Friday, October 8, 2004
Issue Contents:
| 08:29 | The Day Ahead Economic releases and news. |
| 08:53 | Headlines and Reaction Employment report. |
| 09:10 | Swing Trade Setups Featured charts for Friday October 8th. |
| 10:01 | Intraday Update The Surprise Move |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Good morning, on this the 282nd day of 2004. Coming right up this morning is the Employment Report, destined to take on additional significance in light of how it may or may not be used by presidential campaigns.
The market is looking for a catalyst and whether this data point is suitable for this purpose or not, the market seems primed to use it as such.
Policy makers have been in the news recently urging China to raise the value of their currency1. Federeal Reserve governors have also been commenting on the current account deficit - currency traders have reacted in kind and the US Dollar is again near recent all time lows. I suspect we are going to hear much more on currency issues in the coming weeks.
Reminder: Monday is Thanksgiving in Canada, Columbus Day in the United States. Canadian markets are closed in observance of the holiday; equity markets south of the border will be open Monday however the folks in the trading pits in certain interest rate and other markets will have the day off.
US Market Calendar
- 8:30 am: Employment Situation
- 10:00 am: Wholesale Trade
- 10:30 am: Weekly Leading Index for the week ended Oct. 1
- 9:00 pm (ET): Presidential Candidates’ Debate in St. Louis
Canadian Market Calendar
- 7:00 am: Employment Report – September
- 8:15 am: Housing Starts – September
- BoC Business Outlook Survey
Earnings and the Federal Reserve
For earnings highlights, please see today's WSJ Earnings Calendar.
For a list of upcoming speeches, congressional testimony, Federal Open Market Committee material, and statistical releases, please visit the What's Next page of The Federal Reserve Board website. Recently released Federal Reserve Board material, including market moving FOMC decisions and speeches by members, will be found on their What's New page.
1 Dollar Under Pressure Ahead of Jobs Data
Jobs report is out.
Employment Rises by 96,000 in September
Companies added 96,000 jobs to their payrolls in September, fewer than economists forecast for the last employment report before Election Day, highlighting a modest pace of hiring that has become an issue in President Bush’s bid for re-election.
Companies added 96,000 jobs to their payrolls in September, fewer than economists forecast for the last employment report before Election Day, highlighting a modest pace of hiring that has become an issue in President Bush’s bid for re-election.
The four hurricanes striking Florida and other coastal states the past two months “appears to have held down employment growth, but not enough to change materially,” the Labor Department said Friday in assessing September’s national employment situation.
The nation’s civilian unemployment rate remained at 5.4 percent.
Job growth was held down by losses in manufacturing, retail and information services. September’s net increase of 96,000 payroll jobs was less than August’s rise, which was revised down in Friday’s report from 144,000 to 128,000.
[Spin cycle begin.]
No spin cycle here, but you can bet they are hard at work at this in war rooms in St. Louis right now. If this were not an election year, most of the discussion would be focussing on the apparent “jobless recovery” which the US economy has still to shake. The headline number and revisions downward for prior months are disappointing and can not entirely be blamed on hurricanes and such.
Meanwhile, there have been job cuts announced at a number of high-profile this week alone:
- BofA to cut 4,500 jobs (on top of 12,500 job cuts that the bank initially said it would eliminate during the merger)
- AT&T to cut about 7,000 jobs
- Hurricanes blew away up to 100,000 jobs
- Bombardier axes 2,000, warns more jobs may go
Perhaps more surprising than the US jobs report today is that Canada’s economy produced roughly half the number of jobs over the same period (Economy adds jobs in Sept.):
According to Friday’s report, about 43,200 new jobs were created last month — all of them full-time positions. In Friday’s report, Statscan said full-time employment in Canada last month surged by 71,800 positions, while part-time employment fell by 28,600 jobs. Analysts routinely view full-time hiring trends as the more important indicator because of greater economic impact from full-time wage earners.
This strong growth is surprising in context with the US numbers released today since Canada’s economy is one tenth the size of the US. We can expect that additional pressure will remain on the Bank of Canada to keep its upward bias on interest rates with numbers like these coming out, with a corresponding impact on an already strong Canadian dollar trading at highs not seen in over a decade.
Featured setups from Thursday October 7 closing data symbol scan
Jump to: Long Setups | Short Setups
Notes for the Day
Long candidates carried forward from earlier this week:
ACLS
NT / NT:C
We don’t expect to see these trigger if the market reacts poorly to the jobs number, although it is entirely possible that traders will shrug this off. We shall see soon. Note in a weak market, stocks which triggered yesterday and closed weak are somewhat more likely than not to move below yesterday’s low today.
Short candidates carried forward from earlier this week:
ERES – looks ready to trigger, sell short alert 13.92. Demand it close well in your favour today before considering holding over the weekend. ERES appears to report earnings on October 20th.
Long Setups
General common strategy: Unless noted otherwise, buy stop just above the “high” value, with an initial protective stop at the low value of the bar, not below the bar.
Retracement or Pause in Up Swing / Up Trend
Gold is up > 3$ today; keep an eye on any long positions you may still have from earlier this week for profit taking opportunities or we may see a new leg up in Gold stocks here and now. Lets recycle a few charts from earlier, just in case:
BGO (NYSE)
BGO:C (TSX)
ABX – single down bar in an upswing. Intraday traders only…
EMC – probably will pull back some more but just in case lets put an alert at 12.61 and get ready to go long on a market surprise.
AFL (think the AFLAC duck!) ledge just below a gap. Intraday traders only, the first poke up might be a fake out, but if not there is probably a quite 2% in this name.
SPY – if the market decides it can go up regardless of the number, here’s the first best opportunity to get long above yesterday’s high – a place where price should not go unless the S&P is ready to rise again.
WSM takes over from Martha?
ONNN semi sector, apply all relevant cautions.
SPLS minor pullback below test of top.
Short Setups
General common strategy: Unless noted otherwise, place a sell alert at or just below the low of the setup bar, and look for the first failed intraday bounce after the low has been broken. What we are looking for is price to push down, bounce a little, and fail again – this is where we want to get short.
Test of Bottom – Continuation
SAFC – stealth bear flag forming above test of bottom.
One thing to consider today is that the market can do whatever it wants with news – ignore it, react to it. The bottom line here is that price is attempting to regain the trading range of the last few days and if it succeeds, we might well see an attempt at a rally.
When traders see the market go up on bad news, occasionally this generates a big euphoric rally. Be alert.
Gold is having a strong morning and some of us are attempting new long entries in case Gold stocks can make a new leg up.
Dow 30 – overhead resistance in sight.
S&P 500 – ditto.
Stay tuned.
Today's transcript.
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