The market opened with a boom this morning, even as the headline news fingered the employment report as bad news. Even with the marquee unemployment rate dropping one-tenth of a percent, 148, 000 new jobs is not great news by any stretch, yet the number is less worrisome because of the fallout from the recent political circus.
Employers, rightfully, held back from hiring and investing in their businesses because they had no idea if the ideologues would take down the whole system. You see, it is easy for me to say that the nutcases will come around from big-money pressure, but a solid business cannot take that chance. It has to be one-step ahead, even if that means a short-term slow down.
Bottom line? Watch the market on this one. Even if it has dropped from its morning high, and it ends up in the red today, it understands that the fundamentals are still pointing to global economic improvement.
· The Commerce Department reported that Construction Spending rose by +0.6% in August. The level was above the expectations for an advance of +0.4% and the highest reading since April 2009.
The above shows steady improvement and it means more hiring across the economic spectrum is on the way. The construction industry is one of the largest forces driving US employment. When it is on the rise, a rippling that increases employment across the board occurs. That same rippling then contributes to a widespread increase in spending on both the consumer and producer levels. It is positive for the US and global economy, no matter how it is sliced, and it suggests that the statement below misses the mark widely.
- Many now believe that the Fed no longer has the ability to end its bond-buying activities, or even slow them down. In fact, the rumor floating around the markets —and floating the S&P higher every day — is that the Quantitative Easing program will be expanded.
The two-fold suggestion above is the Fed will continue its QE program forever and that the only reason the S&P is at record highs is because the market believes this to be true. How silly is this? I am not buying it, and neither should you. The Fed will end its QE program (not expand it) sooner rather than later, especially if spending on construction continues to improves, as it has been doing.
- Last month’s reading [construction spending] was revised upward to +1.4% from +0.6% (June: -0.6%, May: +1.3% April: +0.1%).
As I wrote a moment ago, go with the market when it resists the headline negativity and pushes higher. As irrational as it can be at times, the market knows what is good and what is bad, ultimately. Now, here is another piece of thoughtful advice for you.
- Failure is the highest probable outcome for most in this business. Failure doesn’t come because the markets are “rigged” or the belief that “they” are monitoring your odd lot trades to take the other side only to cause you pain…
No, failure when trading the market comes because we fail to do our work, and that work is simple – get the data and analyze it yourself. Don’t listen to the media, or most celebrity analysts for that matter. They are often wrong because they 1) over analyze or 2) they have an emotional bias. The former is an important point. Keep it simple. Look for key data points on the macro level and then work your way down to a trade.
Okay, even if I just said analyzing the market is simple, the work of doing that is not, which is the reason I am giving you something else to think about, as long as we are thinking about things today.
- The only thing easy about the market is losing your trading capital.
It is easy to lose your money when playing the market. I know; I have lost plenty over the years. Admittedly, I lose a lot less these days because 1) I know more now than I did before, and 2) I do my work. Simply, after a long time of playing the market, I am better at what I do.
Okay, one more thought and then I will leave you to go hang out with my wife. Wow! I need to get used to hearing that in my head.
- We are beginning to see hedge funds, which have been underperforming the broad market, plowing back into equities in an attempt to save their year in the fourth quarter.
Hedge funds have not done well this year, so they will work harder to make money for their clients, and since bonds and commodities have not done it so far this year, equities will have to do. Given the above, at least the year-end looks to be good. Maybe my “prediction” back in the spring will come true. The DIJA will finish the year above 16,000. As always, we will see.
Trade in the day; Invest in your life …
