Rally Time!

by Larry Levin

What a rally! The market was able to ignore an incredible amount of negative news today after the S&P refused to break below significant support of 1370.00 yesterday. Was today just a Pollyanna rally? Does somebody (firm) already know tomorrow's jobs data? Has this multi-week congestion finally come to an end? Perhaps we will get the answer in tomorrow's employment number.

This morning Richmond Federal Reserve Bank President Jeffrey Lacker warned the lending to securities firms that started in March may create conditions for future turbulence. "The danger is that the effect of the recent credit extension on the incentives of financial-market participants might induce greater risk taking," Lacker said in a speech to the European Economics and Financial Centre in London . That "in turn could give rise to more frequent crises," he said.

To that I say, "Yes, it will but that's the way it works on the Street now. Get with it Lacker!"

Mr. Lacker urged that the central bank now "clearly" set boundaries for its help to financial markets. In an interview yesterday on the themes of his speech, Lacker said even those new boundaries may not be believed by investors unless a financial firm fails "in a costly way."

And that that I say again, "Yes, it will happen Lacker but that must be what you guys at the Fed want. The horse named Moral Hazard has already left the barn!"

The markets were already rallying and a speech from a Fed governor wasn't going to stop it. Apparently the savings-challenged-Americanus-man spent that stimulus check the day he received it: retail sales were better than expected. Question: Why wasn't that "priced in" or "expected?"

The early rally was also being goosed higher from the weekly unemployment gains that were better than expected. Question: Why wasn't that "priced in" or "expected?"

On the other hand, the following news also came out today that was, apparently, "priced in" or "expected."

1) Mortgages in foreclosure jump in first quarter.

2) Crude Oil SKYROCKETED $5.49 today.

3) Dollar drops against the Euro when Europe warns of rate hikes in future.

4) Ford plans to cut salaried-employee costs by 15%.

5) Continental to cut 3,000 Jobs, ground 67 more jets.

6) UBS closing Muni bond business, firing 280 people.

7) ...AND THE BIGGIE... MBIA and Ambac are stripped of their AAA financial strength ratings by S&P.

As I said at the beginning of the week, Friday's report is the most important. What can we expect?

Arguments for Weaker Non-Farm Payrolls

Services ISM Employment Component Falls Below 50
Consumer Confidence Indexes Hit 16 and 28-Year Lows
ISM Manufacturing Employment Component Holds Below 50 For 7th Consecutive Month
Challenger Reports Shows Planned Layoffs Surge 45.6%
Help Wanted Index Holds at Record Low of 19.0
Work Stoppages Increase as 8.3K Workers Go On Strike
Monster.com Online Ads Decline For First Time In 4 Months
Continuing Claims: 4 Week Moving Average on the Rise

Arguments for Stronger Non-Farm Payrolls

Umm, cause we want it to be stronger?

Economists are expecting the payroll data to show a 50,000-60,000 drop in employment for May. Some are much higher and some expect a gain. But what do these guys know anyway; if put all the economists in the world head to toe and you'll still never reach a conclusion.

Real Time Trading Signals*for

Trade Date: 6/4/08

E-Mini S&P Trades*
(before fees and commissions):


1) PP sell @ 9:00am at 1386.75 = +1.50 (1 lot)

2) OTF buy @ 10:00am at 1391.75 = -1.00 & b/e

3) OTF buy @ 12:20pm at 1397.00 = b/e (1 lot)

4) FT buy @ 1:00pm at 1395.00 = -1.75 (1 lot)

5) Algorithm trades (3)...combined total...+6.75

E-Mini Russell Trades*
(before fees and commissions):


1) Sell @ 1:36pm at 756.7 = +.5 (1 lot)



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