Monday Market Movement – Japan Jumps 5% on GDP

This time we're led by Japan, whose market flew up 5% this morning as the Q1 GDP was revised up to 4.1% from 3.5% in an earlier reading.  Fortunately, our last bet of the week in our Short-Term Portfolio on Friday was a long play on EWJ, grabbing the June $10 calls for $1.02 as a great upside cover to our still pretty bearish positions.  5% up in the Nikkei should give us at least 20% in our options – not a bad hedge, though we'll take that money and run at the open.

As you can see from the chart on the right, Dave Fry isn't buying the "rally" quite yet, either.  The S&P finished well over our strong bounce goal of 1,634 at 1,643, which is why we wanted some upside hedges, but the next level we need to see is that 50% line at 1,645 – and it looks like we'll be testing that this morning.  

All the other indices hit our Strong Bounce lines, except the NYSE – which finished just below it's 9,360 at 9,355.  We're still DEEPLY concerned about the underlying Global Fundamentals and the fact that the US added 175,000 jobs in May, we're still 6M jobs short of where we were pre-Bush and, at this pace, it will take us the whole rest of Obama's turn in office to get back to "full employment" (4.5% unemployment). 

So, on the bright side – it seems like the FREE MONEY train is never going to stop but, in reality, the Fed can't drop another $3Tn on the market and book it into what would become a $6.6Tn balance sheet.  People will lose confidence in our Central Bank long before their balance sheet becomes bigger than Japan's GDP!  

The ADP chart on the left illustrates how it's small business (Russell) that's driving our job growth with companies under 50 employees now creating MORE jobs than the "job creators" in bigger businesses.  When Big Business refuses to pay living wages – Americans are still innovative enough to create their own jobs and, as that yellow line crosses higher, you'll see labor costs finally rise for Big Business as it becomes harder and harder to find cheap talent – as it is used against them in the local markets by their smaller competitors.  …

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