Wow what a week, a massive 300 point drop on Monday followed
by huge triple digit gains on Thursday and Friday. Add in a cloudy jobs report,
mixed earnings, and an announcement by the Secretary of the Treasury that the
U.S might run out of money by February 27th and it makes for a wild
and potentially very volatile future.
Personally
I had a very flat week, until Friday when a wrong bet against three major DOW
components (J.P Morgan Chase, American Express, and Intel) left me treading
water when the rest of the market soared. This just goes to show you how
volatile and unpredictable the current Market really is. But instead of venting
my frustration I want to discuss what Friday’s shady jobs report really means
for the future of the U.S stock market and the recovery of the American
economy.
Realistically
after taking a close look at the report, which stated that the U.S economy
added 113 thousand new jobs in January (way below estimates of 180-185
thousand) I saw that many things could of negatively impacted the jobs report.
First thing, which many over
optimistic bulls have labeled as the reason the jobs report disappointed in
both December and January, is the frigid weather. The weather might have played
a small part in the poor jobs report, but job sectors that traditionally lose jobs
to weather such as construction, actually added jobs in January. My opinion as
to why the jobs report disappointed was that January was a bad month for just
about everyone, I am not just talking about the stock market that lost over 5%
in the first month of 2014 I am talking about small businesses and the world
wide picture in general. With the emerging markets falling part, the winter
storms hammering our Country and the stock market in decline it is easy to label
January as an off month.
So as to whether the January jobs
report was a good or bad indication about the strength of the rest of the
economy I am obliged to say that it does not show as bad of a picture as the
headline suggests. I consider the jobs report as another indication January
shaped up to be a terrible month, but what really shocked me was how the stock
market reacted to the news.
When I got the alert on my phone
that the jobs report missed expectation I immediately checked the futures which
all fell after the news, and I was overjoyed (considering I had puts betting against
several DOW components). Unfortunately for me, the market quickly reversed
itself and in the day climbed to the triple digits and closed with a 163 point
gain. What I do not understand is why? I agree the jobs report might not have
painted as bleak a picture as at first glance it suggested but neither did it
warrant such rapid gains. After doing some digging I came to the conclusion
that investors bought on the presumption that the Fed will suspend its taper
and continue pumping money into the economy. This might help stocks in the
short term but in reality it is bad, by suspending the taper the Fed would
acknowledge that the U.S economy needs support. And if the current moodiness of
the market is any indication stocks will react violently.
For those of you who made money on
Thursday and Friday I would take your profits and run. Volatility in the market
has returned and I expect the gains made will be reversed in next week’s trading.
Plus the market will not be helped by the fact that the U.S will not be able to
pay its debts unless the debt ceiling is raised by February 27th.
But that topic is probably going to be discussed in next week’s blog entry.
So my analysis of the current
market is that the gains made on Thursday and Friday will be wiped out next
week when a number of factors, such as a reevaluation of the jobs report and
possible debt ceiling problems starting up again, converge and send the market
lower.
But in the words of Jim Cramer
“there is a bull market somewhere” so read my page on possible investment
opportunities, to see how to make money even in this wild unpredictable market.
(That page should get posted sometime next week.)
I WILL
BE POSTING ONCE EVERY WEEKEND ABOUT MY OPINIONS ON THE MARKET AND VARIOUS
INVESTMENT OPPORTUNITIES I HAVE FOUND.
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