The Next Two Weekly Jobless Figures Are Crucial

All eyes will be focused on the weekly jobless claims to be released by the Department of Labor at 8:30 AM EST on Thursday.

You may recall that investors did not exactly run the last two weekly reports up the flagpole and salute them, which showed sharp increases in unemployment claims. At this point the bulls are being comfortably complacent, blaming the bad numbers on  “random noise” and short term statistical anomalies. This was the final data series to turn negative, and the last of a recent plethora of downshifting economic reports.

Get two more high or higher jobless numbers, and the four week moving average will turn up. That will be enough to set the cat among the equity holding pigeons, and turn a modest 5% correction into a much scarier one that is 15% or greater. All of a sudden it is déjà vu all over again, with 2012 turning into a carbon copy of 2011, 2010, and 2009, and a big summer sell off in the cards.

I have been warning about the likelihood of such a development all year. After every company in the US hired one person, they again slammed on the brakes and quit returning e-mails. Corporate management these days are playing defense, and don’t see any increase in consumer spending as sustainable. Why add overhead in front of the next slowdown? There are also not a lot of companies that want to expand the workforce going into the summer, which normally sees a seasonal slowdown.

This sudden downgrade of one of the most important data streams is occurring just as a whole flock of black swans are getting clearance for landing. The French elections are signaling that we have at least two more weeks of “RISK OFF” on the table until the run off on May 6, and possibly much more. Last night, the HSBC Chinese purchasing managers index came in at 49.1 for April, below the crucial boom/bust level of 50 for a sixth month. That means a Chinese hard landing is still on the table, although I think that it is unlikely.

The timing of all this couldn’t be worse, or better, if you happen to be short, as I am. The charts for virtually every risk asset, from Apple (AAPL), to the (SPX), (IWM), (USO), (CU), (FXY), (FXE), (GLD), and (SLV), are either showing textbook head and shoulder tops, or are already in clear down trends. I include an ample sampling below.

Anyone who believes that the “RISK ON/RISK OFF” model is dead works in a profession where they can be consistently wrong and still stay in business, like in journalism. Give it two more weeks, and expect the media to start wringing hands about “double dip” or “triple dip” recession. Last year risk assets peaked on April 29. This year, April 29 came early, on April 2.

 

 

 

 

The Black Swans Have Been Cleared for Landing

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