Thursday, July 2, 2009

So Far, So Bad

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

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The stock market is tanking today. A sell off the last trading day before July 4th is statistically unlikely and should be considered bearish in and of itself. We will have to wait until the close next Tuesday to see if the first four trading days of the quarter were net down and are also providing a bear signal. Stocks started off strong on Wednesday, but faded as the day progressed. The Dow was up only 57 points at the end, but managed to close above its 200-day moving average for only the second time in almost three weeks. Volume was unusually low for the first day of a quarter. The Dow is below both its 200-day and 50-day as I write this and a close below both key levels at the end of a week can only be interpreted as negative.

The monthly employment report was released this morning and set the tone for trading. A loss of 325,000 jobs was predicted by analysts, but the number came in way above expectations at 467,000. The official unemployment rate was 9.5%. If discouraged and involuntary part-time workers are factored in, unemployment would have been 16.5%. Only education and health care were supposedly hiring last month.

While bad economic news is negative for a currency, somehow the U.S. dollar went up on this news. The mainstream media has indeed been reporting the dollar rise and explaining it as safe haven buying. If you are puzzled by this, you should be, especially since gold is going down at the same time. No one in their right mind would load up on a currency with a weak economy as a safe haven play. It is more likely the invisible hand of the U.S. Treasury lifting the dollar today. Don't expect the media to ever report that though.

All the major U.S. stock indices are down over 2% in afternoon trading. Oil is performing even worse. The commodity hit a low of $66.54 in today's trading and was just over 67 at the close of NYMEX trading. Natural gas futures are barely down, although UNG is dropping big time. The cause of the disconnect is not clear. The reason for any drop whatsoever is even less clear, since the storage report this morning was very bullish. Analysts expected a build up of 82 billion cubic feet, but the increase was only 70 billion.

I guess we will just have to wait until next week to see how things play out.

NEXT: Does Money Printing Cause Deflation or Inflation?

Daryl Montgomery
Organizer,New York Investing meetup

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

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