Thursday, May 15, 2008

The Psychology of Today's Data

This morning Initial Claims for Unemployment were released for the week ending May 10th. The figure was 371,000 and as we stated a few days ago any number between 350K and 375K will not be market moving and we should look more to the manufacturing data. Some economists believe monthly unemployment claims must jump by 150K in order for a real recession to be called. We haven’t seen that yet and hopefully never will. The silver lining of continued high energy prices is research and development (R&D). High oil prices will kick start more aggressive science and technologies like solar, wind, and countless others not even mentioned by the general media as yet. So there are those who want high energy prices so that the paradigm shift to alternative energy will occur more quickly. POTC believes the paradigm shift to alternative sources of energy will occur even when crude oil pulls back under $100/barrel so we prefer to have energy and food prices fall, giving instant relief to consumers around the world.

The NY Empire Index for May comes at 8:30 ET and the Philadelphia manufacturing data comes at 10:00 ET. You would be wise to wait for the larger gauge of manufacturing data slated for release at 9:15 ET (Capacity Utilization) before putting all your chips on the line.

The Capacity Utilization number takes the temperature of the U.S. factories, utilities, and mines. MINES and MINING may be the key words that ignite the market bulls come Thursday. Perhaps a company like Joy Global (JOYG) will do well this week.

Even inflationary environments have sectors that outperform. The mining sector is a silver lining that is included in the Capacity Utilization data, so if the week has in fact been bearish Thursday's before market release of Capacity Utilization could reverse that sentiment and fire start the S&P Index above last week’s close of 1,388, so set up trades accordingly. Regardless of earnings and/or economic data, we always obey the 11 Commandments. Earnings before market open came from J.C. Penney Company (JCP), reporting $0.54/share compared with the estimated $.50, however a 50% cut in profits was also reported. HPQ were originally slated to report after market cose, but they have rescheduled for Tuesday 20th May.

Friday, May 16th is option expiration day so we will pay close attention to Thursday's action, especially in response to Capacity Utilization data. The double top in the DJ Transport Index is mirrord in many of the stocks that we monitor and POTC suspects that today will see a head fake move up, followed by blood letting on Friday.


Anonymous said...

StockWatcher said...

Any change in your position vis-a-vis JRJC, following the upward guidance by the co. issued today?