged at the open giving the possibility of the eventual outcome. Still, we wouldn’t expect dip buyers to appear until some earnings calls give reason for such actions.
We noted the market over-stretched and likely played right into NFP# making profit taking almost inevitable with either a ‘whisper200k # or what was eventual reality number that was the perfect ‘excuse’ for some profit taking. In all, one NFP# does not justify a negative trend change just yet The number is so conflicting that the market will need to average out 3-4 months of numbers to get a true read.
… Let’s move on and not lose sight a recovery is underway with global IP lifting…also, most importantly earnings season is likely to be a positive catalyst…luckily, DJIM trading methodology surrounds earnings linked stocks and the season for finding and trading ‘winners’ is around the bend. Finding fresh ‘winners’ is all we should concern ourselves with and leave the uncertainty of the markets to others to grapple with.