Another market melt-up. Forget Herbalife (HLF). The big story is the mountains of money being lost by traders who shorted the market at the open on Friday on the worst Jobs Report in years...and are being annihilated and forced to throw in the towel.
Let's be blunt: the market has gone straight up almost every minute since the Friday open. If you shorted at the open Friday--not an unreasonable bet--you're down about two percent.
"I see shorts panicking. If you shorted on the jobs number, you shorted at the lows," one head of a trading firm said to me.
Why? The trading community has little doubt who is pulling the strings and making the difference: the Central Bankers of the World (Inc). The employment report was good for the market because now the Fed can't exit. Melt higher.
With all respect to my trader friends, who see the Unholy Troika (Bernanke, Draghi, Kuroda) behind every corner, there's a couple of other factors at work today:
- the inflation numbers in China were very benign overnight...that means China has room to engage in big-time stimulus, following the Japanese. Watch out for this: commodity bears are very nervous about this report. Notice Copper Futures up 2.1 percent today. When was the last time that happened? January maybe?
- discount the Jobs Report. The Bureau of Labor Statistics reported this morning that job openings in February rose to 3,925,000, the highest level since May 2008. The number of persons unemployed for each job opening fell to 3.07, the lowest level since October 2008. This affirms the view of many (Bullard, etc.) that the March Jobs number does not make a trend.
Finally, for those wondering why we suddenly get these midday (12-1 PM) ramps, there is considerable speculation that this is Japanese money coming into the markets, just as European money often helps our markets until they close about 11:30 a.m. ET.
"We have replaced the Great Rotation trade with the economic refugee trade," one exasperated trader wrote tome. "The Europeans and the Japanese are coming here."
What's next? A rally in beaten up cyclical names, particularly commodity stocks. There has been a lot of rotation in the market that has been making it hard for the market to go down. Recently, it's been defensive names (consumer, utilities, healthcare) leading the way, with cyclicals (materials, industrials, energy) on the ropes. But that may be about to change. The China inflation number was the first shot across the bow. If we get decent news on China imports and exports this weekend, commodities and commodity stocks could rip.
