Oil, Jobless Claims and Earnings

This morning's Jobless Claims came in with few surprises...

Released On 10/4/2012 8:30:00 AM For wk9/29, 2012

	Prior	Consensus	Consensus Range	Actual
New Claims - Level	359 K	370 K	364 K to 375 K	367 K
4-week Moving Average - Level	374.00 K			375.00 K
New Claims - Change	-26 K			4 K

This is actually a slight beat of consensus, although there was no follow through on last week's better than expected number which of course was revised higher by 4000 as is always the case. Jobless Claims had no effect whatsoever on the market.

Even though USO/Oil is just starting to get a foothold, I have to wonder how it will effect earnings that are already sour. Data just out shows negative earnings pre-announcements are running ahead of positive ones by more than 4 to 1, this isn't a new trend to lower expectations before earnings, it's been going on consistently for at least the last 3 quarters. However the pickup in negative pre-announcements is almost as high as it was in 2009.

Any further inflation is oil which is used extensively throughout manufacturing, not just for fuel, gas and food inflation isn't going to help the already weak earnings outlook. This seems to be further confirmation of the recent trend of seeing the high flying stocks under distribution while those that have been beat up are looking much better.

Speaking of beaten up, oil has been slapped around pretty hard since QE3 was announced, I have to wonder if it is finally gaining a foothold. Finally later today we will see the F_O_M_C minutes and perhaps get more clarity on what Bernie was really afraid of, although I doubt we'll get the full story as there were a barrage of calls from Bernie to other voting members before the policy decision, I think whatever it was that had Bernie losing sleep was fleshed out in those calls as confirmed by Hilsenrath of the WSJ about a week ago.


Here are the USO charts

 Oil as most dollar correlated risk assets, gapped up 1% this morning. The positive divergence started yesterday was whacked as the Turkey/Syria shelling news came out, but even as I said yesterday, I didn't expect oil to just make an about face, rallying higher, I expected more of a lateral or "U" shaped move as the divergence developed. At this point the $USD weakness is helping, but even without it, I suspect oil ha a move higher just to wring out the excesses.

 USO 2 min seeing a better looking stance

 5 min also looking better.

It's this 15 min chart that makes the oil chart worthwhile.

As to what inflation in the sector does to earnings, I have a feeling inflation and earnings in general will be part of a volatile QE3 wildcard, as will the F_E_D minutes.

By the way, as usual, remember that anything from the F_E_D almost always sees an initial knee jerk reaction, the knee-jerk on QE3 was quickly reversed within little more than a day.