- Jobs report tries to change the alter the status quo, fails.
- Stocks rally on the jobs weakness, then Putin torpedoes the move. At least stocks recovered the sharp losses.
- Jobs weak in number and in quality, unemployment rate masks the true issues.
- Looking for leaders to finish setting up to help SP500, DJ30 join NASDAQ and SOX.
Weak jobs tries to break the market upside, comes up short.
Thursday we opined that a jobs report at the extreme, strong or weak, could work to break the indices from the resistance they had bumped on the week. NASDAQ and SOX rallied nicely to next resistance while the rest of the market rallied, but not much, before hitting low resistance. The odds for a move on Friday were not great, but again, a report that moved investors could move the indices.
Jobs came in weaker than expected. As discussed in detail below, the revisions were killers, undermining the report The unemployment rate dropped two clicks to 7.3%, but that 'gain' was not really a gain based upon WHY it fell.
The market viewed the weakness as a positive, that the Fed might 'taper' its taper plans. Futures jumped, stocks opened higher. Maybe it was going to be a rather bizarre reaction to a weak jobs report that jogged the markets past resistance. Indeed, Rick Santelli, upon release of the numbers and the reaction of the markets, suggested the US was some kind of banana republic given we buy weak data on the hope of more printed money.
Stocks started upside, but as fast as they started they faded. The Fed may be inclined to taper its taper, but there is also the Syria issue and Vladamir Putin at the G-20 told reporters that is Syria was attacked, whoever did the attacking would have to deal with Russia.
Stocks plunged lower. Plunged. For a half hour they sold, but then the switch was thrown and the bids returned. Stocks rallied back up to the early highs and spent the rest of the day, almost, at those levels. A last hour selloff took more air out and closed the indices basically flat with DJ30 and SOX posting modest losses.
SP500 0.09, 0.01%
NASDAQ 1.23, 0.03%
DJ30 -14.98, -0.10%
So, after it looked as if the jobs report might go ahead and push the indices out of their doldrums ahead of the weekend, well, inertia took over and leaves the indices still to deal with the next resistance. NASDAQ and SOX actually moving well while SP500, DJ30, and SP400 bounced last week but only token bounces to low resistance levels.
Jobs report disappoints on all fronts even as unemployment falls to 7.3%.
Improving, kind of, for all the wrong reasons. August non-farm payrolls missed expectations by 8K (169K versus 177K), but it was the dad-blamed revisions that hurt:
July: -58K as manufacturing dumped 22K MORE jobs than originally reported.
But, no need to fear. The unemployment rate fell to 7.3% from 7.4%, and that was a beat.
The Administration's Secretary of Labor dutifully pronounced that the 'steady recovery' continued, though, of course, not as fast as our benevolent King-President wants. So, by golly, Congress should go out and pass the President's middle class savior spending package consisting of, of course, road projects, bridge projects, this project, that project, etc.
Those never work. Fix a bridge. Then what do the workers do? That didn't create any lasting jobs. We tried it in 2009 and into 2010. 2010 was the zenith of the recovery and it was pathetic with just a couple of quarters, not even back to back, of 4% GDP growth. The economy has 'cooled' since then, cooling almost to stall speed. But for everyone else in the world looking so crappy we would look crappy. By our own standards (now just historical sadly) our economy is crappy regardless of what other countries are doing.
But Jon, you say, there ARE more jobs. The unemployment rate IS falling. Really?
Unemployment: 7.3% or 11.4%?
The reason the rate fell is the same one: fewer people in the workforce looking for jobs. The participation rate fell to 63.2%, the lowest since our friend Jimmy Carter was destroying the US economy back in August 1978. That is a whopping decrease from 63.4%. Carter would be proud of our current President.
Key stat: 516,000 people LEFT the workforce in August, pushing the total not in the workforce to a staggering 90.5M! We need more food stamps! More college loans to inflate college prices even more so our kids can graduate and go to work at $14.50/hour jobs working 27.4 hours per week! Get to work Mr. President!
Now the Labor Secretary pointed out that the U6 employment number fell to 13.7% from almost 14%. Those are the underemployed due to economic conditions. You know what is going on there? They are giving up, tired of working crappy jobs that pay little and are dead ends. They are opting out, quitting, collecting unemployment and whatever benefits they can. They are pushing the 'left the workforce' stat through the rough as noted above. You cannot be underemployed, at least how the government counts it, if you just stop working.
If you use the historical average of workforce participation at roughly 65%, the unemployment rate would be a whopping 11.4%, up from 11.2% in July. Now, Mr. Labor Secretary, is THAT a trend you feel is a good one to keep in place?
More Jobs: Love those low-pay, low hour jobs.
Our economy has shifted over the past six years from a creator of breadwinner, well-paying jobs to a creator of low-pay, low-skill jobs. The President talks of millions of jobs created and 800K just this year. That isn't even 200K per month. Quite the statistic to brag about.
But it is worse. The jobs the US is creating far and away predominant in the low-pay, and now becoming low-hours worked, sectors. Retail and hospitality make up 70% of that market. That is the burgeoning sector of jobs growth. At approximately $14.50/hour, it is not where you want to spend the prime of your career.
Yet, that is where the bulk of our jobs are created. In August 44K retail jobs dwarfed other sectors. They go to the 50+ age group, the 'Wal-Mart Greeter Generation' as I term it. Damn waste of knowledge and talent, and a damn shame they have to do it. But then again, we all may be doing that before this is over . . .
Lower hours worked.
Not only are the bulk of the jobs low pay, but the bulk are also low hours. The low-wage sectors, the fastest growing mind you, are also logging lower and lower hours worked. In July, the last figures available, the workweek fell to 27.4 hours, the lowest ever recorded for this group. With Obamacare hitting any employers with 50+ employees who work 30 hours or more per week, it behooves employers to cut hours worked and if need be, hire more workers.
That is what has happened. The lion's share of the new jobs created in 2013 are at the low end pay scale and the reason for the hiring 'bonanza' in that segment is they need more workers because they cannot let existing workers log more than 30 hours per week. So, hire more workers and EVERYONE works less hours. In 2013, payrolls are up 3 times the hours worked. There you have it.
Perhaps the delay of the implementation of the employer mandate will reverse this, but I doubt it. It was a one-year reprieve. Why go back to the old ways when you know the law is coming? Just keep in place what you have now and then you are ready without incurring more costs associated with switching back and then having to switch again.
Dollar lost ground: 1.3178 versus 1.3121 euro.
Bonds rallied back: 2.92% versus 2.98% 10 year.
Oil rebounded: 110.53, +2.16
Gold recovered: 1386.70, +14.10
Stats: +1.23 points (+0.03%) to close at 3660.01
Volume: 1.701B (+11.03%)
Up Volume: 953.69M (-196.31M)
Down Volume: 747.59M (+366M)
A/D and Hi/Lo: Decliners led 1.09 to 1
Previous Session: Advancers led 1.51 to 1
New Highs: 105 (-13)
New Lows: 19 (-3)
Stats: +0.09 points (+0.01%) to close at 1655.17
NYSE Volume: 615M (+8.66%)
A/D and Hi/Lo: Advancers led 1.63 to 1
Previous Session: Decliners led 1.06 to 1
New Highs: 127 (+13)
New Lows: 110 (-48)
Stats: -14.98 points (-0.1%) to close at 14922.5
Closed out the week with the gains intact, but unable to really change the needle on the NYSE indices.
SP500: Big doji at the 50 day EMA Friday, still with a rally on the rally but also unable to break the trend lower from early August. Decision time this week for the large caps, i.e. do they follow NASDAQ and SOX higher? Can the latter two lead higher?
NASDAQ: held the 50 day EMA the prior week and rallied off of it last week. Made it to the November trendline on the Friday high, then faded some. Still trending higher, the strongest of the indices, and it is up to NASDAQ to continue the trend higher. Up for a week and usually that means a test to rest, but NASDAQ doesn't really have any room to test and keep things moving higher.
DJ30: a second doji just below the 20 day EMA as DJ30 continues to look very toppy though near term it is building some momentum for a bounce higher.
SP400: Still weak, tapping the 50 day EMA on the Friday high then fading to a big doji. Bounced on the week but remains below resistance and looks like a bear flag, similar to SP500.
RUTX: Trying to improve and bridge to NASDAQ and SOX. Closed over the 50 day EMA after breaking it Thursday. Not bad, working in a lateral range the past three weeks, holding the May high as it does. If it can join upside, that is very good for the market.
SOX: Excellent break higher last week took SOX through the 2011 peak. Friday it tested the move, but managed to hold that key level. Very important to for SOX to hold this general level on a test and then break higher once more. It can still form a head and shoulders as it is right at the May peak that could turn into a left shoulder. Important point indeed.
Energy is picking up, e.g. HAL, SLB, KEG. Not across the board but a big help to SP500.
Internet remain strong: YNDX, LNKD, FB, NTES, SINA.
Techs are working of course: AAPL in a nice base. FNSR is flying in the networking. STX is trying to turn. Chips are aiding as well: AMCC, AFOP, ALTR, BRCM is turning as well.
VIX: 15.88; -0.73
VXN: 16.77; -1.12
VXO: 15.57; -0.96
Put/Call Ratio (CBOE): 0.77; +0.02
Bulls and Bears:
After the big decline in bulls and jump in bears, the moved moderated with just 0.1% changes. Taking a breather after starting a serious convergence the prior week.
Bulls: 37.1 versus 38.1% versus 43.3%. Diving below the early July, late June levels. 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: Last undercut 35%, the threshold for bullishness, in early June 2012.
Bears: 23.7 versus 23.8% versus 21.6%. Finally breaking free from the 20 level that held for three weeks, and now matching the highs from late June and early July. Starting to get there but needs to jump toward 30.
Background: 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.
Stocks start the week facing resistance brought about by a week of gains. That is typically not a bad scenario in a bull market as the market rallies to resistance, takes a breather, then takes it out.
Right now the market is still split with NASDAQ and SOX leading but facing resistance from their good moves, with NASDAQ continuing as the only index not to break its uptrend. RUTX is in the middle, trying to make it across to the leading indices. SP500, DJ30, and SP400 look weak, bouncing back up but in bear flags. The latter three have a lot to prove. Heck, even NASDAQ has a lot to prove.
With the indices unable to hold initial moves after a weak jobs report, it is somewhat clear investors are accepting the Fed will taper. They are accepting it without tanking the market, at least for now. How DJ30, SP500 and SP400 react this week tells just how enthusiastic that acceptance is.
That still does not guarantee a break higher from this resistance. Even so, we like the patterns that continue to develop in the market. Internet still leads, techs are doing well, chips are stepping up, even some energy and commodities are turning. With leadership forming up the market has a shot because it has fresh legs coming in. AAPL is set to breakout and if it does then the market has a big component to help NASDAQ head upside.
This week we will see some of the plays we have try to finish a test or put in a short test as the indices bump resistance and attempt to work through. We want to see those stocks break upside, and if they do then we, of course, step in. Some pretty bearish index patterns on NYSE and it will take leadership to turn them. Makes for an interesting week.
Support and resistance
NASDAQ: Closed at 3660.01
3680 is the November 2012 up trendline
3694 is the August high and the post-bear market high.
3755 is the upper channel line for the November 2012 to present uptrend.
Next major resistance is around 4100 as NASDAQ hits 13 year highs
The July 2013 intraday high at 3625
The 50 day EMA at 3586
3532 is the May intraday high
3521 is the August 2000 low.
3502 is the May 2013 closing high
The 2011 up trendline at 3360
The 200 day SMA at 3315
3295 is the June 2013 low selloff
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 1655.17
The 50 day EMA at 1656
1657 is the late August upper gap point
1687 is the May high and post-bear market high
1710 is the August 2013 peak
1654 is the June 2013 peak
1627 is the August 2013 low
1576 from October 2007, the prior all-time high
1573 is the June 2013 closing low
1569.48 is the 78% Fibonacci retracement of the April to May 2013 run
The 200 day SMA at 1568
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
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 14,922.50
The 20 day EMA at 15,019
15,050 from the August 2013 interim recovery high
The 50 day EMA at 15,131
15,318 is the June closing high
15,542 is the May 2013 intraday high
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 (14,659 closing)
The 200 day SMA at 14,479
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
September 3 - Tuesday
ISM Index, August (10:00): 55.7 actual versus 53.6 expected, 55.4 prior (no revisions)
Construction Spending, July (10:00): 0.6% actual versus 0.5% expected, 0.0% prior (revised from -0.6%)
September 4 - Wednesday
MBA Mortgage Index, 08/31 (7:00): -2.5% prior
Trade Balance, July (8:30): -$38.2B expected, -$34.2B prior
Auto Sales, August (14:00): 5.6M prior
Truck Sales, August (14:00): 6.8M prior
September 5 - Thursday
Challenger Job Cuts, August (7:30): 56.5% actual versus 2.3% prior
ADP Employment Change, August (8:15): 176K actual versus 180K expected, 198K prior (revised from 200K)
Initial Claims, 08/31 (8:30): 323K actual versus 333K expected, 332K prior (revised from 331K)
Continuing Claims, 08/24 (8:30): 2951K actual versus 2977K expected, 2994K prior (revised from 2989K)
Productivity-Rev., Q2 (8:30): 2.3% actual versus 1.5% expected, 0.9% prior
Unit Labor Costs, Q2 (8:30): 0.0% actual versus 1.0% expected, 1.4% prior
Factory Orders, July (10:00): -2.4% actual versus -3.7% expected, 1.6% prior (revised from 1.5%)
ISM Services, August (10:00): 58.6 actual versus 54.5 expected, 56.0 prior
Natural Gas Inventories, 08/31 (10:30): 58 bcf actual versus 67 bcf prior
Crude Inventories, 08/31 (11:00): -1.836M actual versus 2.986M prior
September 6 - Friday
Nonfarm Payrolls, August (8:30): 169K actual versus 177K expected, 104K prior (revised from 162K)
Nonfarm Private Payr, August (8:30): 152K actual versus 180K expected, 127K prior (revised from 161K)
Unemployment Rate, August (8:30): 7.3% actual versus 7.4% expected, 7.4% prior
Hourly Earnings, August (8:30): 0.2% actual versus 0.2% expected, 0.0% prior (revised from -0.1%)
Average Workweek, August (8:30): 34.5 actual versus 34.5 expected, 34.4 prior
September 9 - Monday
Consumer Credit, July (15:00): $13.0B expected, $13.8B prior
September 10 - Tuesday
JOLTS - Job Openings, July (10:00): 3.936M prior
September 11 - Wednesday
MBA Mortgage Index, 09/07 (7:00): 1.3% prior
Wholesale Inventories, July (10:00): 0.2% expected, -0.2% prior
Crude Inventories, 09/07 (10:30): -1.836M prior
September 12 - Thursday
Initial Claims, 09/07 (8:30): 327K expected, 323K prior
Continuing Claims, 08/31 (8:30): 2975K expected, 2951K prior
Export Prices ex-ag., August (8:30): 0.0% prior
Import Prices ex-oil, August (8:30): -0.4% prior
Natural Gas Inventories, 09/07 (10:30): 58 bcf prior
Treasury Budget, August (14:00): -$190.5B prior
September 13 - Friday
Retail Sales, August (8:30): 0.4% expected, 0.2% prior
Retail Sales ex-auto, August (8:30): 0.3% expected, 0.5% prior
PPI, August (8:30): 0.2% expected, 0.0% prior
Core PPI, August (8:30): 0.1% expected, 0.1% prior
Michigan Sentiment - Preliminary, September (9:55): 82.0 expected, 82.1 prior
Business Inventories, July (10:00): 0.3% expected, 0.0% prior
By: Jon Johnson, Editor
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