FUNDAMENTALS DON'T MATTER RIGHT NOW
There was a comment in yesterday's thread about the divergence between the stock market and this statistic. You could put almost any stat on the board and the discussion would be the same, they don't matter. There was a time in our history where financial markets were actually linked to some degree to the general economic picture, then slowly the "They can't handle the truth" generation developed. It was a subtle development and took place over a couple of decades.
It started with the formation of the PPT which was done basically by Ronald Reagan. I have no problem with the basic concept of the PPT but like so many things absolute power corrupts absolutely and this is no different. The idea that the government should step in during a crisis period to stabilize the economy is not a bad idea. However, once Alan "Hall Pass" Greenspan took over, he decided it was best to inflate bubbles so that people would constantly have a booming sector to put their money into to increase their wealth. Of course I call him Hall Pass because nobody has ever gotten a bigger hall pass in this whole mess than this guy who started it all.
What was lost in the idea of manipulating things to rotate bubbles, is the long term consequences of doing it. The PPT has gotten way too much into micro-managing the stock market now in an attempt to once again create a bubble where people can make money back to make up for being out of a job or having an upside down mortgage. It is a shame that we don't have an objective media any more and the only place you can go to get the truth is onto the internet in the blog world. It is pretty clear based on how the Benghazi situation has played out that no semblance of truth is likely to come from our big brother on anything they don't feel like talking about. As a result, the FED activities will never be opened completely to the public. Just the fact that there are traders at the FED should tell you all you need to know.
What does this have to do with anything?
As a result of all of these shenanigans, the traditional barometers for things are not of any use in trying to determine where the stock market will go. The NFP report, GDP, Business Inventories, Retail Sales, kick it all to the curb. It has been decided in a back room that we have no access to, that we can't take care of ourselves so someone needs to do it for us. The plan is apparently to make everyone think life is good solely through a high DOW price. The problem with this for most people is that they are not participating in this spectacular rally from 6500 because many have pulled money out of retirement accounts to stop from losing their homes due to job losses.
In an attempt to further the process, the doctoring of the NFP report has gotten so complex, that even people homing for both sides of the political process are scratching their heads at the numbers. All of these things are an attempt to obscure reality with a hope that reality will magically get better and then gradually the false numbers can be unwound by letting the real numbers catch up to the fake ones. So far it is not happening which is why these large divergences such as with the report above are not having any effect on the stock market.
One of the things we have to do as traders is adapt to what is happening at the moment, this is no different. The FED is essentially the commercial element in the stock market, so monitoring what they are doing is going to be the best way of determining what is likely coming. They will not be able to stop every decline, volume is their enemy. Since the volume has been light for the most part for the whole rally starting in 2009, they have been able to contain most of the declines pretty easily. If we ever got to a huge hedge fund liquidation point like in 2008, it would be too much volume for them to overcome. I do think we will have something like that take place, but the timing of it is not clear to me at the moment.
For now forget the government reports, they don't mean much.