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Market Recon: 1/31/2013

Stephen J. Guilfoyle “Sarge” was previously the U.S. Economist at Meridian Equity Partners from 2007 following a long career at Credit Suisse. Stephen has worked on the trading floor of the NYSE continuously since July 1987 and actively serves as a Sergeant in the National Guard.

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Good Morning,

What a splice in time we are at, don’t you think?  The market wants to take a break.  We all feel it.  Maybe it all started yesterday.  A contraction now would be healthy, so we can take off higher later, is what all of the smart guys are saying.  That’s what my Dad is saying, and trust me, my Dad is smarter than the smart guys.  So how do we play this?  Stock picking is getting hard.  Yes, it was easy to do early in “Earnings Season”, but that is not a sustainable plan, so what I am going to do now, is play specific earnings, and macro events that can produce volatility.  Otherwise, I may retreat to the world of futures trading, so I can stick to equity indices and commodities when I am less than sure, an area that plays well to my trading levels.

Today, we literally have got a ton of stuff going on globally in the macro world, and China just may take the cake later tonight.  This morning we saw French Consumer Spending, and Retail Sales numbers for Germany, as well as their “Jobs Day”.  The Unemployment situation in Germany unexpectedly improved in January, but for December, both the German Retail Sales, and French Consumer Spending disappointed.  Thus, the European equity market is struggling this morning.

Once the clock strikes 08:30 in the Eastern Time Zone, we’ll get our weekly dose of Jobless Claims, which has managed to stay lower for a couple of weeks.  Today, expect the number to near 350K, which is actually toward the lower end of consensus range.  It also looks like you may be able to chalk up another win for Personal Income over Consumer Spending for December.  Maybe the overall economy wants you to spend your money, but I like when the little guy wins.  Personal Spending outpaced Consumer Spending in both October and November, but that came after three straight months where Spending beat Income.

Still at 08:30, look for the Employee Cost Index for the fourth quarter to have grown by half of a percent q/q.  Canada will also report their monthly GDP number for November.  Up north they’re looking for growth of 0.2% on top of October’s growth of 0.1%.

Tonight, you will see Household Spending numbers, and an Unemployment print from Japan.  You will see Manufacturing numbers and a Producer level inflation print from Australia.  The big deal tonight is however, Chinese.  At 20:00 ET, and 20:45 ET, we’ll see our twin January Manufacturing PMI prints out of China.  First up will be the governmental number, which measures the bigger companies.  Here we look for improvement to 51.1, up from December’s 50.6, which a lot of folks doubted.  The HSBC number, which measures the smaller companies is improving just the same however, and that does lend some credibility to the rest of China’s improving macro picture.  For the HSBC print, look for 52.1, up just a smidge from December’s 51.9.  The Chinese PMIs will be the tip of the iceberg that is Friday.  Friday is not only “Jobs Day” in the U.S., but it is also “PMI Day” around the world, to include the U.S.

This post originally appeared at  Guilfoyle’s Market Recon.  

Follow the Sarge on Twitter here: @Sarge986

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