PIGS Won’t Fly

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It was pretty ugly across the board yesterday.

There was little buying interest — the market gapped down, drifted lower all day, and closed on the lows. (Hardly encouraging short term).

Europe appears to be heading to a more prolonged downturn than previously believed, with the PIGS Greece, Spain, Ireland and Portugal (first mentioned here in 2008) all in various degrees of trouble. China’s centrally planned economy is cutting back on lending, after artificially pumping up a credit bubble and housing boom (why does that sound so familiar?). Commodities continue to soften.

We also get NFP today at 8:30am, with the annual revision that likely will reveal what I have been whining about for years: The 2001 change in the Birth Death model skewed NFP results entirely. B/D was responsible for more than 75% of the job creation data in 2007; the revision is likely to “disappear” any where from 500,000 to 1.5 million jobs from the 2009 payroll data.

The range of guesses was -40,000¬† to 75,000 (Barrons). Unemployment is likely to rise in today’s data as well.

Note that this is old news: The changes are for the trailing 12 months. Whether the lowering of jobs data extends the Fed’s ZIRP accommodation further or not is the most significant aspect of this old data.

Futures today look even worse than they did at this time yesterday.

As I have noted repeatedly over the past 9 months, I am giving the rally/uptrend the benefit of the doubt. The playbook in an bullish cycle — whether cyclical or secular, is you buy dips at support with tight stops. (In bearish cycles, you sell every rally). Hence, why the 1030-38 level is key, with a secondary support level at lets call it 1025.

We are flirting with mortally wounding the uptrend line. As noted in our secular bear market composite, that sets up the next 25%, 18 month correction . . .

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