Gold prices surged to a record high above $1200 an ounce in November, influenced to a great extent by news that India had purchased 200 metric tonnes of gold from the International Monetary Fund.

Gold also rallied substantially last April and May when China revealed that its gold reserves had almost doubled since 2003, to 1,054 tonnes.

However, gold is to the downside so far this week after a four week rally that had it back to $1,138 an ounce last week.

The culprit seems to be remarks by the director of China’s Administration of Foreign Exchange, Yi Gang, which cools off prospects of China moving more of its reserves from U.S. dollars to gold. Speaking at a news conference, Yi Gang said, “Gold is not a bad asset, but currently a few factors limit our ability to increase foreign-exchange investment in gold.”

Could  those factors include that the nice rally underway in the U.S. dollar is giving China second thoughts of moving some its reserves away from the dollar?

Yesterday in the U.S. stock market.

It was a very narrow trading range, low volatility, low volume day. The total range of the Dow from its intraday high to intraday low was only 45 points. Only .9 billion shares traded on the NYSE.

The Dow began to the upside by 20 points, about as called for by the early morning indicators, but immediately rolled over to the downside. However, at its low it was down only 25 points. It tried to recover mid-afternoon, but late day selling closed it down fractionally.

Yesterday’s intraday chart:

The Dow closed down 13 points, or 0.1%. The S&P 500 closed unchanged. The NYSE Composite closed unchanged. The Nasdaq closed up 0.2%. The Russell 2000 closed up 0.2%. The DJ Transportation Avg. closed up 0.4%.

Asian markets closed fractionally higher last night, similar to U.S. market yesterday.

Among individual countries:

Australia closed up 0.2%. China closed up 0.5%. Hong Kong closed up 0.1%. India closed down 0.3%. Japan closed down 0.2%. Singapore closed up 0.2%. South Korea closed up 0.1%. Taiwan closed up 0.1%.

If you’d like to see a three-month chart of these indexes and others, click here, and then click on any of the markets in the list at the left side of the page it takes you to.

Markets this morning.

European markets are down on average of just over 1/2%.

Oil is down $1.50 a barrel at $80.39.

Gold is down $12 an ounce at $1,111.

Markets in the U.S.

This is a very light week for potential market-moving economic reports in the U.S., basically unemployment claims on Thursday and retail sales on Friday. To see the full schedule of the week’s reports click here, and look at the left side of the page it takes you to.

Our pre-open indicators are somewhat negative, pointing to the Dow being down 30 points or so in the early going.

Market Patterns.

With the ‘monthly strength period’ having ended last Thursday, the next weekly pattern is that this is the week before this quarter’s quadruple-witching expirations week, and the week before is usually negative.

In addition, last Friday’s employment report seems to be following its historical pattern of creating a one to 2-day triple-digit move in one direction or the other by the Dow. The rest of that pattern is that whichever direction the move takes is usually reversed over the following few days.

Interesting Chart of the Morning.

Back in November we showed subscribers why natural gas was beginning to look interesting. We had a short-term buy signal, and we were coming into the winter heating season when natural gas often rises. But we warned not to jump the gun on the short-term signal, as the signal had not spread to the intermediate=term indicators. So we had only moved the etf UNG to our ‘Watch List’.

Some might wonder why we never mentioned it again. The reason was that the short-term signal did not spread to the intermediate-term indicators, and the short-term rally soon fizzled and UNG was headed down to new lows.

In the other direction, the early indication short-term buy signal on the U.S. Dollar (not shown) did spread to the intermediate-term indicators on the out-of-favor U.S. dollar, and it has been in a nice rally since December.

Please scroll down to see other recent ‘Interesting Charts of the Morning’ and commentary.

To read my weekend newspaper column ‘Stress-Testing Taxpayer Patience’ click here!

SUBSCRIBERS: There is a Special Report on your website from Saturday, and the new issue of the newsletter will be out tomorrow, Wednesday.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term signals and market moves that are most important to investors. So, please consider a subscription to our independent research and recommendations. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my latest book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information.

Concerns that economies, particularly in Europe, may slide back into recession have been rising. Economists were surprised by the report in February that GDP growth in the 16 Euro-zone countries had fallen back to just 0.1% growth in the fourth quarter. Subsequent worries about the serious debt problems in a number of European countries, including Greece, Italy, Spain, and Ireland, and what those headlines might do to consumer confidence, have not lessened the concerns.

However, with the arrival of those worries has come a significant change in currency exchange rates. The previously strong Euro has been in a significant decline since early December, while the U.S. dollar has reversed its long decline and has been experiencing a substantial rally. The popular trade of the last few years of ‘Sell dollars – Buy euro’s’ has reversed.

The devaluation of the euro could go a long ways toward lessening concerns about a double-dip recession in Europe by raising the prices of imports into Europe, and lowering the prices of European exported products to other nations. Don’t be surprised if manufacturing activity picked up in Europe in January and February as a result.

Currency pressures seem to be in the other direction in China. For several years global central banks have complained about China pegging its currency, the renminbi, to the U.S. dollar. They claim that keeps the Chinese currency undervalued, which is of major and unfair assistance to China’s exports.

The global pressure on China to allow its currency to float in the free markets may finally be having an effect. Or perhaps it’s just part of recent indications that China wants to slow its over-heated economy. But the Financial Times reports this morning that the governor of China’s central bank has given a strong hint that China may soon abandon the dollar peg, explaining that it was a special policy to help China get through the global financial crisis. The FT reports him as saying, “This is a part of our package of policies for dealing with the global financial crisis. Sooner or later, we will exit the policies.”

He provided no timetable, and insisted China will not yield to any pressure forcing it to allow its currency to appreciate. However, China has been making some moves since mid January to reverse some of its previous stimulus efforts. Perhaps freeing its currency to rise will be next, although if so it will almost certainly be in controlled incremental steps.

Meanwhile, China’s stock market has not liked even the minor steps taken to remove previous stimulus efforts.  

Asian markets closed up last night, catching up to Friday’s rally in the U.S. on jobs report.

Among individual countries:

Australia closed up 0.9%. China closed up 0.7%. Hong Kong closed up 2.0%. India closed up 0.6%. Japan closed up 1.9%. Singapore closed up 1.6%. South Korea closed up 1.6%. Taiwan closed up 1.3%.

If you’d like to see a three-month chart of these indexes and others, click here, and then click on any of the markets in the list at the left side of the page it takes you to.

Markets this morning.

European markets are up fractionally, on average of about 0.2%.

Oil is up $.64 a barrel at $82.13.

Gold is up $2 an ounce at $1,137.

Markets in the U.S.

This is a very light week for potential market-moving economic reports in the U.S., basically only unemployment claims and retail sales late in the week. To see the full schedule of the week’s reports click here, and look at the left side of the page it takes you to.

Our pre-open indicators are fractionally positive, pointing to the Dow being up 15 points or so in the early going.

Market Patterns.

With the ‘monthly strength period’ having ended on Thursday, the next weekly pattern is that this is the week before this quarter’s quadruple-witching expirations week, and the week before is usually negative.

In addition ‘The Big One’, Friday’s employment report, seems to be following its frequent pattern of creating a one to 2-day triple-digit move in one direction or the other by the Dow. The rest of that pattern is that which ever direction the move takes is usually reversed over the following one to three days.

Interesting Chart of the Morning.

Have global markets become short-term overbought above 21-day moving averages with the big rally last week?

Please scroll down to see other recent ‘Interesting Charts of the Morning’ and commentary.

To read my weekend newspaper column ‘Stress-Testing Taxpayer Patience’ click here!

SUBSCRIBERS: There is a Special Report on your website from Saturday, and the new issue of the newsletter will be out on Wednesday.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term signals and market moves that are most important to investors. So, please consider a subscription to our independent research and recommendations. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my latest book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information.

Historically, employment has been a lagging indicator in economic recoveries. Makes sense. Employers don’t need to hire workers back until well after their businesses have recovered and are growing again.

Historically, the main driving forces of the economy have been the housing industry and the auto industry. It’s usually slowdowns in one or both that cause economic slowdowns, and recoveries in one or both that lead economic recoveries. Makes sense. Homes and autos are important large purchases by consumers, whose spending accounts for 70% of GDP. They borrow much more money than they lay out to buy homes and autos, which leverages the importance of that spending compared to buying a new pair of jeans or a new smart-phone.

So what’s going on with the stock market’s positive response to Friday’s report that only 36,000 jobs were lost in February, while ignoring the very negative news from the housing sector and consumer confidence?

In the last ten days or so we’ve learned that new home sales unexpectedly plunged 11% in January, existing home sales fell 7.2%, pending home sales fell 7.6%. The declines took place even though the government’s important program of providing rebates to homebuyers, which is due to end April 30, was still in effect. And we learned that February may not have been any better, since the Conference Board reported the bottom has dropped out of consumer confidence, its Consumer Confidence Index plunging from 56.5 in January to 46.0 in February. (The norm for the index is 100, based on its level in 1985).

The market’s resiliency in the face of those negative surprises, and ability to take the loss of only 36,000 jobs as a big positive, was impressive.

Perhaps I should just leave it at that and not wonder if it indicates the market now really believes employment is a leading indicator, and housing and consumer confidence, so important last year, are now lagging and unimportant indicators, that employment can recover and economic growth can continue, if the housing sector and autos roll over to the downside again.

Yesterday in the U.S. stock market.

The economic report we always refer to as the The Big One (because it most often results in a triple-digit kneejerk reaction in the Dow in one direction or the other), lived up to its history again.

This time it was to the upside. But how much was short-covering given that the consensus forecast was for a very negative jobs report, which probably had traders heavily on the short side and needing to rush to the buy side to close out those mistaken short positions?

From the looks of the very low volume not many investors on the sidelines were pulled in. Perhaps they are aware of the other side of the history of the market’s response to the jobs report. Whichever is the direction of the initial one or two-day triple-digit move, it’s usually reversed over the following one to two days, and the market goes back to trading on its previous influences.

Yesterday’s intraday chart:

The Dow closed up 122 points, or 1.2%. The S&P 500 closed up 1.4%. The NYSE Composite closed up 1.6%. The Nasdaq closed up 1.5%. The Russell 2000 closed up 2.1%. The DJ Transportation Avg. closed up 0.8%.

Global markets for the week.

It was a very positive week, it’s first influence the ‘monthly strength period’ which was due to begin the previous Friday and to run through Thursday, and then the reaction to the jobs report yesterday.

If you’d like to see a three-month chart of any or all of the above indexes click here, and then click on any of the markets in the similar list at the left side of the page it takes you to.

What’s next for the market?

In the U.S., next week will be a very light week for potential market-moving economic reports, basically only unemployment claims and retail sales late in the week. To see the full schedule of next week’s reports click here, and look at the left side of the page it takes you to.

The market will probably return to watching economic developments in Europe.

Stock Market Patterns.

The next weekly pattern now that the ‘Monthly Strength Period’ has ended is that next week is the week before this quarter’s quadruple-witching expirations week, and the week before is usually negative.

Interesting Charts of the Morning.

The speculative stocks of the Nasdaq and the small stocks of the Russell 2000 have attracted most of the activity in the renewed rally. Have they already become precariously overbought above short-term moving averages?

Please scroll down to see other recent ‘Interesting Charts of the Morning’ and commentary.

To read my weekend newspaper column ‘Stress-Testing Taxpayer Patience’ click here!

I’ll be back Monday a.m. after a look at events over the weekend, Asian markets Sunday night, and early morning indicators for Monday.

SUBSCRIBERS: There will be a Special Report on your website later today, and the new issue of the newsleter will be out on Wednesday.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term signals and market moves that are most important to investors. So, please consider a subscription to our independent research and recommendations. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my latest book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information.

Economic reports are of significant importance. That’s obvious. They are about the only factual indications of conditions in various parts of the economy. Pundits can raise or lower the importance of individual reports to support their opinions, can use the effect of weather or holidays or unusual events to downplay results they don’t like in specific reports. Realtor groups, financial firms, or others preserving their self-interest, can try to gloss over bad reports by assuring us all the way down that ‘this is the bottom’, or whatever.

But the reports provide the facts if we pay attention to them. Or do they?

Because economic reports can be such significant market-movers, at some point or other most investors or traders have probably wished they could either know what the numbers in a report will be in advance, or could choose the numbers that will be reported. Of course the former would be illegal insider-trading, and the latter would be illegal market manipulation. So that cannot be happening.

However, the accuracy and therefore the usefulness of many reports can certainly be questioned, given the number and size of revisions that are made a month or two after they are released.

The market’s reaction to reports would often be quite different if the correct numbers were reported at the time, rather in a revision a month or two later.  

Employment reports are valid examples.

On Wednesday the ADP report was that only 20,000 jobs were lost in the private sector in February. That was a comforting report, about in line with expectations, and did not influence the market.

However, at the same time, the previous month’s report, that only 22,000 jobs were lost in January, was revised to a loss of 60,000 jobs, almost three times the number originally reported. The revision was pretty much ignored as ‘old’ information. Are the numbers being gamed? Will the report of only 20,000 jobs lost in February be revised next month?

Is the Labor Department’s Bureau of Labor Statistics employment report, which was released this morning, any more reliable?

A month ago, when it reported that only 20,000 jobs were lost in January, it revised its report of the previous month, that 85,000 jobs were lost in December to an actual loss of 150,000.

It also revised its numbers for the entire period of April 2008 to March 2009, to a total of 930,000 more jobs lost in the period than had been reported. That’s an average of 78,000 more jobs lost per month through that period than was shown in the monthly reports.

It’s not all in the direction of more losses than reported.

In December the BLS report was that 4,000 new jobs had been created in November. In January’s report, that November number was revised to show that 64,000 new jobs were actually created in November. Can you imagine how the market, which is still waiting for a report of jobs being created rather than lost, would have taken off to the upside if the correct number of 64,000 new jobs created had been in the original report?

The BLS report this morning was that there were 36,000 jobs lost in February, better than forecasts.

However, its report 2 months ago that 150,000 jobs were lost in December was revised to a loss of only 109,000. If that lower number had been reported in December would the market have responded entirely different?

When reported numbers can be revised up 1,600% from 4,000 to 64,000 new jobs created, or down 300% from 22,000 jobs lost to 60,000 a month later, of what use are the reports?

If it’s a matter of more time being needed to get the numbers right, then investors would be much better served if the reports came out a couple of weeks later, than to be constantly provided with incorrect and misleading information on which important investing decisions are being made.

Of course if the game is to throw out any old number for now, we’ll correct it next month when it will be considered old news, then they’re doing just fine.

OECD sees continuing economic recovery.

The Paris-based Organization for Economic Cooperation and Development reports its leading indicator of economic activity of its 31 member countries rose to 103.6 in January from 102.8 in December, showing no signs of the global economy slipping back into recession. Its leading indicators in only two countries, Brazil and India, declined.

Yesterday in the U.S. stock market.

Considerable indecision of up, down, back up moves, in a narrow trading range in which the Dow moved only 60 points between its intraday low and intraday high, on low volume, but with a positive close to end the ‘monthly strength period’.

Yesterday’s intraday chart:

The Dow closed up 47 points or 0.4%. The S&P 500 closed up 0.4%. The NYSE Composite closed up 0.1%. The Nasdaq closed up 0.5%. The Russell 2000 closed up 0.5%. The DJ Transportation Avg. closed up 0.3%.

The troublesome pattern of the previous few days was absent yesterday. Rather than strength in the morning and selling in the afternoon, yesterday it was strength in the first half hour, a sell-off that gave it all back by 11 am, and then a rally in the afternoon.

All in a narrow trading range in which the Dow moved only 60 points between its intraday low and intraday high, and on low volume, with fewer than 1 billion shares traded on the NYSE, as the market continued to wait for this morning’s release of the BLS jobs report.

Asian markets closed back up last night after previous session’s decline.

Among individual countries:

Australia closed up 0.3%. China closed up 0.3%. Hong Kong closed up 1.0%. India closed up 0.1%. Indonesia closed up 0.5%.  Japan closed up 2.2%. Malaysia closed up 1.2%. Singapore closed up 0.8%. South Korea closed up 1.0%. Taiwan closed up 1.3%.

If you’d like to see a three-month chart of these indexes and others, click here, and then click on any of the markets in the list at the left side of the page it takes you to.

Note; Our data-feed comes in automatically from Reuters and is doubled-checked with the data-feed from eSignal. Often when markets are closed they don’t show that but transmit the data from the last close. That’s why when you watch the tape on CNBC and websites, you often see that a market supposedly closed up or down the previous day, when in fact that market was closed for a holiday. That is why sometimes you see the same thing with our sampling of individual global market closes. It is the data from incoming data-feeds.

Markets this morning.

European markets are up in reaction to the U.S. jobs report, on average of about 0.7%.

Oil is up $1.15 a barrel at $81.36.

Gold is up $.50 an ounce $1,133, now up $17 an ounce, about 1.5%, so far this week.

Markets in the U.S.

In the U.S., the important economic reports continue to come out. To see the full schedule of this week’s reports click here, and look at the left side of the page it takes you to.

Last week it was that the Conference Board’s Consumer Confidence Index plunged sharply in February; New Home Sales plunged 11% in January; Existing home sales fell 7.2%; Durable Goods Orders ex aircraft orders fell 0.6%; and unemployment claims rose 22,000 last week, the second straight weekly rise. But the revision of 4th quarter GDP to 5.9% GDP growth from 5.7% was a positive, exactly in line with economists’ consensus estimate.

This week it has been that consumer incomes rose 0.1% in January, the smallest rise in four months, while spending rose 0.5%, the highest pace since May, 2008. The ISM Mfg index declined to 56.5 in February from 58.4 in January. And Construction Spending fell again in January, down 0.6%. The ADP employment report was that only 20,000 jobs were lost in February, but the last report (for January), which showed only 22,000 jobs were lost in January was revised to a loss of 60,000 jobs. The ISM non-mfg index (services) rose to 53 from 50.5 Any number above 50 indicates expansion, below 50 indicates contraction. The market took Wednesday afternoon’s Fed Beige Book as negative as it implied the economic recovery is going to be slow.

Yesterday, the reports were mixed, with new unemployment claims declining a big 29,000 last week, and U.S. Factory Orders rising 1.7% in January. But Pending Home Sales reinforced the concerns about the housing industry by declining 7.6% in January.

And this morning it was The Big One, the BLS Employment Report for February, which showed only 36,000 jobs lost in February, and that the unemployment rate remained at 9.7%, both better than forecasts. And that has the early morning indicators up quite positively.

Our pre-open indicators are pointing to the Dow being up 70 points or so in the early going.

Stock Market Patterns.

The ‘Monthly Strength Period’ was due to begin last Friday and to end yesterday. And the pattern held true to its history.

The next weekly pattern is that next week is the week before this month’s options expirations week, and the week before tends to be negative.

Interesting Charts of the Morning.

Oil headed for $90 a barrel?

Please scroll down to see recent charts and commentaries.

To read my newspaper column from last weekend ‘Is the Stock Market Saying the Economy Will Remain Strong?’ click here! It will be replaced with this weekend’s column later today.

NOTE: Although tomorrow is Saturday and markets are closed I will be back in the morning with a wrap up of today’s market and this week’s, and an outlook for Monday and next week.

SUBSCRIBERS: There will be a Special Report on your website this weekend. There is an updated intermediate-term ‘Market Signals, Charts, and Recommendations’ report, and a hotline, on your website from Wednesday evening. The next issue of the newsletter will be out next Wednesday.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term signals and market moves that are most important to investors. So, please consider a subscription to our independent research and recommendations. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my latest book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information.