Weekly Commentary for April 3, 2010

| April 3, 2010

The much anticipated March employment report was released by the Bureau of Labor Statistics yesterday, indicating that 162,000 jobs were added last month. However, 48,000 of those were temporary census workers and 82,000 originated with the controversial birth/death modeling adjustment, so only 32,000 of those new jobs are permanent and not purely theoretical. The birth/death modeling, as currently implemented, overstates employment levels because it fails to take into account certain types of job losses. This fact was recently acknowledged by the BLS itself, and some economists, such has John Williams at Shadow Government Statistics, estimate that the monthly error introduced by this adjustment is as high as 250,000, which would suggest that jobs are still being lost.

The bear market rally from early 2009 continued slightly higher this week, but the uptrend remains vulnerable to a violent correction.

There are no meaningful technical barriers for the S&P 500 index until the very strong congestion resistance in the 1,210 to 1,250 range, so the existing upward momentum can certainly carry stocks higher from here, but the risk of a fast, unanticipated reversal is high. Our analysis of the broad fundamental and technical views continues to suggest that the formation of a long-term top sometime over the next several months is highly likely, so we would recommend that you remain defensive.

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Category: Commentary, Market Update


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