Jobs, USDX, ES, and Rates

I hope you all get it by now, that the negative correlation between equity markets and the US Dollar is broken.  In fact, we’ve flipped all the way to a .5 positive 30 day running correlation.  A few months ago if the $DX_F dropped like it did this morning, equity markets would have been flying.  Here’s what we saw this morning.

Pretty obvious at this point eh?  The jobs number was bad, far worse than expected at -85K.  I’m not surprised, then again, I don’t think you can even trust the number anyway, they always get revised down after the fact.  I continue to believe there aren’t any jobs out there, and there won’t be any time soon.  This country’s economy is going through a radical shift, we don’t produce anything anymore, and we haven’t embarked found the next growth industry.  Will dumb manufacturing jobs ever come back to this country, I doubt it, we’ve moved on, up the ladder of production, we are a service and ideas economy now.  We were screwed in the 80′s before the computer changed our economy and gave us all jobs.  We will once again find a spark to ignite a new industry to do the same, hopefully it doesn’t take a decade.

Due to the lousy jobs number, and what will continue to be lousy jobs numbers, the $FED isn’t raising rates any time soon.  Here’s what will happen.  Food and energy prices will begin to creep up, and then explode to the upside.  At that point the fed will have no choice but to raise rates, and they will do it quickly by more than a full point to start, sending the dollar screaming.  Until then the Dollar is going to wash around as equities churn higher yet.  In the short term, here’s what I see for the $DX_F.

That 50 day moving average in blue is going to be tested.  This is a very bullish flag pattern which should resolve itself to the upside after that test.  I’ll be looking to take a short position in the $EURUSD as it comes back up to test significant resistance levels.

As for the equity markets.  We continue to see healthy sector rotation taking place.  Financials are running into earnings season, no surprise.  Materials are hot as hell but are set to take a break following a crazy run to the upside.  A few healthcare names I’m watching are breaking out of long term bases, I would be looking there for exposure.  Look to buy the tech leaders on any weakness, I highly doubt they are going to let $AMZN dump before earnings.  As well, I believe they are going to blow the numbers out of the park, hell they better after this run, or it’s a long way down from here.

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