Thursday, June 2, 2011

Go back and look at my blog of Sunday April 30.


Flash

In the blog I suggested that the bond market was telling us something different than what the stock market was screaming. The bond market was telling us that the stock and commodity markets were over priced and that the economy was slowing rapidly. I suggested that both the commodity and stock markets were headed for a correction. The first week of May both started a correction. The month of May economic releases showed that the economy not only in the United States but, around the world has hit, as some pundits are saying, are in a soft patch. By the way what is a soft spot?

These pundits don’t want to face the reality that there is a better than even chance that the economy will continue to lose steam through the summer. Calling it a soft spot is code for a slowdown or mini-recession.  I actually heard a pollster suggest today the we have created 750,000 jobs and yet he didn't say that 1.4 million Americans have stopped looking for work in the same period of time.  Based on the ADP payroll report on the past Wednesday many economists have substantially reduced the job creation report for this Friday. General estimates are for about 125,000 new private sector jobs and the unemployment rate to creep above 9%.

The number on Friday could be very disappointing or perhaps because of the reporting period be surprising to the up side. If the jobs report is above the 125,000 consensuses to anything above 140,000 then look for the market to rally in the morning. I would expect that after the morning rally this I would expect the market to fall off in the afternoon. Keep in mind that the market is down just over 4% since May 1, 2011.  A normal correction in a bull market is 4% to 6% so we do have a little more to go. I think 1302 to 1305 are major support and a break through these support level could push us towards a 10% correction.

More later


Dan Perkins

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