Fear of Jobs

By Duru

February 6, 2004


America's companies are still making money off the backs of the few working like the many. Friday's sub-par jobs report once again underscores that we are experiencing a "jobless" recovery. Unfortunately, we now have to contend with an additional wrinkle. Before the Fed hinted it is now ready to consider raising rates sometime in the finite future, investors and traders now FEAR the jobs report. That's right - we have gone from dismissing poor jobs numbers as lagging indicators of the past recession to celebrating lackluster jobs numbers as shackles preventing the Fed from tightening up the money supply. We fear jobs. We fear a robust and rapidly growing economy. We now want it nice and smooth and gradual - hold the caffeine please. Poor Bush, he now can't win for losing as they say. The very jobs he paid untold billions to buy with his tax cuts now threaten to stifle the very recovery he so desperately needs to cling to another four years of fun and bombing raids. The irony of it all!

Now, I still struggle to understand how much difference it really makes if rates are 1% or 2%, but I should be deferential since the mere whiff of rate increases that come with exchanging "being patient" for "considerable period" sent such amazing convulsions throughout the markets. I am amazed because I thought these convulsions would be saved for actual rate hikes, not teasers. Such is the madness of the market.

So let's see, we now fear the Fed, fear Bush (or at least fear for Bush), and fear jobs. I guess all we need now is for the fear of Janet to completely overwhelm nation's ability to function. I used to think of the female body as a most fabulous form, deserving of praise and appreciation. But after 200,000 people complained to the FCC about the Superbowl halftime show that exposed more than the traditional artificial cleavage and glistening legs of demure NFL cheerleaders, I suppose I got it all wrong! Maybe people are grossed out at the self-mutilation Janet displayed in her "pectoralis majoris" region - I could at least sympathize with that. But, come on, if 200,000 people would write to Bush complaining about his performance, perhaps I could take the Janet-uproar more seriously.

Anyway, I digress from the markets yet again. Here is my latest read of things. I feel compelled to issue this update only because at last view it seemed things were right on the verge of completely coming apart. As has been the market's tradition, it pulled itself quite nice and neatly from the brink.

I am most fascinated with the Nasdaq right now. On a relative basis, January was the strongest month for technology stocks in a while. I do not mean in terms of percentage gain but on looking at how the Nasdaq has toyed with the 50DMA (daily moving average). Every single month since August featured some sort of touch or break of this 50DMA with the Nazz recovering, often sharply and quickly. January was much more like the early days of the rally. We only just recently threatened the 50DMA again, and, like clockwork, the rally bounced sharply and quickly. As long as the lower volume does not turn this move into a headfake, I daresay the next leg up will soon be underway. My thesis is also supported by the basing pattern (price consolidation) we saw in the last three months of the year, the subsequent break-out in January, and the successful test of this support. Let's hope things hold up better than a Janet Jackson under-garment! (also note that while under-performing the Nasdaq, the Semiconductor index suddenly came alive and in one fell swoop bounced off the rally's up-trend line AND punctured back above its 50DMA - talk about a move!)

Be careful out there (especially with potentially malfunctioning wardrobes on the prowl!).


Ó DrDuru, 2004