Friday, March 4, 2011

The Only Chart that Matters

For the near term anyway:

My Take:

I hate to keep putting this up but the market is obsessed with oil.  We broke $105 briefly today before pulling back to $104 and change at the close.

We saw a sharp rally off the lows at the end of the day. I say no reason for optimism near the close other than oil pulling back a tad.  I will chalk this move up as a robo rally and nothing more.

I thought we would end the days at the lows because it was a Friday, and I figured traders wouldn't want to be stuck in positions over the weekend due to fears of what might happen in the Gulf region. 

One thing is for sure at this point:  Volatility is back!  I expect more of the same moving forward as the market worries about the ending of QE and oil prices.

The way I see it: Stocks are doused in gasoline, and all it will take is one spark to turn this thing into a towering inferno.

What could trigger the blaze?

Let me count the ways:

$140 oil.

Saudi Arabian revolution(Keep a close eye on the scheduled March 11th protests).

PIIGS default/Euro debt collapse.

European interest rate hike(which was hinted at this week by the ECB).

Sharp sell off in the US dollar(look at the chart of the dollar folks, it's ugly).

Sharp rise in interest rates on treasuries.

Buyer beware:

If any one or a combination of these things strike we are in deep trouble. 

The Bottom Line

The jobs number of +193K was decent but it's not enough to allow us to grow out of our problems.  We need at least +200k new jobs a month in order to start lowering the unemployment rate to any large degree.  Given our devestating job losses since 2008 the number needs to be even higher than this for now so I think the market was a tad disappointed at the number.

Remember, we have about 100,000 people entering the job market every month so you need to peel this number off when you look at the jobs number when it coems to putting people back to work.

Stay focused on oil for now, and let's all pray that the Middle East settles down before things get out of hand. 

The Fed's QE will be the next crisis.  Worries about the ending of QE are already hitting the market  after today's tough talk from the Fed:

"Federal Reserve policy makers are signaling they favor an abrupt end to $600 billion in Treasury purchases in June, jettisoning their prior strategy of gradually pulling back on intervention in bond markets.

“I don’t see a lot of gain to reverting to a tapering approach,” Atlanta Fed President Dennis Lockhart told reporters yesterday. “I don’t think that is necessary,” Philadelphia Fed President Charles Plosser said last month."

Bottom Line Continued:

Translation?  Umm...Things are really getting out of hand and we better settle down before oil hits $200 a barrel.

I have said it over and over again:  Bernanke has painted himself into a seriously bad corner.  I think the global chaos is forcing the Fed to rethink things.  The problem is if Ben ends QE than interest rates are going to soar.  This in turn will then KO the housing market and the banking system.

Nice choice for the Fed eh?  $200 oil and raging inflation or a deflationary spiral/banking collapse with double digit interest rates on treasuries. 

Being Fed Chairmen at this point just has to plain stink.  It didn't have to be this way if we had taken our medicine in 2008.   Talk about a no win situation.


Bill Hicks said...

In honor of having managed to single-handedly destabilize the entire Middle East, I hereby nominate The Bernank as The Most Dangerous Man on the Planet.

Jeff said...

Here here Bill.

The guy is a sociopath.

getyourselfconnected said...

After Bernanke's latest testimony for CONgress and now add Greenspan sounding like a total fiing drunk idiot I am convinced FED heads are indeed more dangerous than air born ebola. Got gold and or silver?

Jake at EconomPic is closing the site as he moves on. Major bummer.

Jeff said...


Yeah that sucks...Never read him...Just read the post.

I can't blame him. I think about doing the same thing but I keep posting when I can.

Living in America is going to get much tougher and if you blog for free then it's easy to give it up.

I am sure you can relate!

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