Data Dependency Hell! 8-4-06

Good Evening.

When your friendly neighborhood Kcap Team saw this mornings Non-Farm Payroll report, we breathed a sigh of relief. The number of new jobs added 113,000 showed that the economy is still growing. However, being slightly less than forecasted might give the Fed more ammunition to pause on August 8th. Remember Bernanke has already expressed his desire to pause he just needs justification of a cooling trend. In fact, the recent string of slightly less than expected new jobs created over the past few months has definitely set a trend of a cooling economy as far as employment is concerned. One number does not make a trend but certainly 3 does!

Market Bovines were even awarded a slight blip up in the unemployment rate to 4.8% as well as an immaterial upward revision to last months new jobs creation. The only fly in the ointment in today's report was the slight up-tick in Average Hourly Earnings to 0.4% from the expected 0.3%. Fundamentally this is still not too large of a concern for the Fed since they seem committed to the notion that slowing economic growth will eventually squash inflation.

Despite the good cheer this morning, the famously wimpy, skittish, pathetic, short sighted, weak, beaten, battered, bruised, fundamentally ignorant, doomed conformists, and any other disparaging remark that can be used to describe this new breed of Bull…fainted like a goat the moment the profit taking kicked in. The Bulls truly are nauseating in their lack of staying power. The good news is that today's reversal to the downside after what looked like a very promising start actually improves the stage for a post Fed rally.

If You Held a Taser to Our Head:
Perhaps the largest problem that the Bulls face nowadays is the notion of a data dependent Fed. We all know how inaccurate and full of revisions the daily economic reports are. The fact that the Fed has decided to hang its hat on such fickle information from government bureaucrats has caused an unusual amount of uncertainty from market participants. Once the Fed finally embraces an action plan that will not be swayed by the next deviant economic report the market may be able to provide a little less fickleness of its own. We have built up our portfolios to a very long posture and hope to keep that stance over the next few days. We believe the Fed is likely to pause on Tuesday and will offer enough guidance to support their new posture for the next one or two meetings.

Hope you traded well.

___________________________________________________
The analysis, opinions and/or forecasts expressed on the Kcap Trading Blog (“KTB”) are for informational purposes only and should not be relied upon in making investment decisions. By using this site you agree that Kleiner Capital Management, LLC (“KCAP”) and its principals are not liable for any action you take or any decision you make in reliance on any content. Please be aware that there is no commitment by KCAP to update the KTB. Furthermore, there may be inconsistent timing and follow up (if any) of posts.
None of the information on KTB is considered individualized investment advice and should not be construed as a recommendation or solicitation to purchase any securities. Reliance on information provided on KTB in no way establishes an advisor-client relationship. Investors are encouraged to seek the advice of a qualified investment professional prior to investing funds.
Clients of KCAP, as well as the firm’s principals and other employees, may be invested in securities discussed at KTB. However, any mention of said securities is not intended to influence market conditions for the security to the benefit of KCAP clients and/or principals and employees. KCAP is not affiliated with any advertisers on this site and does not endorse any of their content. For additional information and disclosures, please visit www.kleinercapital.com.
The information on KTB has been furnished from sources we consider to be reliable, but no guarantee is made with respect to accuracy.
___________________________

Click Here To E-mail Comments