July 3 SP 500 up 2.75 before the three day weekend

Treasury two-year notes gained after reports showed payrolls fell for a sixth straight month and U.S. service industries unexpectedly contracted in June, reducing speculation the Federal Reserve will raise interest rates. Which by the way puts us behind the Euro again. We will see a pull back on the euro but am expecting to hit new highs.

The 62,000 drop in payrolls was more than forecast, and followed a revised 62,000 decline in May that was greater than initially reported, the Labor Department said in Washington. The jobless rate remained at 5.5 percent after jumping in May by the most in two decades. The drop in payrolls in each month of the year is the longest streak since 2001-2002. The economy shed jobs for 14 months beginning March 2001, the same month it entered a recession.
Some analysts and investors are reversing predictions that the worst of the credit-market contraction is over after more than $400 billion of writedowns and losses by the world's largest financial institutions. Lehman Brothers Holdings Inc. last month increased its quarterly loss estimate for Merrill Lynch & Co. and more than doubled its prediction for Merrill's subprime writedown, to $5.4 billion.

Citigroup Inc. and Merrill had their second-quarter earnings estimates cut yesterday by Oppenheimer & Co.'s Meredith Whitney on expectations of writedowns related to the subprime market and bond-insurer downgrades. Crude oil futures touched a record above $145 a barrel in New York on concern conflict with Iran would cut oil supplies.

Oil pullback and then off we go.

The question, what does it look like for the price of oil?
Lets see, war with Iran, hurricane season on way, Refinery utilization down, global demand sky rocketing, cantrell oil field production down causing mexicos overall exports to drop 12.5% this month, I am bullish oil.

But I am bullish after we see a bit of a pull back. We didn't push through the 150 price by the fourth of July so it looks like we will see a bit of a pullback and then take off. World is still in consumer price shock to these surging prices and demand will fall off a bit as discretionary traveling will go down. Remember this is summer and the biggest time for families to take vacations. Give them a few weeks bottled up in their homes with the kids and the toys will be broken out and we will see families hitting the road for shorter trips in the RVs with boats and ATVs.

Unemployment rate

The unemployment rate in May jumped more than it has in over two decades, reaching its highest level since October 2004 and emphasizing the recessionary risk the U.S. economy is currently facing. The civilian unemployment rate spiked to 5.5 percent from 5.0 percent in April, coming in much worse than the expectation of 5.1 percent. The last time the unemployment rate jumped half a percentage point was February 1985. With nearly 49,000 jobs cut from payrolls following decreases of 28,000 in April and 88,000 in March, May marked the fifth consecutive month of job losses. Overall, the economy has shed 324,000 jobs this year.
The latest decrease was led by declines in construction, professional & business services, retail trade, and manufacturing. Revisions to March and April resulted in a net revision downward of 15,000. On the inflation front, average hourly earnings advanced 0.3 percent in May, coming in above the market projection for a 0.2 percent boost.

With widespread payroll losses, the May non-farm report clearly portrayed further deterioration in the labor sector, lessening the ability of the consumer to support economic growth. The jump in unemployment may very well have been exaggerated for technical reasons such as graduating college students attempting to enter the labor market, but nevertheless points to weakening in employment. May's report has also put the Fed in a tough situation by lowering the odds of a healthy rebound in economic growth later this year. Treasury yields fell on the news and equities fell under downward pressure.

For week ending June 21, the Labor Department reported that the advance figure for seasonally adjusted initial claims was 384,000, unchanged from the previous week's revised figure of 384,000. They also reported a four-week moving average of 378,250, an increase of 2,250 from the previous week's revised average of 376,000.

SP 500 daily could crack support soon

We are making attempt at the support. This move has a bit more strength behind it compared to March's push down.

Normally, I would not expect it to push through before a 3 day weekend. But the news is not good and sentiment says short. Sentiment is behind and they are just starting to short the market so there is some room to go down. How much, we shall see.

Lots of different warning signs popping up. If anything happens with Iran I expect to see our currency take a beating and gold to go through the roof.

The next target on oil is $160, once we break the psychological $150 it is poised to take off.

Careful out there.

European Central Bank raises rates ahead of Fed

Treasury 10-year notes rose after the National Association of Purchasing Management-Milwaukee manufacturing index dropped to its lowest since October 2001 and stocks of several financial firms fell.

Citigroup Inc., Merrill Lynch & Co. and Lehman Brothers Holdings Inc. were among the firms that declined. The purchasing association's monthly index of regional manufacturing fell to 39, its fourth straight month below 50. A reading lower than 50 means the number of manufacturers that said business deteriorated was greater than the number saying it improved.
Treasuries earlier fell, extending the biggest quarterly decline since 2004, as inflation in the euro region rose to the highest in 16 years and oil advanced above $143 a barrel.
The retreat pushed 10-year yields up from a three-week low after a European Union report showed the rate of euro-region inflation climbed to 4 percent, bolstering the case for the European Central Bank to raise rates. Why are they ahead of us?

Crude oil for August delivery rose as much as $3.46, or 2.5 percent, to $143.67 a barrel in electronic trading on the New York Mercantile Exchange. It reached $142.99 a barrel on June 27 after the Fed left interest rates unchanged at 2 percent. The market continues to struggle with what to do with the rise in oil.

How do you spell Recession?

Treasury two-year notes headed for the biggest five-day gain in three weeks after the Federal Reserve signaled it won't raise interest rates in coming months and the central bank's preferred inflation measure rose less than economists forecast.

Traders pushed two-year note yields to the lowest level in almost three weeks after U.S. consumer confidence fell to a 28- year low. Demand for the safety of government debt also rose as financial news network CNBC reported Merrill Lynch & Co. may post a second-quarter loss and write down the value of mortgage- related assets by as much as $5 billion, citing unidentified people.

Treasuries are still headed for their biggest quarterly loss in four years because of speculation in past weeks that rising energy prices would prompt the Fed to boost interest rates.
With the economy in a slump, and with prices rising rapidly, the Fed has found itself in a dilemma. Short-term rates already are low, and if the central bank cuts them more to stimulate economic growth, then prices could rise even faster and get out of control. If the Fed raises short-term rates, the result could be a recession (or a deeper recession, if the economy already is in one) and a delayed recovery. The economy cannot handle interest-rate increases. On the other hand, inflation pressure is going up. They're stuck between inflation and recession.

june 27 SP 500 gap up to 1295 1300 then fall

Looks like we are going to gap up after todays action and then fall again. Nothing looks that positive except for the "opportunities that are available for the gullible. It is still a little early for real estate unless you are cash positive. Be careful out there. The Bond underwriters are all loosing their ratings and their stock is becoming worthless.