Thump

by Larry Levin

Although today's news was mostly the same, the result was quite different. There was more bad news, real bad, but for some odd reason investors actually read it; the market was hammered. By the close, the Dow was dropped the most since December 1st. Like the rally, however, today's thumping occurred with low volume. In other words, it could very well be a fleeting drop.

Before the market opened a preview of Friday's jobs data was released, which was less like Santa Claus and a lot like Halloween - Michael Myers to be exact. The ADP employment index showed private-sector firms shed 693,000 jobs in December, which was far worse than expected. But one must wonder - how did this happen? After all, wasn't ALL the bad news already "priced in?" Um, not so much.

We await Friday with trepidation, wrote Ian Shepherdson, chief domestic economist for High Frequency Economics. He said to expect that nonfarm payrolls contracted by about 700,000, which would be the biggest drop in 59 years. Here's the scary part: Mr. Shepherdson is actually one of the few good economists.

I failed to mention the corporate news yesterday but that's OK, there was more today. Alcoa plans to cut 13,500 employees, which is good for its bottom line, but its statement scared the hell out of investors today. Late yesterday Alcoa said it believes the economy is headed for another major downturn, will chop capital spending by 50%, sell four businesses, and further curb output to help weather the steep drop in aluminum prices. This led to the fear that Alcoa will cut its dividend, which caused AA to drop 10.1% today.

Intel didn't help either. It dragged the market lower with its shares closing down 6.1% after warning it expects its fourth-quarter revenue to fall 23% from a year ago to $8.2 billion.

Finally, for all the talk of big deficits - it finally hit. The CBO estimated that the Congressional fiduciaries of your money would squander $1.2 trillion more than it receives in fiscal 2009: the first trillion dollar deficit. It also forecast that unemployment could exceed 9% early next year. Oh yeah, and that does NOT include Barack Obama's $800 billion Keynesian wasteful spending. What's more, Mr. Obama said today that we should expect trillion dollar deficits for many years to come.

Can you borrow your way to prosperity? Can you spend your way there? When will the madness end?

Previous Day's Trading Room Results:

Trade Date: 1/7/09

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

1) B/away sell @ 8:30am at 915.50 = -2.25 (1 lot)

2) TP sell @ 9:05am at 917.75 = +4.00 (1 lot)

3) OTF sell @ 10:00am at 913.75 = -1.00 (1 lot)

4) Engf buy @ 12:40pm at 912.50 = -1.00 (1 lot)

5) Algorithm positions (4)...combined daily total...+0.25

ZB (30 Year Bond) Trades*
(before fees and commissions):


1) No trades today.



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Thursday, January 8, 2009