Today, we had a rally…and everyone went out and bought the global growth stocks, be it Oil, Materials, etc,
The Euro/JPY was in rally mode and the “Risk On” play was all the rage. So the question comes up, is this rally going to last for more than a day or two?
Well, as I am still trying to figure out The PPT system, I will revert over to my style of Analysis. First, what the heck did Copper do today? Well, US Copper Futures ended down but bounced back above $3.00 a pound after a 12 day low. Last night the Shanghai Copper Futures sold off hard. Tonight they are up, but only by a 1/3 of what they lost yesterday. It appears that even if we got a relief rally to retest the $3.00 support, Copper is still having a greater focus on the fact that China won’t be building like crazy…not that many High End Apartments or Shanghai Expo Parks needing to be built this year. Weak Dr. Copper spells weaker Market. As, I heard last night, all Bull Markets have a Copper Roof.
Second, Iron Ore, VALE’s executive director on Tuesday indicated that they were going to push the upcoming third quarters price for iron Ore up, they saw the huge rally up in the Spot Ore, The Chinese Steel Mills now are paying a lower amount, they did the math and want more.
If you don’t follow the Spot Iron Ore out of China and India, it was in a crazy rally up where prices seemed to go up about 2% everyday. But, recently it has been in freefall. Last Night talk brought out some “Dealers” and the price for spot did move up about 1%, but it was not the Steel Mills buying, only Traders hoping for a bottom if China goes all 2009 on the Ore Miners and refuses to pay up. With Rebar still falling on the futures (yet up a small bit tonight)and Chinese Steel Production prices cut for June, the dealers buying last night on speculation could get hurt, we will watch. I believe that Chinese Customers have a formula that was agreed on with the contract, so it may be a non issue anyway, well at least until July. Plus, Rubber is still falling on the Shanghai Futures as a slowdown in China’s car sales is bothering it…which also doesn’t help steel.
Third, the Euro/JPY and USD/JPY crosses. Last night the Japanese Prime Minister announced he was stepping down. The surprise news had everyone selling the Yen, this set off a short squeeze because everyone has been selling the USD/JPY for awhile. Right now the USD/JPY is at 92.19ihs and the Euro/JPY is holding around 113 with 113.50 being toppy point. We will just have to sit and wait to see if the dealers really want to go long Euros and the OZ at this point and continue to sell the Yen. My own gut feeling is that the Prime Minister story was just a bit of a surprise, and even with that event the Euro/JPY is having a hard time staying over 113. The Mining tax in Australia, is off, and then it is on, then it is off…just getting bored with that.
Last, we continue to play the “what will the Non Farm Payroll be” which I discussed in last week’s post in the Peanut Gallery. Today’s, Challenger Jobs Report had a good headline and everyone including Obama is already pricing in a very good Jobs number. Yet, on Friday if we get a good number and Japan has settled down then, believe it or not, we could actually sell off on the news. In the past, I have seen the USD bought on the data, stronger dollar can trigger the program trades to sell the market. So, the market may actually move down even on a good number and of course the market will probably sell off on a bad number or even at this point an In-Line number at this moment.
Also, I know this is a bit bearish, but I am really kind of concerned about the last part of the Challenger Report, the Press Release is posted below, do you see the trend on Government workers being laid off? These are normally higher end workers that will be coming into the labor market. This could be a growing trend that really could cause some ugly ripples and make Mr. Devil Dog one happy guy….knock, knock.
My conclusion, like I said last week, we have an upside bias this week with support about 1072 and resistance around 1040ish. But, next week Congress comes back from vacation so I would not get use to a Summer Rally.
Job-Cut Announcements Remain Flat in May
EMPLOYERS ANNOUNCE 38,180 CUTS AS SUMMER SLOWDOWN APPROACHES
CHICAGO, June 2, 2010 – The pace of downsizing was virtually unchanged in May, as employers announced plans to cut 38,810 jobs from their payrolls during the month. That was slightly (1.3 percent) more than the four-year low of 38,326 job cuts announced in April, according to the latest job-cut report released Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc.
May layoffs were 65 percent lower than the same month a year ago, when planned job cuts totaled 111,182. This marks the 12th consecutive month in which the job-cut total was lower than the comparable year-ago figure. It also marks the 12th consecutive month that saw fewer than 100,000 announced job cuts.
Through the first five months of 2010, planned layoffs announced by employers totaled 258,319, which is 69 percent fewer than the 822,282 announced during the same period last year.
“Announced job cuts have, for all intents and purposes, returned to pre-recession levels. What makes the low job-cut totals we have seen this spring particularly remarkable is that we still have not reached what is the slowest downsizing period of the year, which typically occurs during the summer months,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas, Inc.
“It is difficult to imagine the pace of downsizing slowing even further, considering that the economy, while recovering, is still in a relatively fragile state. However, monthly job cuts may indeed continue to fall during the summer, when many businesses hold off on making dramatic staffing changes,” he added.
The one area of the economy that may not follow the typical pattern of a summer slowdown is the government and non-profit sector, which announced 16,697 job cuts in May, 12 percent more than April’s 14,973. May job cuts brought the year-to-date total for the struggling sector to 93,470, which is more than two-and-a-half times more than the second-ranked pharmaceutical industry’s 34,157 job cuts this year.
“Unlike the private sector, which is beginning to see the fruits of recovery, the budget crisis for many states and municipalities is only getting worse. High unemployment and falling home ownership are taking a significant toll on tax revenues. And, with many states in an election year, politicians are reluctant to raise income taxes and sales taxes, so as not to punish voters. However, this leaves them with no other choice but to make drastic cuts in public programs and the jobs that go with them,” said Challenger.
Sorry, I tried to get paragraphs in edit but didn’t come out.
Thanks Nymph. Putting things into perspective.