The futures love the lower than expected jobs numbers, I guess they think that confirms the Fed is done tightening, but as Lee Corso likes to state, "not so fast, my friend". I think the overreaction to these numbers is just that. Today is Day 4 of the new trading year. We continue to new highs premarket, let's see if the momentum can continue from these gap up prices into today's close for the weekend, or will traders book the nice gains they have for the week/year. Funny how all indices are up more than they were over the course of 2005 in just one week!! Very nice.

Average Workweek 33.7 vs 33.7 consensus
Hourly Earnings +0.3% vs +0.2% consensus
Unemployment Rate 4.9% vs 5.0% consensus
Nonfarm Payrolls 108K vs 200K consensus

Associated Press is reporting Standard & Poor's lowered co's corporate credit rating further into junk territory Thursday, citing concerns about co's ability to turn around its N. American operations. S&P also downgraded Ford's financial arm, Ford Motor Credit Co. The agency cut the ratings for both two levels to BB- and assigned the automaker a negative outlook. S&P said restructuring plans will be expensive and warned that it could be undermined if Ford's market share losses continue and the company resorts to costly incentives. S&P said it will take Ford several years -- at best -- to turn around its North American automotive business.

More than two thirds (67%) of the stocks that hit a new high 10 days ago closed higher on Thursday than they did 10 days earlier. There were 374 new highs on Wednesday and 291 on Thursday. 44% of the stocks in my universe of 4,000 stocks are now in a short term uptrend. This is up from 33% when the down trend began on 12/20. 71% of stocks are now above their 10 week averages. 55% of the Nasdaq 100 stocks advanced on Thursday, along with 45% of the S&P 500 stocks and 53% of the Dow 30 stocks. 58% of the Nasdaq 100 stocks closed above their 30 day averages, as did 78% of the 211 stocks that have doubled in the past year. 20% of the doublers hit a new high on Thursday. Six times as many stocks are within 5% of a new high than a new low (30% vs. 5%).

I hope you enjoyed the best BCS game we have seen to date last nite. I forgot to discuss the game this am, but I did say take Vince and the 7.5 pts the Horns were getting in the backyard of the Trojans. I think Vince showed who was the top college player of 05 was. Matt Leinart really came off as a sore loser at the end of the game, a tough way to end your college career with a sore spot, but he was flat out beaten by a better QB overall then he. Take the money Vince, you can't get greater press than you will receive by staying your senior year. Take the money my man. Watch Troy Smith next year at Ohio State. I think he is coming into his own right as the top QB next year unless Mr. Young comes back. This does not come easy for this Wolverine to say, but I call em like I see em, and Troy Smith will be a force to be reckoned with next year in the Big Ten and possible national championship for the Buckeyes. Unless, that is, Michigan coaches wake up and utilize talent they have to match that of their brethren down in Columbus. Not going to happen until new blood comes to coach in Ann Arbor I am afraid.
Congrats Horns! Hook em!!

On the theme that this rally did not start from a bullish technical condition by numerous measures, one comes across the "Commitment of Traders" report. Recently, the usually correct "Commercials" have acquired a net short position in the futures market larger than anytime in the past five years save for two times. Those times were just prior to the December 2004 market peak and in February 2001, right at the end of a bear market rally. It can then be said that their current position does not at all support the notion that a new rally phase has started. Taken alone, this indicator suggests that this rally will turn into a bull trap.

Is there a lesson in the Nat Gas move (-40% since mid-December)? Yes, it's called risk management. That kind of volatility does exist in equities, it's just been dormant long enough for people to entirely discount it. That, in a nutshell, is the disconnect between perception and reality that keeps me up at night.

Market is coiling again all day. They keep pushing the upper limits of this move which is seemingly tired. But can they push it to the next level. Don't know but should be interesting to watch the follow thru if they can push the highs to new levels. Cheap vols still, you can play the next "big move" cheaply either way. Look for the coils and set yourself up with some cheap calls or puts, the market is setting up for a big move.

Futures showing a slight give back on the open, very slight. European markets are slightly red on the day with Prime Minister Sharon being the reason du jour. Can they make it 3 days in a row for the US markets. Time will tell. There were only 5 times in 2005 that the markets did what they did in the last two days. They went up. Tough to guage this opening days of this market this year. Still lots of divergences that need to be resolved if we are to go higher. Retail looks very mixed and really slowing over the end of the holiday period to me. I still think there is more risk to the downside than the 2-4% that maybe left on the upside of this market for the next few months.
Time will tell.

Monster (MNST) Employment Index for Dec fell to 145 from 149 in Nov. The company said online postings may rebound in Jan, based on the past two year's data.

The company also noted that online job availability is much higher in almost all industries, occupations, regions and states than last year at this time, which demonstrates solid growth over '05.

Sales at U.S. retailers rose 2.9 percent in the final week of December, the smallest gain of the holiday season, as shoppers sought bargains and redeemed gift cards, according to Bloomberg.

Comparable sales fell less than 1 percent from the previous week, the International Council of Shopping Centers said in a statement Wednesday. Sales for the two-month period remain ''on track for a moderate increase'' of 3 percent to 3.5 percent, the New York-based trade group said.

Meanwhile, the Johnson Redbook Retail Sales Index, which monitors same-store sales of 9,000 retail units, reported that sales rose 2.6 percent for the final week of December compared to the same year-ago period, resulting in a 3.4 percent gain for the month. That was slightly below the 3.8 percent forecast, Bloomberg said.

Initial jobless claims for the week ending Dec 31 came in at 291k vs 320k exp. Prior reading was revised to 326k from 322k.

Continuing claims for the week ending Dec 24 came in at 2718k vs 2675k exp. Prior reading was revised to 2705k from 2715k.

This paper from the San Francisco Fed (Nov. 10, 2005) says that as of Sep. 2005, the personal savings rate out of disposable income was negative for the fourth consecutive month. During the 1980s, the personal savings rate averaged 9%, during the 90s, 5.2%. Since 2000, the personal savings rate has averaged 1.9%.

The reason why this is happening is obvious from a psychological standpoint, which the Fed paper acknowledges: rapid increases in stock price, and in particular residential property prices - both of which are directly attributable to Fed policy - have lured people into substituting paper asset gains for savings. Deeper than that, one of the side affects of the entire 18-year secular bull market in stocks and financial assets, has been the substitution of investment for savings. As I have written before, I believe savings and investment are related, but ultimately very different. Savings and investment are not the same thing.

The conclusion reached by the Fed paper: "Going forward, the possibility of cooling asset markets and rising borrowing costs may cause the personal saving rate to revert to levels which are more in line with historical averages. While such a development would act as near-term drag on household spending and GDP growth, an increase in domestic saving would help correct the large imbalance that now exists in the U.S. current account."

If the Fed fears deflation above all possible outcomes, then a sharp increase in personal savings is the last thing the Fed wants to see no matter how many research papers are written about it. The answer is obvious: punish dollar savers. So far, so good.

The weekly MBA mortgage applications index dropped -1.5% last week, with purchasing applications falling -3.4%, and refinancing jumping 8.3%. The fixed 30-yr mortgage rate fell 6 basis points to 6.15% while the 15-yr nudged lower 2 bps to 5.74%. The 1-yr adjustable rate mortgage rate picked up to 5.41%.

Did someone order more volatility this year? If the S&P 500 (SPX) closes up more than 1.5% today, it will be first time since Oct. 28. It should be noted as well that it only happened three times in 2005.

The Nasdaq 100 (NDX) is currently up more than 2% and there were only two days with 2% or more gain in 2005 for that index.

And so we tested last weeks lows and since the fed announcement full moonshot in the markets. The fed says in its minutes it may be done soon with raising rates. Or it may not . . . but today, the market likes what it hears and we are up like the biggest rocket ship you have ever seen!! Nasdaq up 2.4% on the day and the SP up 1.6% for the day.

Happy New Year indeed!!

"Wal-Mart Stores Inc. expects December same-store sales at its U.S. locations to show growth of 2.2%, at the low end of its previous guidance of 2%-4%, despite aggressive discounts and marketing this holiday season.

In its weekly prerecorded sales update Saturday, the world's largest retailer said general-merchandise sales were stronger than food sales for the week ended Friday. The stronger general-merchandise sales -- a reversal from previous weeks -- likely indicates Wal-Mart saw a strong flow of gift-card redemptions in the week after Christmas.

Even so, the 2.2% gain in same-store sales, that is, sales at stores open at least a year, is Wal-Mart's lowest December gain in five years." (emphasis added)

So we fire up the new trading year with all the media outlets and analysts pumping with fresh material. Wait it isn't fresh, just turned the calender and they have product to sell you again. Weeee, gap up futures after long weekend and no news, same game different year!! Let's see how they can run the spoos up to 1275 again. We worked off the overbought situation and now as they took them near oversold on Friday with the test of 1248 on the SPX. The NCAA championship game is tomorrow nite. I think you have to Take Texas and the 7 pts. They played in the Rose Bowl last year, so the hype won't get to the horns I believe. Take Vince Young over immobile Matt Leinart. Bush et all are sweet, I hope we get a great game!