Wednesday, March 31, 2010

Think of the Bears as Cola ....

Gosh this market is beyond boring.  Every day is almost identical to the last - a movement in premarket, and first 20 minutes of the trading day.... and every so often a flurry in the closing 15 minutes.  Otherwise the S&P 500 sits in a tight range of 2-4 S&P points as 5 firms computers trade to each other, collecting rebates by the millions for creating liquidity.  A few months ago we noted the wards of the state - AIG, Citigroup, Fannie and Freddie were 40% of all volume... Zerohedge noted again we are back at that, with Citigroup alone now "25% of all volume". And that boys and girls is your new paradigm market. 

Despite this morning's "disappointing" ADP employment figures I still expect a blowout government payroll figure Friday because ADP uses private sector payroll data and hence does not benefit from make believe jobs that help to stoke "animal spirits" in the stock market via the birth/death model .[Jan 27, 2008: Monthly Jobs Report & Birth Death Model] (which of course are revised away quietly a year later), [Feb 3, 2010: US to "Find" Extra 825,000 Unemployed this Friday after Birth/Death Model Revised]  nor does it account for weather.  (remember, only Canadians can hire workers during snowstorms - it's not possible in the US).  And of course it does not include those census workers.  So I'm not worried about it, nor is the market.**  Garbage in - garbage out has been working for years, why stop it now?   [May 10, 2008: Finally Some Mainstream Reporters are Figuring Out the "Spin" from Government]

If humans were still the dominant species in the stock market, I'd assume a "sell the news" reaction could face us as "buy the rumor, sell the ("good") news" hits Monday (the market will be closed Friday) but I have no historical reference for the HAL9000 era. We did have a long run in 2006/2007 where the S&P 500 never fell more than 2% (I think it was about a year and a half) and in retrospect I guess this was the turning of the page of the new era.   The robots give us an almost emotionless market (only global economic calamity causing their sponsoring firms to deleverage seems to cause the circuits to malfunction), and as long as all the right algorithims are checked and every entity on the planet is backstopped, I guess we just continue ever upward (or sideways) .  Down is not an option unless it is intraday or -0.2%.

Think of bears as cola...

** based on income tax receipts which the US government SHOULD be using for employment rather than all the hocus pocus they use to justify their "fine tuning", it does appear the labor market is finally showing some actual growth.  Remember, we need 125K jobs a month just to keep up with population growth.


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