Zak Mir on Ben Hur And The Non Farms

As I have mentioned before, I knowingly allow myself to receive a lot of junk mail from the financial services industry, if only to keep an eye on their “cutting edge” marketing wheezes. The latest I received in the last few days was “how will you be positioning yourself for the Non Farm Payrolls?”

The correct answer for most retail investors is that they will be going out for a long lunch on Friday afternoon, as this is probably the only way they can avoid taking a severe financial slap from the most volatile trading day of the month! Indeed, this point reminds me as to why the Non Farms are the number one piece of economic data. GDP should really be the big one, but of course it is more fun having a monthly re-run of the chariot race scene in Ben Hur for traders, and U.S. employment data is as good an excuse as any!

This brings me onto the how to approach this do or die event. This week was typical in many ways. As the big day approached, the equity markets moved counter-trend, with the European markets particularly hard hit. What was noticeable is that the FTSE 100 not only made a beeline for former April resistance at 6,533 – the “minimum” downside you would expect after the pullback from 6,800 plus, but then plummeted a further 200 points and more, intraday, at its lowest. This could be regarded as particularly cruel given the way that both the Dow and S&P bounced almost exactly off their former April peaks of 14,887 and 1,597 respectively and so their corrections were somewhat more shallow. 

My view was that given the way that the Dow and S&P were clearly not going to fall further than former support, that the FTSE 100’s position near 6,350 made it and still makes it nearly 200 points too cheap. This was especially the case if there was no horror from the non farm figures, and which came in at 175,000. It was not too difficult a call to make given that after flushing out most who were long  since the beginning of the week, we were almost at the position of the famous Yazz song (yes, I’m showing my age!) – the only way to go was up.

This was actually the opposite to the position in Gold where the metal has been squeezing higher over $1,400 and as high as $1,420 over the past few sessions. The cynical view here was that having stopped out the bears, the metal would decline after the 1.30pm announcement and, judging by the $1,378 print I see at the moment – this has been the case.  With Dollar / Yen this afternoon also reversing the flush out of those who were long of the cross, taking it down from 100 plus towards 95 before the bounce came and then rebounded hard, this is understandable given the recent anti-correlation between the two. I would not say that this is always what happens – a countertrend move a few days before NFP’s and then a resumption of it, but it makes for a reasonable starting point.

Finally, on the subject of financial services as described above, I am looking at the daily chart of Hargreaves Lansdowne (HL.). This is the company that people / clients are apparently happy to pay the full whack for the full service. Although I suppose it all comes down to the Bristol based group having the right brand / corporate culture, I do not personally understand how they pull it off. Whatever the case, the shares have been one of the better performers within the FTSE 100 in recent years. The big trick, if you can call it that, has been that just when you think the bull run is over it revives (a bit like Rocky at the end of Rocky 1).

The present position may be a case in point in the sense that the stock has bounced off the floor of a March gap at 902p. While it does not look like a great setup at the moment, no end of day close below the gap could allow a new leg to the upside and a retest of 1,000p. The absolute stop loss would be the intraday low of today at 894p.