Thoughts & Trades

So today was a pretty nasty day in the equity markets unless you came into the day short, with the S&P 500 ending the day down 18.53 points and the Dow down 144 points. In the overnight session the S&P futures looked good on positive economic data out of Germany until about 8:30 ETD when weekly initial jobless claims hit the wire rising by 16,000 from 484,000 to 500,000. Consensus was a decline of 4,000, and and a quick swoosh sell off of about 10 handles in the eminis followed. Lets pause here for a bit, the chart below shows the initial jobless claims on a weekly basis going back to April of '08 and as you can see their steady decline stalled out going into this year and with the 500,000 reading this morning brings us back to last November levels which is not a good sign for the economic recovery. While it can be said that jobs lag recoveries, it would be nice to see some growth.

However when I see charts like this one from the Bureau of Labor Statistics it makes me question whats going on.

In the above chart, the red line is employment and the blue line is labor demand, as you can see there is a large gap there. This tells me that folks that are unemployed are a little too comfortable being that way and in some cases are probably getting paid more via unemployment benefits than they would if they went out and got a job. This has to stop before the jobless claims will start declining again in my opinion. To get back on track here, we then had the Philadelphia Fed Survey out at 10:00 ETD which was also ugly coming in at -7.7. The survey was worse that expected and shows a continued decline as you can see below.

All in all, I am still bullish on the economic recovery albeit on shaky ground at the moment until we see companies start spending some of their cash hoards on hiring and value creation. Steve Place wrote an excellent article on this today that's worth a read so I wont go into that. I didn't make any moves in my portfolio today although it was difficult not to put on a long oil position with crude being down so low, but I still think we could test the $70-$72 level and that's where I will step in. I am watching that very closely and I'm also looking to add to my Citi position around the $3.70 level which is at a short term rising trend line.