Last week we heard that the September employment rate fell to 7.8% thanks to the creation of about 114,000 jobs. Some are crying fowl and see this "good news" as a manipulation or lie to help Obama out before the November election. The reality is that it is meaningless news and this chart shows how the unemployment rate fell and why the number people out of work is really higher than the unemployment rate makes it sound in this economy - and has been for years. Simply put less people are being counted as being a part of the labor force:
Stock Market Commentary
According to Investors Intelligence in their last report the number of people who they polled and told them that they were bullish near the stock market peak for September was 54.1% while the number of people bearish was at 24.50%. 54% is a fairly high reading for the number of bulls and major peaks have come in the stock market during the past three years at readings of 55% and above.
This is a great review team. I actually watched this movie the other day and wrote this month's October issue of WSW Monthly after watching it. I thought the movie was great and had a clear message - people are political animals. They will believe anything to feel like they are part of the group. It's not really about Scientology or even cults, but human nature itself.
Every day I get at least a half dozen emails from people asking me if I am worried about stocks. Usually they send me an article that has a reason to think a new bear market is coming. The reason might be that psychology is bullish, the market has gone up a lot so it has to drop, the economy will never recover, Elliot Wave nonsense says everything will fall, or we are in deflation. What is going on is that the person sending the email is usually simply worried and wants some reassurance.
So if you are worried all I got to say is STOP BEING SO SCARED!!!!
Yesterday the DOW fell over 100 points and the S&P 500 fell 15 points. What is even more noteworthy though is that on the NYSE 90% of the orders were sell orders. This was panic selling.
The truth is a lot of people doubt that this rally is real and there are some people that get nervous at any sign of weakness and sell out. I'm sure there are many hedge fund managers that have felt like they have been forced to buy just because the market was going up and they can't miss out and not because they believe in it, so are quick to sell at any sign of weakness.
The Fed has promised to print money now every month for the next few years to try to stimulate the economy. I really don't know how more debt and inflation will force companies to hire more people, especially in view of the fact that we have been doing this now for three years already and can't see any impact. It's not just me that's skeptical. Last week a Fed governor came out and basically admitted that the Fed doesn't know what it is doing and is now just hoping its action will mean something.
just sold two of my positions - AI and TUR. I am doing this to free up some money in my account and reduce the margin I was using. I believe at some point this Fall we will see the markets pause and consolidate for a few weeks and once they do I want to be able to buy some positions.
"The truth, however, is that nobody on the committee, nor on our staffs at the Board of Governors and the 12 Banks, really knows what is holding back the economy. Nobody really knows what will work to get the economy back on course. And nobody—in fact, no central bank anywhere on the planet—has the experience of successfully navigating a return home from the place in which we now find ourselves. No central bank—not, at least, the Federal Reserve—has ever been on this cruise before."
I've mostly been writing about the long-term trends of the market. Back at the end of July I started to talk to you about how cheap the valuations are in global markets outside of the United States and how bull markets seemed to be lining up to start there and in gold. And then I began to buy and show you exactly what I was buying, how much, and when. And things have gone up. New bulls have started just about everywhere.
I haven't said a whole lot about the short-term moves though. It looks to me right now we are seeing a little pause. Take a look at this chart of gold.
All they talked about yesterday on CNBC was predictions for another Fed money debt printing operation today. Many people expect the Fed to announce that it will print money and buy bonds when it meets today. I don't know if they will or not. According to Reuters 65% of economists expect the Fed to make the plunge into bond buying today.
They say the Fed will do it because of the poor unemployment report of last month.
It probably has been a done deal for weeks, but today the German Constitutional Court gave the green light for the ECB to begin unlimited money printing "sterilized" bond buying operations.
According to CBS Marketwatch:
"Germany’s top court on Wednesday rejected calls to block ratification of the European Stability Mechanism, triggering a modest sigh of relief from financial markets and clearing the way for implementation of an important tool in Europe’s effort to contain its three-year-old debt crisis."
We have seen a lot of things happen together the past few months in the stock market. We saw Facebook open up and collapse. We saw gold breakout into a new bull market and rise. Today we are seeing the European Central Bank announce plans for a "sterilized" bond buying bailout program for Italy, Spain, Portugal, and probably even Greece. They are talking about it all over TV right now.
But yesterday something huge happened that NO ONE on TV is talking about. And this event is good news for you if you are invested in any of the markets:
There are seasonal patterns to most commodities and that includes gold. You can see gold's historic seasonal pattern for the last 30 years in this chart. Now last year was different, because gold peaked around this time of year and then went into a mini-bear market consolidation phase. But in most years it has a tendency to have its best months overall from August till spring.
I bought various positions in the past few weeks. I want to add to them. I want to buy more mining stocks and more stocks and funds linked to Europe. But I'm waiting for a pullback first. If I owned nothing I'd be buying now, but I don't. I got some positions. I want a pullback to see where I am at in them before I buy more. I want to average in at some lower prices where we are now - or some more time.
Take a look at this chart of gold. You can see that it broke its downtrend resistance line going back a year now just the other week. It popped up and now appears to making a normal pause, that probably will end sometime in September. It could end any moment, but usually a chart like this leads to a pause for 3-4 weeks. There is really powerful support in the 1610-1640 area, of its 150-day moving average, but I doubt it would even fall that much. More likely gold will simply trade in a 1650-1670 range and then just breakout of it.
Where is the best place to invest in the world right now?
That's a question you never hear anyone really asking on CNBC. Mostly it's all about trades and the hyped up news of the hour. It's about "fast money" and the few times a year the question is asked of a guest on CNBC the answer is almost always the United States - and the reason given is always the same - this is the greatest country in the world with the best free market system on the planet so its too dangerous to try to do anything else. Nonsense.