Tuesday, June 29, 2010

Has the “Wolf Pack” Returned a Tad Early?

I said in my posting of June 11, that I thought that the “Wolf Pack” would return to ravage the markets by mid summer. In my Flash of May 25 I indicated that I was looking for the 1040 level on the S&P 500 to hold at that time, but that I also felt that we were going to test 950 to 975 range on the S&P 500 before this leg was over. Today we find ourselves back to the 1040 level and briefly we went below the target level of 1040 on the S&P 500. We could close below the 1040 level today, but I do not think the assault to 1000 and eventually to the 950 levels will happen today.

I believe the catalyst to bring the market down will be the jobs numbers on Friday morning ahead of a long holiday weekend. The current estimate for the jobs number on Friday is down 100,000. The high-end of the estimate is down 431,000 jobs lost. I think the market is getting more concerned about the faltering economy and the lack of new jobs being created. I believe that the patience Americans is running out with the Obama administration.

If the jobs number, reported on Friday, is down more that 150,000, look for the market to have a hard sell off.  A number less that 100,000, minus census workers, will satisfy the “Wolf Pack” for a short while. You should pay attention to the unemployment rate, which is forecast to rise from 9.6% to 9.8%. Increasing job losses and the unemployment rate will hang over the markets through the summer. The Democrats are running out of time to turn things around in the minds of the electorate. We only have 4 jobs number reports left before the general election.

It was interesting to note the conflict between the President and the Euro leaders over what is the best path to economic recovery. Obama wants to continue to spend while the Euro Land governments want to cut government spending. As a student of history one only has to look back at the great depression to see what happened to the economy of the world when the stimulus stopped. Don’t get me wrong, I’m not in favor of the uncontrolled spending we have today. I’m in favor in spending that encourages job and new business creation not just jobs for Federal Bureaucrats.

History does have the propensity of repeating itself.

Dan Perkins