Unemployment Rate Jumps, (Possibly) Saves Bears

It’s still early but it looks like the Bears were saved by the largest jump in the unemployment rate since 1986... from 5.1% to 5.5%.

• The U.S. lost jobs in May for a fifth month.
• Payrolls fell by 49,000, a smaller decline than forecast, after a 28,000 drop in April that was more than initially reported.
• The unemployment rate increased to 5.5 percent from 5 percent, the biggest jump since February 1986, signaling the world's largest economy is stalling.
• Payrolls shrank by 324,000 workers in the first five months of the year.
• The number of Americans receiving jobless benefits surpassed 3.1 million in May for the first time in four years, indicating employees that are being let go are having a more difficult time finding new jobs.
• Consumer confidence last month sank to the lowest level in more than 15 years as the employment outlook deteriorated, according to a report from the Conference Board, a New York research group.

U.S. Payrolls Fell 49,000 in May, Jobless Rate Jumps to 5.5%: “The U.S. lost jobs in May for a fifth month and the unemployment rate rose by the most in more than two decades, signaling the world's largest economy is stalling.

Payrolls fell by 49,000, a smaller decline than forecast, after a 28,000 drop in April that was more than initially reported, the Labor Department said today in Washington. The jobless rate increased to 5.5 percent from 5 percent, the biggest jump since February 1986.”

The S&P 500 came off quickly pre-market on the news from an overnight high of 1411. Today is an absolutely critical day for the Bears. A close anywhere above 1400 would make it damn near impossible to maintain a Bearish posture in these markets.

Anybody else notice that oil went from $122 to $132 in two days? A 8% move in two days, done with such ease, will likely to result in a move to new record highs… and equities managed to stay bid.

Crazy. Just crazy.

The Bank and Mortgage Index: Nothing But Trouble

The Bank Index (BKX, candles) has spent three consecutive days below the key support area of $75.00. While some kind of bounce into the $77.00 area is certainly possible, BKX should accelerate downwards now that a good number of banks are on deathwatch...

With MBIA and Ambac likely to give up the ghost now too, it is plausible that a few imprudent banks will get whacked for not having properly valued their now useless hedges with these firms.

The Mortgage Index (MFX) continues to tease critical support and looks set to break. Should MBIA and Ambac finally lose their ridiculous debt ratings, expect to see a negative reaction in Fannie Mae (FNM) and Freddie Mac (FRE). This would put the smack-down on MFX as FNM and FRE each carry a 10% weight in the index.

When the S&P500 (SPX, grey, area) rallied to 1440 both BKX and MFX underperformed massively. Now that that both are set to break down, expect the SPX to continue to follow thru on the downside as well.

The pressure of the declining 200, 50 and 20 day EMA's (green, red, blue lines) on the SPX is immense.

The Bulltards are likely to fail here.

Dennis Gartman, Short Oil

Dennis Gartman is somebody who’s insight I greatly respect:

Gartman Tells CNBC He's `Short' Crude Oil, `Long' Natural Gas: “Dennis Gartman, economist and editor of the Gartman Letter, told CNBC he's "short" crude oil against a natural gas investing position.

“I've been in and out of oil for a long time,” he told the financial news channel. “The only oil position that I have on right now, I'm short crude oil and I'm long natural gas. That's been a wonderful trade.”

Gartman also said he doesn't have a net outright position in crude oil because he's “too afraid of it.”

“Things that move 4 percent, I don't want anything to do with,” he said.”

Being a financial ninja I do trade crude short outright. However, I do prefer to avoid heart attacks and stains in my pants whenever possible. Therefore, when I trade crude from the short side I do it using options. This allows me to avoid that Black Swan event that I just know is stalking me personally…

Guys like Mahmoud Ahmadinejad and Hugo Chavez have a nasty habit of spawning political Black Swans and oil just happens to be a political animal at these prices.

I’ve been shorting oil from $133 (after the pre-market spike to $135 that didn’t ‘stick’) using $130 and $125 strikes. I have a core position around which a trade.

Oil is in a bubble. Believe it. I’m not going to argue about Peak Oil. It really doesn’t matter. Parabolic prices are not sustainable. Period. End of story.

I’ve posted on parabolic moves many times…

Related Posts:
Oil Crisis and the Blame Game
From Bubble To Bubble, More Hidden Losses
Parabolic Commodities: The End is in Sight
Life After Things Go Parabolic, This Bounce Too Will End
When The Momos Go Parabolic
Dammit, Why Won’t You Learn?

In Oil Crisis and the Blame Game I argued that: “Maybe we can hammer out a top around here somewhere... Money has been flowing into inverse energy ETFs (DUG for example), indicating that money is for the first time attempting to call a top. Oil and Gas shares have fallen even as oil blew through $130 and immediately tagged $135.

Big energy companies, such as Exxon Mobile (XOM) failed to sustain new highs even as oil rallied hard. Something is up. Pop, and drop. XOM broke resistance and then immediately FAILED. Hmmm...”

Since then crude has indeed come off.

WSJ: Following The Tracks of The Bear

TheFinancialNinja made it into WSJ´s Marketbeat. (Hat tip jmf)

Can't Resist Apple, Way Too Juicy, Way Too Ripe (UPDATE1)

This is an update on the post Can’t Resist Apple: Way Too Ripe, Way Too Juicy.

Talk about shorting AAPL always offends a surprising number of people. (It’s a great company with great products but don’t you dare fall in love with the stock.)

So the first short attempt worked out. I started buying July $180 Puts as prices continued to move from $180 straight up to $190 and change. I traded around my core position by buying additional puts in regular intervals on the days AAPL was up and sold them back off on the days AAPL was down.

$170 is the Bull trendline from the lows of $115. I did not expect AAPL to break that on the first attempt, especially without a catalyst (some kind of Bearish news). So when AAPL finally pushed down to $170 and failed, I sold off the last of my puts.

Analysts came in and upgraded AAPL. The bounce was fast and furious, jamming AAPL back up to $190. But momentum has seriously started to fade and the uptrend is now in danger of being violated. I like the chart so much I bought Jan 09 puts at $180 and $170. That position is now on auto pilot.

While I trade the charts, I do keep the fundamentals in mind. I don’t get into the details too much, but just enough to be facing the right way on a broad macro level.

Ok. So, you’re house price is falling so fast you still can’t believe it and your mortgage is about to reset to a rate that ‘tastes like vomit’. You’re worried about your job security, despite the fact it costs you so much now just to drive to work that going in for a half day isn’t even worth it. You now deeply regret buying the SUV you don’t actually own, because you’ve traded your previous cars in so frequently that the lease payments on this one almost equal your pre-reset mortgage payments. How likely are you to be both willing and able to load up on shiny, expensive consumer discretionary items with big monthly costs such as the Apple iPhone?

Which is more probable, a surprise to the upside in a stock priced to perfection in a deteriorating economy or a surprise to the downside?