Dallas, TX
February 4, 2010, 08:00 EST		 Dr. Joe Duarte's Market I.Q.


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Intelligence, Market Timing, And Trading Strategy For Traders and Investors

Employment Report Shakes Set In
What's Hot Today:
U.S. stock index futures were looking to open lower on Thursday. The dollar was on the rise as Portugal and Spain's politics are worsening and Greece remains a trouble spot in the European Union.
Today's Economic Calendar:
  • Chain Store Sales

  • Monster Employment Index 6:00 AM ET

  • Jobless Claims 8:30 AM ET

  • Productivity and Costs 8:30 AM ET

  • RBC CASH Index 9:00 AM ET

  • Factory Orders 10:00 AM ET

  • EIA Natural Gas Report 10:30 AM ET

  • 3-Month Bill Announcement 11:00 AM ET

  • 6-Month Bill Announcement 11:00 AM ET

  • 52-Week Bill Announcement 11:00 AM ET

  • Treasury STRIPS 3:00 PM ET

  • Fed Balance Sheet 4:30 PM ET

  • Money Supply 4:30 PM ET
News For Thought

Democrats publicly disagree with Obama budget. According to The L.A. Times: "As Congress begins picking through President Obama's vast election-year budget, many Democratic incumbents and candidates seem to be finding something they love -- to campaign against." According to the report: "A Democratic Senate candidate in Missouri denounced the budget's sky-high deficit. A Florida Democrat whose congressional district includes the Kennedy Space Center hit the roof over NASA budget cuts. And a headline on the 2010 campaign website of Sen. Blanche Lincoln (D-Ark.) blares her opposition to Obama's farm budget: "Blanche stands up for Arkansas farm families.""

Portugal Wobbles. According to The Reuters: "Bond traders probing for weak links in the euro zone trained their guns on Portugal on Thursday as the head of the International Monetary Fund called for painful steps to cut huge fiscal deficits." The report added: "Political tension in Portugal over a regional spending bill and a climbdown by the Spanish government over pension reform added to the woes of peripheral euro zone states facing huge challenges to curb budget shortfalls bloated by recession. IMF Managing Director Dominique Strauss-Kahn said his organization was ready to help Greece, which is under more pressure over its finances than any other bloc member, but expressed confidence the government would take the "very difficult measures" needed to deal with its fiscal crisis."

Employment Report Shakes Set In
Is Wall Street Setting Up For An Employment Report Disappointment?
Investors are waiting for Friday's employment report before deciding what to do next with their portfolios. As we do every month we try to parse key tea leaves and see how things may develop on Friday.

First, we looked at the reports issued by ADP and Challenger Christmas on Wednesday. The former reported a drop of 22,000 in the month of January, a fairly good number. The latter reported that corporations have plans to lay off "71,482 workers, the first time since July last year that planned job cuts rose," according to CNBC.

The Challenger layoff data, was surprisingly placed in a fairly positive light by the firm's CEO John Challenger. Challenger told CNBC that "Heavy cuts in the retail and telecommunications sectors were to blame for the surge, as well as downsizing in the pharmaceutical sector" yet noted that some of the proposed layoffs were due to retailers laying off Christmas help, and adding that this January was better than last year's when there were 241,749 layoffs planned.

Challenger hedged his bets, noting that some kind of surprise could easily start a new round of layoffs, but that for now things seem to have "stabilized" and that if nothing changes, the current data "bodes well for much lighter downsizing this year."

Our usual set of stock indicators were not telling a terrible tale either. Manpower Inc. (NYSE: MAN) our corner office bellwether was in the middle of its recent trading range, not giving anything away.



Chart Courtesy of StockCharts.com


Administaff (NYSE: ASF), which helps us to glimpse into what traders are thinking about small business, was less rosy looking than Manpower. And that's a little worrisome, since ASF had acted fairly well before the last two employment reports. Maybe traders are giving up on small business for now as the tax and budget situation plays out in Washington.



Chart Courtesy of StockCharts.com


That leaves us with Monster Worldwide (NYSE: MWW). The stock rallied on 2-3, and the Monster Employment Index fell one point in January, the slowest rate of decline since 2008. The company's press release says that they are " subtle signs of firming in hiring trends, even for sectors like finance in recent months."



Chart Courtesy of StockCharts.com


Here are some details from Monster: "Arts, entertainment, and recreation notched a rare increase in January, as demand edged up from late-2009 lows. The educational services industry also rose in January, starting the new year with relatively heated demand for additional workers. Mining, quarrying, and oil and gas extraction edged up on the month amidst improved labor market conditions in the primary sector. In contrast, construction and wholesale trade continued to slide from the recent high seen in the November Index, contrasting with the industry's typical seasonal trend. Online recruitment activity also dipped in the accommodation and food services; management of companies and enterprises; and administrative and support industries in January. Utilities; educational services; real estate; and transportation show greater online job availability compared to a year ago, while arts, entertainment, and recreation continues to decline on an annual basis in January."

Conclusion

The jobs report is one day away. And all indications are that we should see improvement in the numbers. The consensus is for anywhere from 40,000 jobs lost, to 75,000 jobs gaines, according to The Wall Street Journal. Last month there were 85,000 jobs lost, while the consensus was for a rise in jobs.

There are certainly going to be revisions. And there will be a lot of talk about the household survey where people that run businesses from their home and work part time are counted. And then, there is always the potential gremlins from the Labor Department, such as seasonal adjustements and other estimates.

What we're saying is that Wall Street is working itself up to some kind of improvement in this report. But if there is a big surprise, to the up or to the down side, the market is likely to move significantly.

Also to keep in mind is the international situation. Iran is rattling sabers and China is not happy with the trade talk it's hearing from The White House.

The S & P 500, barring a major change, looks to have a high probability of failing at the 20 and 50 day moving averages. The key is what happens when the numbers are released on Friday morning.

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Market Moves - Stock Of The Day
Powershares U.S. Dollar Bull ETF (NYSE: UUP) Crosses Key Chart Point

Chart Courtesy of StockCharts.com


The U.S. Dollar continues to gain strength and the Powershares U.S. Dollar Bull ETF (NYSE: UUP) has crossed above its 200-day moving average.



Chart Courtesy of StockCharts.com



The markets are fixated on the action in the S & P 500. And we agree that it is significant. Yet, a more important trend may be reversing in the U.S. Dollar as a multi-year down trend in the greenback may have started to reverse.

The 200-day moving average is the line between bull and bear markets, and the dollar is now technically in a bull market. To be sure, it's early in the game, and things could change, especially on Friday if the employment numbers are not dollar friendly.

Yet, the dollar has a lot going for it. For one thing, Europe has three countries, Spain, Portugal, and Greece, that are in deep fiscal trouble. Japan is also increasingly weak and vulnerable economically. And the U.S. economy, barring a double dip, looks to have stopped falling, or at least seems to be contracting at a slower rate.

With all the potential trouble spots in the world, and everyone hating the dollar, it seems reasonable to assume that this is the proverbial blood in the streets buying opportunity for the dollar.

The key is for the greenback to remain steady and continue to climb, even if it's a slow grind.

Dr. Duarte owns shares in UUP.
 

 


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