Jobs Headlines Trumpeted, Reality Still Harsh

MARKET SUMMARY

- Jobs headlines trumpeted, reality still harsh, stocks and bonds not buying it.
- Looks like a few make up jobs as participation crumbles, 1M added out to the out of workforce category, wages still stink.
- Since the bottom of the recession, as many have left the workforce as jobs created (or saved?).
- Underwhelming response from stocks leaves indices in the same place, and that is not necessarily good.

You would think that with 288K jobs and an unemployment rate tumbling to 6.3% from 6.6% that a stock market that has seen the worst economic recovery in US history, Great Depression included, would be loaded for bear, ready to scream out of the starting gate (as I mix my metaphors). SP500 and DJ30 are both within spitting distance of new highs and surely this news would blast them off to new runs and new heights.

It didn't. The large cap indices were negative, the smaller caps were barely positive. Status quo Thursday was the status quo Friday even with a reportedly barnburner of a jobs report.

SP500 -2.54, -0.13%
NASDAQ -3.55, -0.09%
DJ30 -45.98, -0.28%
SP400 0.22%
RUTX 0.25%
SOX -0.28%

Volume lower: NYSE -3%, NASDAQ -10%.

A/D: 1.3:1 NYSE, flat NASDAQ


Jobs touted as great but the report shows the decay in the US employment market.

As I have said before, pseudo-quoting John Belushi in 'Animal House,' what the **** happened to the American economy I used to know? 288K jobs 'great?' 6.3% unemployment great? The trend seems right, but we are 5 years into a recovery and there are as many asterisks besides the numbers as jobs purportedly created. Perhaps THAT is why the market went nowhere on such a 'great' report.

The company line was Russia made the market do it. Fear of Russian/Ukraine escalating conflict supposedly kept investors at bay, jacking up bond prices. Sure, that was it. Then WHY did futures initially jump on the jobs report headlines and then quickly dissipate that bounce when the details were read?

Many said the rise to 288K (210K expected) was simply catch-up from Q1 and its bad weather. Jobs that would have been filled were delayed until the weather improved. Somewhat plausible. If that IS the case, then the jobs market is STILL TERRIBLE; the 288K is the aggregate of jobs not filled during the polar vortex as well as jobs for April? As Jed Clampett would say on 'The Beverly Hillbillies,' pitiful.

The details were downright discouraging.

The 6.3% unemployment was achieved by 988,000 people leaving the workforce altogether. Some said the unemployment rate 'tumbled.' If anything tumbled it was the participation rate, falling to 62.8% from 63.2%, tied with the all-time low. That shows the March bounce was the outrider when participation moved above 63%.

Further, the unadjusted numbers show the number of jobs actually FELL 73,000. Huge birth/death adjustment upside, increasing jobs reported.

Average Hourly Wage: 0.0% versus -0.1% March. Simply no traction, but that will be used by the Administration to push for a higher minimum wage. Cannot create well paying jobs so raise the salary of those working traditionally part-time, stepping stone, learn how to work jobs. Of course that money is just pulled out of the air. Sure.

Who gets the jobs? Again it goes to the 55 and over crowd, the new jobs swingers. The 54 to 16 worker demographics LOST net jobs yet again. While the Administration says we are just a few thousand jobs below recovering every job lost in the Depression, the 24 to 54 group, the workers in their prime, are STILL 2.8M JOBS BELOW PRE-RECESSION LEVELS.

Kicker: Since February 2010, the bottom of the depression, an average 172K jobs/month have been created. During that same time, 175K workers/month LEFT the workforce. Jobs created matched by people leaving the workforce. No wonder there remain 92M people not in the labor force. Holy crap.


1970's parallels.

I used to write about how this recovery or lack thereof paralleled the 1970's with the regulations, the lack of jobs, etc. It is now in many cases much worse because in 1980 we had the sense to change course and go back to pro-growth.

You may not remember or were not even born yet, but in the 1970's many said that the US experiment had a nice run but it was over. Capitalism just collapsed on its own accord as a society grew to a certain size. Our economic prowess was questioned thanks to an extended recession, exploding interest and inflation rates, no jobs . . . stagflation.

Our military might was questioned as we lost Viet Nam despite winning every battle. We simply did not have the will, and perhaps we should not have, to do what was necessary to win that war. It, however, cost us tens of thousands of lives, perhaps tragically because we would not do what was necessary to win.

In any event, the US was questioned on all fronts. It was over. No it wasn't. We just had the wrong policies. We were trying to dance with someone other than who brought us, i.e. capitalism, free markets, and individual liberty. When the restraints were removed, when regulations were rolled back, taxes cut, individual restrictions removed, the US economy went back to doing what capitalism and freedom do best: created new ideas, technologies, jobs, and increased our standard of living yet again.

Recently a Frenchman, no not the one from 'The Matrix Reloaded,' had a book published that says, again, capitalism cannot work, that you ultimately must raise taxes and have a big government as the inevitable path.

Well, perhaps he is correct in a way. Government WILL grow out of control if it is unrestrained. And for the past 60 years we have let our government grow unrestrained, turning over education, retirement, charity, etc. to the feds versus doing what he had done for our entire history, i.e. letting the locals handle local issues, letting DC handle defense and major infrastructure.

But, here is the rub. The REASON we have the troubles we have today, again a view our military is weakened, a certainty that our economy is weak, is because AGAIN we are letting government grow and take over every aspect of our lives. There is now even a bill that would allow the government to scan ALL of our communications looking for 'hate speech', whatever that is. The thought police from '1984' are here.

Indeed, if history shows ANYTHING, it is that the socialism and communism touted in the book (as it has been since its inception), have NEVER worked. They fail, or have a populace so beaten down that they accept the servitude. China had to loosen up and turn more capitalist or lose control of its citizens. I say that China's government is ultimately doomed as even now it is fighting a battle to keep the economy going to keep the populace happy. If it fails and there is a massive bubble pop, China could lose its grip.

This theme of 'capitalism is an aberration' comes up every 50 years or so. The sad thing is, capitalism BECAME the aberration because governments hemmed it in. Ancient Greece and many other societies were thrived on capitalism. It was the oppressive states that forced monarchies and emperors on others and stifled liberty and free enterprise.

That book is garbage, a rehash of the same old theories that history clearly shows do not work. Even if you can get communist, socialist, totalitarian, or other societies to work, you have to ask yourself is that the kind of system you want to live in? Most people today who are claiming they want to turn socialist, etc. would not like it one bit if we truly were that. I guess that is another negative effect of a federally run education system: a populace that does not really know what kind of government it has or should have.


THE MARKET

THE CHARTS

As noted, there was no change in the index charts. SP500, DJ30 still just below the prior all-time highs. the intraday action was not good but it was not terrible. Stalled on lower volume.

NASDAQ: Still below the 50 day EMA, still a weak pattern very much looking like a head and shoulders.

SP400: Midcaps again surged through the 50 day SMA and again gave it up, sporting a large candlestick doji. That leaves SP400 still weak, similar to the other

RUTX: Rallied to the 20 day EMA then reversed to close below the 10 day EMA. At the 200 day SMA, in position to bounce, but still mired at that level.

SOX: Still hugging the 50 day SMA and the trendline, but in position to make a break higher showing a nice tight doji.


Leadership:

Materials were not bad: LPX (lumber), CX (cement) were up.

Metals still looking good: AKS, MTL, FCX (copper).

Energy: Still solid, e.g. HAL, AXAS, GPOR

Still more defensive as growth continues to lag though electronics remain strong (MXWL, OVTI).


What we did.

We did pick up some basic stocks, e.g. AKS (steel) and AOS (water heaters, etc.). Pretty standard stuff but showing good patterns.


OTHER MARKETS

Euro/Dollar:

1.3875 versus 1.3865 versus 1.3868 versus 1.3814 versus 1.3851 versus 1.3839 versus 1.3831 versus 1.3817 versus 1.3805 versus 1.3794 versus 1.3815 versus 1.3815 versus 1.3814 versus 1.3820 versus 1.3883 versus 1.3886 euro versus 1.3855 versus 1.3797 versus 1.3742 versus 1.3701 versus 1.3712 versus 1.3760 versus 1.3794 versus 1.3779 versus 1.3752 versus 1.3748 versus 1.3788 versus 1.3823 versus 1.3842 versus 1.3794

Dollar/Yen:

102.24 versus 102.30 versus 102.22 versus 102.62 versus 102.49 versus 102.13 versus 102.32 versus 102.44 versus 102.61 versus 102.62 versus 102.44 versus 102.27 versus 101.80 versus 101.72 versus 101.43 versus 102.00 versus 101.70 versus 102.59 versus 103.10 versus 103.24 versus 103.92 versus 103.76 versus 103.68 versus 103.21 versus 102.81 versus 101.24 versus 101.99 versus 102.26 versus 102.25 versus 102.25


Bonds: Initially sold on jobs report, then surged.

10 year: 2.59% versus 2.67% versus 2.69% versus 2.70% versus 2.67% versus 2.68% versus 2.69% versus 2.73% versus 2.71% versus 2.72% versus 2.64% versus 2.62% versus 2.64% versus 2.62% versus 2.65% versus 2.69% versus 2.68% versus 2.70% versus 2.73% versus 2.79% versus 2.80% versus 2.75% versus 2.73% versus 2.71% versus 2.68% versus 2.70% versus 2.75% versus 2.73% versus 2.77%


Oil: 99.81, +0.33.


Gold: 1302.90, +20.30.


MARKET STATISTICS

NASDAQ
Stats: -3.55 points (-0.09%) to close at 4123.9
Volume: 1.821B (-10.25%)

Up Volume: 842.2M (-307.8M)
Down Volume: 970.11M (+113.25M)

A/D and Hi/Lo: Advancers led 1.03 to 1
Previous Session: Decliners led 1.12 to 1

New Highs: 44 (-19)
New Lows: 63 (-12)

S&P
Stats: -2.54 points (-0.13%) to close at 1881.14
NYSE Volume: 603M (-2.74%)

A/D and Hi/Lo: Advancers led 1.33 to 1
Previous Session: Advancers led 1.33 to 1

New Highs: 141 (-1)
New Lows: 64 (-19)

DJ30
Stats: -45.98 points (-0.28%) to close at 16512.89


SENTIMENT INDICATORS

VIX: 12.91; -0.34
VXN: 17.03; -0.12
VXO: 11.82; -0.57

Put/Call Ratio (CBOE): 0.95; +0.14

Bulls and Bears:

Bulls are leaping upside. Leaping. At 54.7% they top the recent high and are covering upside ground fast the past three weeks.

Bears fade a point: 20.6 versus 21.6 versus 20.6 versus 18.6.

Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.




Note the extreme bullishness: it was this high in 2007 at the crash, in early 2005 as well.

Bulls: 54.7 versus 51.6 versus 50.5
54.6% versus 50.5 versus 54.7% 52.0% 54.6% 53.5% 46.5% 41.8% 45.9% 53.1% 57.6 56.1 60.6% 61.6% 60.0% 58.2% 57.1% 55.7% 53.6% 52.6% 55.2% 52.6 49.5 42.3% 45.4 46.4% 44.3% 42.3% 37.1% 37.1% 38.1% 43.3%.

Background: Last undercut 35%, the threshold for bullishness, in early June 2012.

Bears: 20.6% versus 21.7% versus 20.6
18.6% 18.6% 17.5% 17.4% 15.1% 17.2% 17.2% 17.4% 17.4% 15.3% 15.1 15.3% 15.2% 15.2% 14.0 14.3 14.3% 14.4 15.5 15.5% 15.6% 16.5% 18.5 21.6% 20.6% 18.6% 20.6% 21.6% 22.7% 23.7% 23.8% 21.6%.

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.


NEXT WEEK

Perhaps it was the Russia/Ukraine issues as new violence sprang up. Perhaps the issues with the jobs report prevented any rally attempt; stocks did bounce but then gave up the bounce when all of the details were released and read. So, with Russia out there and Ukraine's actions the very thing Putin drew his red line for, then the likelihood of an engagement over the weekend is possible. Just as it was last weekend, right? I am, however, somewhat sadly more confident that Putin will act upon his red lines versus the US President.

In any event, stocks enter the weekend holding their relative position held all week, but that is not necessarily a positive as they have little traction and could do nothing in the wake of the jobs report. With the volatility seen the past two months and the lack of leadership, that again makes for an interesting week ahead given much of the economic news was released this week.

We are looking at pretty much and equal split of upside and downside. The market is still trying to work through increased volatility in the face of the FOMC taper announcement, taper commencement, and taper continuation. Pricing equities in a reduced stimulus environment and still questionable economic conditions is a process and a volatile one as we have seen. It is still in the process and the outcome is yet to be decided. Growth is lagging, large cap NYSE are at their highs but uncertain. Thus we will play good patterns as they present, but pare back gain expectations overall though we sure see some great individual returns, upside and downside.



SUPPORT AND RESISTANCE

NASDAQ: Closed at 4123.90

Resistance:
4131 is the March 2014 low
The 50 day EMA at 4155
4246.55 is the January 2014 peak
4280 is the lower November 2012 trendline
4277 is the March lower gap point
4289 is the July 2000 recovery high
4372 is the March 2014 high
4381 is the upper channel line for the November 2012 to present uptrend.

Support:
4104 is the lower gap point from 12/20/13
4070 is the series of highs from late November/early December
3991 is the prior November 2013 high and the post-bear market high.
The 200 day SMA at 3978
3968 is the February 2014 low
3855 is the November low
3819 is the early October high
3801 is the September 2013 high.
The October low at 3750
3697 is the August high and a prior post-bear market high in the recovery.


S&P 500: Closed at 1881.14

Resistance:
1883.57 is the prior all-time high hit in early March.
1897 is the all-time high hit in April 2014

Support:
1870 is the December 2012 up trendline
The 50 day EMA at 1857
The December and January highs at 1848
1822 is the lower trendline from 11/2012
The April 2014 low at 1814
1808 is the November and December 2013 twin peaks
The 200 day SMA at 1777
1775.22 is the October prior all-time high
1768 is the December 3013 low
1738 is the February 2014 low
1730 is the September 2013 peak
1710 is the August 2013 peak.
1698 to 1700 are the July and August interim highs
1687 is the May high and post-bear market high
1685 is the mid-August 2013 upper gap point
1657 is the late August upper gap point
1654 is the June 2013 peak
1646 is the October 2013 low just before the surge into early 2014
1627 is the August 2013 low


Dow: Closed at 16,512.89

Resistance:
16,589 is the December 2013 all-time high
16,632 is the April 2014 all-time high
16,724 is a lower trendline off the 11/2012 low

Support:
16,506 is the March 2014 peak
The 50 day EMA at 16,332
16,257 is the January 2014 low
16,179 is the November 2013 peak.
The 200 day SMA at 15,832
15,739 is the December 2013 low
15,696 is the September 2013 peak
15,659 is the August 2013 peak
15,542 is the May 2013 intraday high
15,340 is the February 2014 low
15,318 is the June closing high
15,050 from the August 2013 interim recovery high
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,762 is the August 2013 low
14,551 is the June 2013 intraday low on the selloff (14,659 closing)


Economic Calendar

May 2 - Friday
Nonfarm Payrolls, April (8:30): 288K actual versus 210K expected, 203K prior (revised from 192K)
Nonfarm Private Payr, April (8:30): 273K actual versus 205K expected, 202K prior (revised from 192K)
Unemployment Rate, April (8:30): 6.3% actual versus 6.6% expected, 6.7% prior
Hourly Earnings, April (8:30): 0.0% actual versus 0.2% expected, 0.1% prior (revised from 0.0%)
Average Workweek, April (8:30): 34.5 actual versus 34.5 expected, 34.5 prior
Factory Orders, March (10:00): 1.1% actual versus 1.6% expected, 1.5% prior (revised from 1.6%)

May 5 - Monday
ISM Services, April (10:00): 54.0 expected, 53.1 prior

May 6 - Tuesday
Trade Balance, March (8:30): -$42.5B expected, -$42.3B prior

May 7 - Wednesday
MBA Mortgage Index, 05/03 (7:00)
Productivity-Prel, Q1 (8:30): -1.2% expected, 1.8% prior
Unit Labor Costs, Q1 (8:30): 2.5% expected, -0.1% prior
Crude Inventories, 05/03 (10:30): 1.698M prior
Consumer Credit, March (15:00): $16.1B expected, $16.5B prior

May 8 - Thursday
Initial Claims, 05/03 (8:30): 325K expected, 344K prior
Continuing Claims, 04/26 (8:30): 2750K expected, 2771K prior
Natural Gas Inventor, 05/03 (10:30): 82 bcf prior

May 9 - Friday
Wholesale Inventorie, March (10:00): 1.0% expected, 0.5% prior
JOLTS - Job Openings, March (10:00): 4.173M prior

By: Jon Johnson, Editor
Copyright 2014 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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