Wednesday, September 01, 2010

Pop goes the market...

I've said over the past couple of weeks that the pessimistic side of the street seemed to be getting a little crowded. Everyone was jumping on the negative bandwagon and that often leads to violent reversals on little or no news.

Take today for example. Chinese economic data was a little lighter than expected (but seriously we need to stop trading based on their economic data. It seems about as legitimate as that $120 Rolex you bought on Canal Street last year) and the ADP jobs data was negative for the first time in nearly a year. Then the manufacturing data comes out at 10am ever so slightly above expectations and bam, the market explodes. It's not always about the data, sometimes it's just how the market reacts to the data.

Two points I'd make on the ISM report.

1) This is a measure of manufacturing activity which has declined in importance in our economy over the past 20 years. The service index is a much for accurate read on the current state of the economy.

2) The report was much more mixed than the headlines would lead you to believe. While the prices, production, inventories, imports and employment pieces rose, the new orders, backlog of orders, supplier deliveries and new export orders fell. I read this to be more of a gain in efficiency than any uptick in global demand.

There was some good commentary from another strategist last week that highlighted the increasing correlation of all stocks to one another. This perfectly meshes with what happened in Japan over the past 2 decades and what has happened here in the US markets roughly every 18 years. If that analysis proves correct then we are going to be in a volatile trading pattern for the next 7 years with ample opportunities for the nimble traders to make boatloads of cash to fund their memberships at Baltusrol, while Joe and Jane six pack watch their 401k stagnate for 20 years. Good times.

I've been saying for some time that rising ticket prices is covering up the fact that ticket sales are drifting lower at movie theaters.

It's as if music companies could have invented some form of 3d music that would allow them to charge $24/disc then they could ignore what iTunes and illegal downloading did to their industry. Well, the movie industry seems to be recognizing some of their issues....

"Summer movie attendance fell to the lowest level since 1997, while soaring ticket prices produced record revenue for Hollywood studios and theater owners.The number of tickets sold from the first weekend of May through the U.S. Labor Day holiday is expected to drop 2.6 percent to 552 million, Box-Office said yesterday in an e-mailed statement. That would be the lowest attendance since summer moviegoers bought 540.3 million tickets in 1997."


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