Non-Farm Payrolls and US Trade Balance

Despite what Gallup found yesterday, which was not good and far more reliable as they don't screw with the employment picture using deceptive seasonal adjustments that allow the Department of Labor to come up with any number they wish by adjusting the seasonal adjustment, the NFP beat consensus coming in at 227k on expectations of 210k, but you may have noticed the market didn't go hog wild rally mode on the beat. Why? One reason may be that last month was adjusted higher from 243k to 284k making the 227k beat today look like a slide to both the adjusted and non-adjusted NFP from last month.

More importantly, Professional and Business services added 82k jobs in February with 45k of them being temporary positions. Another BLS adjustment, the Birth / Death Model added another 91k jobs.

The US Trade Balance printed a $52.5 billion deficit, the worst since Fall of 2008 (October more specifically), the 3 month trend is the largest drop since records have been kept ($9.4 bn). In essence, the Trade Deficit is not only rising, but rising at an accelerated pace.

Greek PSI

The Greek PSI thus far is not hard to understand, it is lengthy and a bit complicated, but not hard to understand. The market's initial reaction to the 1 a.m. announcement was not good, but since then ES has bounced around in a range, a little above and a little below yesterday's 4 pm market close, it rallied around 6 a.m. in to the Non-Farm Payrolls which is another story and the market since has been in a triangle consolidation.

The participation in the Greek PSI was right down the middle of expectations at 85.8% of bond holders, only 69% of non-Greek Bond holders participated (these are the foreign law bonds the hedge funds have accumulated). That means $25 billion in foreign law bonds have not participated and Greece has said they WILL enact the coercive retroactive collective action clauses, either forcing these holdouts to participate or perhaps just not paying them altogether. The hedge funds will bring lawsuits to try to recover full par and on an accelerated basis. Greece did extend the deadline for foreign law bonds to March 23rd as some speculated.

Later today the ISDA will determine if a default has occurred triggering Credit Default Swaps (the insurance against bond losses).

Market efficiency seems to be betting on another Greek default as the new bonds that replaced the old are already this morning trading at 20% of face value!

Portugal, Ireland and Spain are likely to seek out the same deal that Greece got and why shouldn't they, the Troika just discovered it can force banks to do whatever it wills and subordinate their debt at the same time, which is why the new bonds are trading so cheap, they realize how massively subordinated they are, something that didn't exist in the bond markets until Greece.

It seems the market is waiting to see when Greece triggers the CAC's as they said they will, but apparently haven't yet and what the ISDA's determination will be regarding CDS. We also can look forward to what the credit rating agencies are going to have to say about this, although they may wait for CACs to be triggered forcing all holdouts to participate.

There are further implications which the think tank,  OpenEurope has done a good job of summarizing.


Here's the link to their analysis which raises some interesting issues that most probably have not contemplated, it's worth a read when you have time.

Next up, the ISDA.

Some Reading Material

You can call me a Kook (which is not very nice to say to a surfer), but I have on more then one occasion pointed out what I believe are leaked reports (as 3C showed odd activity before the reports).

We;; it turns out, I may just not be a Kook after all, when the government itself turns to nuclear security agencies to help safeguard the data from being leaked, obviously the data has been leaked.

Here's the story from (I dare not say it, but I will type it), CNBC

Labor Dept. Asks Nuclear Guardians for Help Keeping Jobs Data Secret

A First for Market Internals

I won't bother posting all of the Price/Volume relationships, you can probably guess what the dominant relationship was, Close Up and Volume down (the most bearish of the 4 relations) across the board.

However, I was surprised to see these market internals generally and especially on an advancing day....

Today's movement came from lower than avg. volume (NYSE 717 mln, vs. 775 mln avg; Nasdaq 1570 mln, vs. 1706 mln avg), with advancers outpacing decliners on the NYSE and decliners outpacing advancers on the Nasdaq (NYSE 2364/659 Nasdaq 1820/701), but especially interesting was the new highs/new lows which were:  new highs outpacing new lows on the NYSE and new lows outpacing new highs on the Nasdaq(NYSE new highs/new lows 121/8 and NASDAQ new lows/new highs 79/22).


Even on Tuesday we didn't see new lows outpacing new highs and this is the first time I can remember seeing it since the rally started. 
As for MCP posted earlier with the great 3C chart, here's the breaking news from Briefing.com

Molycorp to acquire Neo Material Technologies in $1.3 bln deal  (25.98 +1.07)

2012-03-08T18:00:36 ET

Co announced the signing of a definitive agreement under which Molycorp will acquire Neo Materials for approximately CDN $1.3 billion. This will create one of the most technologically advanced, vertically integrated rare earth companies in the world.

Something fishy in ES

This is the S&P E mini futures (ES) from pre market , regular market and post market as they trade 24 hours a day during the trading week. In the afternoon you can see where they were falling apart before the Greek debt news that turned out to be as usual, inaccurate. However it's the post market action that is out of the ordinary with 3C leading to a new low. We still have a long night with the Greek PSI details trickling out at 1 a.m. EDT, however I thought this strange enough to post it.

I'll check on it later and see if anything interesting happens

Put MCP on Your Radar

It's unusual to see a stock that is up and really leading positive like this... I'll be looking for an entry long.

 30 min MCP the green arrows are trend confirmation, white are positive divergences and red negative. This stock seems to like to run parabolic head fakes like the one around the 30th with the red arrow above price, but the recent action has been leading positive.

 Here's a closer look on a 15 min chart, accumulation into the 27th and the 13th, now the 15 min chart is leading positive.

 The 5 min chart shows the reversal at the top to the left, again a head fake move with a lot of downside momentum from it, some small accumulation around the start of the month and a head fake move at the yellow arrow, currently though it's leading positive.

This 2 min chart shows that head fake mentioned above clearly, but on the 6th, 3C never came down with price.

I like the looks of MCP, I'd like to catch a pullback to look at a long position here. In any case, I would keep this on your watch list.

How the Sewing Circle Did Its Job

From Sunday's analysis for this week. "The Week Ahead"

"A couple of interesting events we have this week, Apple unveils the Ipad 3 on Wednesday, although the Bollinger bands are so tight, I don't think the breakout will wait for Wednesday."


It didn't, first thing Monday morning...

"Content providers are not cooperating the way AAPL would like, they don't want to hand over so much control of content to AAPL. This is not a perfect analogy, but close enough. When APPL launched the I-Phone, they needed a network that was willing to upgrade their system so I-phone features could be utilized, AT&T stepped up and was rewarded with a 5 year exclusive contract. Imagine if not networks stepped up, this is sort of akin to the content problems AAPL is having"


Trade in AAPL yesterday at the launch of the I-Pad 3 and Apple TV

Probably not the smashing success Tim hoped for...


"We have a bevy of other potential game changing issues coming due around the same time, specifically the Greek PSI deal is slated to be completed Thursday this week and the consequences carry the entire bailout."


I suspected we'd hear some kind of European rumor to push the market higher, specifically remarking that it would likely be refuted within hours as per the norm.


And the news today...


"According to Greek SKAI, participation is now over 90%."

Trade was getting very negative just before this yellow arrow which happened to be the time that a little European rumor, (that's news in Europe) broke...


And for the follow up on that news....


"The SKAI number which ramped the market was based on the assumption of a CAC trigger ""


So risk was on based on the "leaked" erroneous results of the Greek PSI a full 10.5 hours before the results actually start trickling out, with no distincition being made as to what bondholder class did or did not participate initially any way. Meaning, even if there is a "successful" PSI % it is still wide open to market interpretation as there will be no way of knowing whether the Hedge Fund Blocking Stakes will present legal challenges in British courts.


Pretty much all of the elements expected are there, they may be a little off and a little out of order, but they are there.

ES Volume

Can anyone guess what the dominant Price/Volume relationship will be tonight... If this doesn't speak to you....

Note Volume in blue...

Financials/Tech and Event Risk

 XLF 1 min

 XLF 2 min

XLF 5 min

 Tech/XLK 1 min

 XLK 2 min

XLK 5 min

There's clearly no underlying support for the bounce in Financials and Tech..

 The SPY is close enough that it could put in a new closing high and is AAPL below, but at this point, I'm not sure if it even matters,

Between the close and tomorrow's open, we have the reaction to the Greek PSI and Non-Farm Payrolls, both before the market opens, there's huge event risk. Later I'll get in to some specifics on today's rally, but as Soc. Gen. commented, it "seems" stupid with the event risk.

Personally, to me it makes sense.

If things pre-market go wrong, it could make this move look small (by the way, there was a new closing high the day before).

In some ways Monday would make more sense, but in others, letting a move like that fester over the weekend could be equally as damaging.

Thus I closed any longs left.

Thoughts

With the NFP (Non-Farm Payrolls) at 8:30 a.m. tomorrow morning and the Greek PSI results at 1 a.m. EDT, that leaves a lot of uncertainty going in to tomorrow's open.

I think I'll be closing the rest of the HGSI position....