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Friday, April 1, 2011

Jobs

 
 
 

In anticipation of Friday’s monthly jobs report the market was very quiet Thursday.  It was so slow that it registered as an inside day, which means today’s high and low prices were “inside” the prior day’s high and low prices.  The consensus for the jobs data is to see a 200,000 gain.
 
We’re so very lucky that the Federal Reserve only needs to be concerned with job growth and not inflation.  As the Fed constantly says, there is no inflation.  Now, if the Fed broke it down into overall wage-push inflation versus commodity inflation we may see eye-to-eye; however, the Fed refuses to agree to any inflation whatsoever.  Even rising food and energy costs are dismissed as irrelevant - but not much longer I’m sure.
 
Brent crude oil traded over $120 per barrel today, while light sweet crude at the NYMEX nearly reached $107.00.  Additionally, corn and other commodities traded limit-up.  Yup, no inflation there…at all – right Bernanke?
 
One man who disagrees (although there are many) is the CEO of Wal-Mart.  In an interview with USA Today we read…
 
The world's largest retailer is working with suppliers to minimize the effect of cost increases and believes its low-cost business model will position it better than its competitors.

Still, 
inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY's editorial board. "We're seeing cost increases starting to come through at a pretty rapid rate."

Along with steep increases in raw material costs, John Long, a retail strategist at Kurt Salmon, says labor costs in China and fuel costs for transportation are weighing heavily on retailers. He predicts prices will start increasing at all retailers in June.

"Every single retailer has and is paying more for the items they sell, and retailers will be passing some of these costs along," Long says.
"Except for fuel costs, U.S. consumers haven't seen much in the way of inflation for almost a decade, so a broad-based increase in prices will be unprecedented in recent memory."
Consumer prices — or the consumer price index — rose 0.5% in February, the most since mid-2009, largely because of surging food and gasoline prices. Core inflation, which excludes volatile food and energy costs, rose a more modest 0.2%, though that still exceeded estimates.

 
Surprisingly, a few Fed-heads - Charles Plosser of Philadelphia and Richard Fisher of Dallas - have expressed concerns about inflation and suggested they would favor raising rates in the near future.  With today’s comments, Narayana Kocherlakota makes three.  The latter Fed member suggested that the Fed may need to raise interest rates to 0.75% in late 2011 and last I checked, that’s this year.
 
 
Trade Date: 3/31/11
E-Mini S&P Trades*
(before fees and commissions):
 

  1. FT buy @ 9:51am @ 1324.00 = b/e (1 lot)
  2.  Algorithm positions (4)
  3.  “Reading the Tape” positions (3) …combined Secret’s, Algo, & “Reading the Tape” total… +4.50


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