Saturday, August 03, 2013

Overall Numbers Week


- Jobs report continues a 'new tradition' of weak overall numbers, bad quality, and terrible internals.
- Stocks overcome bad jobs and weak personal income, pull a low to high intraday move.

It was not a beauty of a session, but stocks did pull off a low to high intraday move after starting lower on a jobs report that the media call disappointing and that we call appropriate for the US economy and regulatory scheme in place.

SP500 2.80, 0.16%
NASDAQ 13.85, 0.38%
DJ30 30.34, 0.19%
SP400 -0.31%
SOX -0.66%

Back to jobs. Of course there are those such as Mr. Posner formerly of the Fed who said it was 'mixed' with a decent household number and a weak non-farm or 'establishment' number. Perhaps that is why the Fed is so bumbling: if one of its brains thinks this was mixed there is a problem at the Fed.

What about the household survey? It says about 200K jobs were added in July and the unemployment rate fell to 7.4% when 7.5% was expected after June's 7.6%. Why? Participation was backsliding to 63.4% from 63.5%. Those not in the labor force rose 89,957 while the workforce fell 37K. U6 is still in the 14% range (those underemployed due to the economy). Of the jobs created, 35% were full-time (92K). I suppose that is better than June where full time jobs FELL 240K. Stellar Mr. Posner.

As for the other numbers, it is truly sad.

162K versus 175K expected versus 188K June (revised down from 195K).
Earnings: -0.1% versus 0.2% expected versus 0.4% prior Work week: 34.4 versus 34.5 expected versus 34.5 June

Another truly low number. Downward revisions after touted upward revisions the prior month. Seems gravity is pulling the numbers back to reality As Hal said in 'Cliffhanger,' gravity is a b***h.

What about the hourly earnings drop? More indication of the part-time status of workers and the poor quality of jobs. When the vast majority of your jobs are in the low end service industry, wages overall are dragged lower.

Example: Waiters/Bartenders gained 246.5K jobs. Manufacturing: 24K jobs.

The work week? More evidence of the part-time transformation of the US workforce. The workweek has never recovered in this recession and now it is falling again as more jobs are part-time to get below the 30 hour healthcare law cutoff level.

But there is more. Those in the youngest bracket got no job growth. The 25 to 54 demographic, the strongest earning power group, pulled in just 15K jobs! 55 to 69 got the lion's share at 60% of the jobs. Wal-Market greeter syndrome.

Indeed, of the 953,000 jobs created in 2013, a massive 731K were part-time! 77% of the jobs created are part-time!

I asked earlier and I ask again: what is different in this 'recovery' that would cause such a massive shift to part-time from full-time. I mean the big companies have the money; they were favored in stimulus and policies geared to make the US an 'export nation' just like those who used to sell to the US when we were the unquestioned economic power. They are not hiring and have not been hiring. Those that are obviously are hiring part-time.

The administration denies it, but the healthcare law is a huge factor in the part-time. In the overall jobs picture that is just one of the factors. Higher taxes, uncertain costs, massive regulations from EPA to health services with SWAT raids from the EPA on Gibson guitar.

But, you say, the ISM jumped up to 55+ in July so manufacturing is doing fine. Well, it is the same as all other industries: manufacturing is producing for the oil industry that is booming, and it is hiring some people, but even so it could only muster 24K jobs in July. Manufacturing is just not as big of a part of the US economy as it was, and certainly not big enough to support the kind of hiring in the service industry (retail, restaurants). Thus the 10:1 hiring ratio of just waiters and bartenders compared to manufacturing.

I don't mean to bad mouth the economy or talk it down. I just relay the facts that are there and chronicle the obvious denial of the massive restructuring of our jobs force in the US. We have talked about jobs quality for two years now and it is just now catching on in the mainstream as everyone is told jobs are great and the economy is recovering, yet most people in the US do not feel it. The WTF syndrome.

What would change the way companies hire? What would cause companies to totally retool their methodology of its workforce? Regulation and tax policy. The past five years detail a textbook case of how regulatory and tax policy change long-entrenched methodologies. I think only the most ideological would believe that the changes are for the good.

The administration may think things are better; I heard the White House economic advisor today act as if this report was great and that the US was just forging ahead in a flourishing recovery. Of course the numbers are better after trillions in QE money printing. 1.5% is about the best you can do with that kind of money printing. what if you didn't have that? Great Depression 2. What if we didn't have the massive increase in regulations, healthcare law, higher taxes, massive transfer payments to the new class of permanent non-working citizens and those trillions? A 7% GDP and, of course, huge inflation. Take away the overstimulation and you have another great US recovery.

That, however, will NEVER happen in the current environment, and the changing of the US jobs force is only going to cement that into the foundation of our economy. For example, the immigration bill has buried in it a section that eliminates bringing foreign professionals here to act as consultants and contract workers that small and mid-sized companies utilize quite frequently. Why? Because those compete with the businesses of giants such as IBM who want companies to use their services that are, surprise, frequently handled by their overseas operations. IBM lobbied heavily to get this inserted and then lobbied several senators such as Senator McCain (IBM has big presence in AZ) to get on board. He did. Also Flake from Arizona as well who pushed this bill hard, something of a mystery as to why for those in Arizona. Now they know why.

This is just an example of how REGULATIONS impact our jobs here in the US as well as the ability of small and midcap businesses to compete with the big guys who get the benefits from the regulations because they have the lobbyists. Sorry for the long discussion; sometimes the audacity of these actions just makes you mad.


Anyway, that is a LONG WAY from the Friday market action. It was a solid day after the surge, particularly given the weak jobs number and the post-surge hangover. Some of the odds makers have taper now in late 2013 or early 2014! Frankly, I see nothing in this report that changes the Fed's position. Indeed, even though the unemployment number faded because of more people out of the workforce, again, the Fed has not differentiated in the past as to the cause, just the final number. So it is still September to us, and that, down the road, sets up a possible disappointment.

For now the market continues its rally, or so it looks, after the lateral consolidation, the iffy Wednesday, then the strong Thursday. Whether it surges further from here or tests a bit depends upon the big money funds and how much they still have to put to work.

We didn't buy anything on Friday, instead managing positions with some trailing stops to stay focused on stocks in position to surge for us near term. With this market on a run, that is the way you have to play it, and we will continue to do that this coming week.



With the weaker jobs report bonds sold off again as they continue playing ping-pong this past week.

Dollar weaker: 1.3278 versus 1.3215

Bonds rallied back on weaker jobs: 2.60% versus 2.69%

Oil faded some: 106.94, -0.94

Gold flat: 1310.50, -0.30



Stats: +13.84 points (0%) to close at 3689.59
Volume: 1.666B (-9.21%)

Up Volume: 1.013B (-387M)
Down Volume: 627M (+186.18M)

A/D and Hi/Lo: Decliners led 1.15 to 1
Previous Session: Advancers led 2.52 to 1

New Highs: 252 (-66)
New Lows: 34 (+23)

Stats: +2.8 points (0%) to close at 1709.67
NYSE Volume: 613M (-12.93%)

A/D and Hi/Lo: Advancers led 1.14 to 1
Previous Session: Advancers led 1.65 to 1

New Highs: 329 (-267)
New Lows: 160 (-40)

Stats: +30.34 points (0%) to close at 15658.36


VIX: 11.98; -0.96
VXN: 12.77; -1.11
VXO: 11.19; -1.52

Put/Call Ratio (CBOE): 0.88; +0.03

Bulls and Bears:

Bulls faded just a bit while bears again held basically steady as both sides wait out the consolidation in the market after that last run. Good break upside Thursday in the midst of the caution.

Bulls: 48.4% versus 51.5% versus 52.1% versus 46.9% versus 43.8% versus 41.7% versus 46.8% versus 43.8% versus 45.8% versus 52.1% versus 54.2% versus 52.1% versus 47.9% versus 44.3% versus 47.4% versus 50.5%.

Background: Undercut 35%, the threshold for bullishness, in early June. As noted, hit 34% in early June. It did its job and the market is on the rally. Hard drop to 34 from 39.3% as economic reality and a choppy stock market hit. Off the 55+ level hit in late February. That was the highest level since April and May of 2011, the peak of the post-bear market high. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 19.6% versus 19.6% versus 19.8% versus 22.9% versus 25.0% versus 21.9% versus 22.9% versus 20.8% versus 19.8% versus 19.8% versus 19.8% versus 18.8% versus 19.6% versus 20.6% versus 20.6% versus 19.4% versus 19.6% versus 18.6% versus 18.8% versus 21.1% versus 21.1% versus 22.1% versus 21.1% versus 21.1% versus 22.3% versus 22.3% versus 23.4% versus 24.5% versus 24.5% versus 23.4% versus 25.5% versus 27.7% versus 27.7% versus 28.7% versus 27.7%.

Summary: Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.

Support and resistance

NASDAQ: Closed at 3689.59

Resistance: Next major resistance is around 4100 as NASDAQ hits 13 year highs

3658 is the upper channel line for the November 2012 to present uptrend.
The July 2013 intraday high at 3625
The 10 day EMA at 3627
3577 is the November 2012 up trendline
3532 is the May intraday high
3521 is the August 2000 low.
3502 is the May 2013 closing high
The 50 day EMA at 3510
The 2011 up trendline at 3312
3295 is the June 2013 low selloff
The 200 day SMA at 3235
3227 is the April 2000 intraday low
3197 is the September 2012 post-bear market high
3171 is the October intraday high

S&P 500: Closed at 1709.67

The November up trendline at 1712

1687 is the May high and post-bear market high
The 10 day EMA at 1692
1654 is the June 2013 peak
The 50 day EMA at 1653
1576 from October 2007, the prior all-time high
1569.48 is the 78% Fibonacci retracement of the April to May 2013 run
1560 is the June 2013 reversal low
1556 from July 2007
1541 is the April 2013 closing low in that pullback inside the uptrend
1539 from June 2007
The 200 day SMA at 1537
1531 is the recent high
1499 from January 2008
1475 is the September 2012 high
1471 is the October 2012 intraday high
1466 is the September 2012 closing peak and rally closing high
1440 from November 2007 closing lows

Dow: Closed at 15,658.36

The November up trendline at 15,920

15,542 is the May 2013 intraday high
The 20 day EMA at 15,464
15,318 is the June closing high
The 50 day EMA at 15,266
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,551 is the June 2013 intraday low on the selloff
The 200 day SMA at 14,234
14,198 from the October 2007 high
14,149 is the February 2013 high
14,022 from 7-07 peak
14,010 from the early February 2013 consolidation

Economic Calendar

July 29 - Monday
Pending Home Sales, June (10:00): -0.4% actual versus -1.7% expected, 5.8% prior (revised from 6.7%)

July 30 - Tuesday
Case-Shiller 20-city, May (9:00): 12.2% actual versus 10.5% expected, 12.1% prior
Consumer Confidence, July (10:00): 80.3 actual versus 81.6 expected, 82.1 prior (revised from 81.4)

July 31 - Wednesday
MBA Mortgage Index, 07/27 (7:00): -3.7% actual versus -1.2% prior
ADP Employment Change, July (8:15): 200K actual versus 175K expected, 198K prior (revised from 188K)
GDP-Adv., Q2 (8:30): 1.7% actual versus 1.1% expected, 1.1% prior (revised from 1.8%)
Chain Deflator-Adv., Q2 (8:30): 0.7% actual versus 1.2% expected, 1.3% prior (revised from 1.2%)
Employment Cost Index, Q2 (8:30): 0.5% actual versus 0.4% expected, 0.5% prior (revised from 0.3%)
Chicago PMI, July (9:45): 52.3 actual versus 51.5 expected, 51.6 prior
Crude Inventories, 07/27 (10:30): 0.431M actual versus -2.825M prior
FOMC Rate Decision, July (14:00): 0.25% actual versus 0.25% expected, 0.25% prior

August 1 - Thursday
Challenger Job Cuts, July (7:30): 2.3% actual versus 4.8% prior
Initial Claims, 07/27 (8:30): 326K actual versus 345K expected, 345K prior (revised from 343K)
Continuing Claims, 07/20 (8:30): 2951K actual versus 2995K expected, 3003K prior (revised from 2997K)
ISM Index, July (10:00): 55.4 actual versus 51.5 expected, 50.9 prior
Construction Spending, June (10:00): -0.6% actual versus 0.2% expected, 1.3% prior (revised from 0.5%)
Natural Gas Inventor, 07/27 (10:30): 59 bcf actual versus 41 bcf prior
Auto Sales, July (14:00): 5.7M prior
Truck Sales, July (14:00): 6.8M prior

August 2 - Friday
Nonfarm Payrolls, July (8:30): 162K actual versus 175K expected, 188K prior (revised from 195K)
Nonfarm Private Payr, July (8:30): 161K actual versus 195K expected, 196K prior (revised from 202K)
Unemployment Rate, July (8:30): 7.4% actual versus 7.5% expected, 7.6% prior
Hourly Earnings, July (8:30): -0.1% actual versus 0.2% expected, 0.4% prior
Average Workweek, July (8:30): 34.4 actual versus 34.5 expected, 34.5 prior
Personal Income, June (8:30): 0.3% actual versus 0.5% expected, 0.4% prior (revised from 0.5%)
Personal Spending, June (8:30): 0.5% actual versus 0.4% expected, 0.2% prior (revised from 0.3%)
PCE Prices - Core, June (8:30): 0.2% actual versus 0.2% expected, 0.1% prior
Factory Orders, June (10:00): 1.5% actual versus 2.2% expected, 3.0% prior (revised from 2.1%)

August 5 - Monday
ISM Services, July (10:00): 53.2 expected, 52.2 prior

August 6 - Tuesday
Trade Balance, June (8:30): -$43.4B expected, -$45.0B prior

August 7 - Wednesday
MBA Mortgage Index, 08/03 (7:00): -3.7% prior
Crude Inventories, 08/03 (10:30): 0.431M prior
Consumer Credit, June (15:00): $16.0B expected, $19.6B prior

August 8 - Thursday
Initial Claims, 08/03 (8:30): 340K expected, 326K prior
Continuing Claims, 07/27 (8:30): 2975K expected, 2951K prior
Natural Gas Inventories, 08/03 (10:30): 59 bcf prior

August 9 - Friday
Wholesale Inventories, June (10:00): 0.4% expected, -0.5% prior

By: Jon Johnson, Editor
Copyright 2013 | All Rights Reserved

Jon Johnson is the Editor of The Daily at

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