Data Day

by Larry Levin

As I stated yesterday in Notes From the Pit, the market was waiting on today's first data point: weekly jobless claims. The surprise, however, came from the Philly Fed data. To be sure, both were horrible once again and the only to be surprised - again - were U.S. economists.

Consensus economic expectations for weekly jobless claims were for a bad reading of 480,000. The data reading came in at 500,000, with the prior week's reading revised worse than initially reported and the 4-week average of claims climbing as well. Bloomberg said this "initial claims are piling up, indicating that businesses are continuing to cut costs. Initial claims came in at 500,000 in the August 14 week for the largest total since November. The four-week average of 482,500 is the largest since December. A month-to-month look shows significant deterioration of 25,000 for a percentage change of nearly six percent. The Labor Department said special factors are playing no part in the data."

In the Bloomberg article we read that 100% of the economists surveyed were wrong - again - expecting better economic news. How are these folks able to avoid joining the ranks of the unemployed when they are wrong so often?

Although the weekly jobless claims was worse than expected, the Philly Fed Survey was far, FAR, worse than expected. Once again, 100% of the economists surveyed weren't even close to being accurate. The prior month's reading was 5.1 and economists expected it to rise to 7.0. The dolts were off by a gargantuan sum coming in at -7.7.

Regarding the report, Bloomberg said "Manufacturing indications out of the Mid-Atlantic region are decidedly negative for August. The Philadelphia Fed's general business conditions index fell to minus 7.7 to indicate month-to-month contraction in business activity. New orders, at minus 7.1, show a second straight monthly decline in what is a definitive indication of weakness. Unfilled orders extended a run of declines. Shipments also fell in the month as did employment and the workweek. Inventories also fell while delivery times quickened. Today's report is significantly weaker than Monday's soft Empire State report. Together they point to trouble for August manufacturing data."

OK, so the news was very bad - shocking many. The question is: Since the market had been going up on ridiculously low volume, why wasn't today a 2% down day for the indices? In fact, after the market went lower initially (yes, quite a bit) the indices spent the remainder of the morning and all afternoon attempting to go higher. There were no additional attempts to hammer the market.

When one looks at the volume distribution from a Market Profile perspective, Thursday's distribution resembled the "b" shape. What this means is that the majority of volume occurred after an early sell-off. Said another way, there was a whole bunch of buyers supporting the lower prices that the entire latter 3/4 of the day could not make new lows. Moreover, these buyers are long term buyers and will not be shaken out easily. Therefore, even at lower lows, one should not be surprised if buyers once again attempt a rally.




Previous Day's Trading Room Results:

Trade Date: 8/19/10

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


1) FT sell @ 9:41am at 1075.00 = b/e & -0.25 (2 lots)

2) Algorithm positions (1)

3) “Reading the Tape” positions (9) combined Secret’s, Algo, & “Reading the Tape” total… +7.75



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