- Good news, no good move: Stocks jump to open a second session, again fail to hold the move.
- ECB cuts rates, announces the pursuit of QE.
- ADP jobs fall short ahead of jobs report.
- ISM services jumps, again thanks to adjustments.
- Productivity falls but even as it does, wages fall. Something is just not right.
- Stocks fail to hold gains again, less than great action, but the indices continue to hold up.
QE goes continental. Stocks surge again, fail to hold the move again.
It is all the rage. Going QE. Look how it saved the US. From perhaps economic collapse. Surely from a strong recovery where everyone shares in the gains versus those at the top of the socioeconomic ladder. Europe doesn't have that worry: it already has a sharply bifurcated socioeconomic society. It will just make the rich relatively richer.
That was just what the western markets wanted, the EU emulating the US Fed. I used to sarcastically comment 'how European' US economic policies were. We are now so far toward the European side we have lapped the EU.
Futures, of course, surged on the news. They held the gains into the open and rallied into midmorning. ISM Services smoked expectations at 59.6, the highest since August 2005. Employment jumped to 57.1, the best since February 2006. Impressive beats.
Impressive, in an adjusted sort of way. Yes, once again a sentiment survey where respondents gave their purportedly honest answers to the questions, did not show gains, but instead, declines.
Those responding they expected 'higher employment' FELL to 22 from 26 in July and 29 in June. That is not an uptrend as the adjust numbers indicate.
New Orders were lower (63.8 VERSUS 64.9) but still at an elevated level. UNLESS, you look at the unadjusted, unaltered responses of the businesses polled. Those seeing 'higher orders' fell to 29 from 32 in July, 31 in June, and 36 in May. Again, this is a near term downtrend, not the uptrend the adjusted figures herald.
I still do not see, how, in the name of 'smoothing' to show a more 'accurate' picture of business views of the future that the actual responses of those polled are adjusted to what the pollster thinks the answers should have been.
Interestingly, US stocks peaked shortly after that news hit. They spent the rest of the session, outside of the last 45 minutes, selling. A late bounce kept SOX positive, but all indices sported another session of high to low action, squandering an upside open.
SP500 -3.07, -0.15%
NASDAQ -10.28, -0.22%
DJ30 -8.70, -0.05%
VOLUME: NYSE +1.5%, NASDAQ -4.5%. No heavy dumping though still elevated volume all around on this return to work after the summer.
A/D: NYSE -2:1, NASDAQ -3:2.
It wasn't the Black Death or anything like that. Indeed, the indices mostly held up just fine as DJ30, SP500 still hold near support, SP400 is at the 10 day EMA, and SOX was positive and at the top of the July range even if it did fade off the high. All the same action they have shown the past week, all working on a lateral consolidation more or less, all with something to prove but also not selling off.
NASDAQ and RUTX, the Wednesday laggards, lagged again, but even with another day of fairly impressive high to low intraday slumps, both of these indices are still at the 10 day EMA. Not what you would call a nasty reversal.
Big Names: As noted, GOOG jumped but faded. AAPL sold again. NFLX broke the 10 day EMA. PCLN fell to the 200 day SMA, completing its destiny. Not an impressive lot.
Financial: Still relatively solid with JPM holding the line over the 10 day EMA, C continuing the upside move. BAC is setting up nicely with a lateral move over the 10 day EMA.
Biotechs/drugs: Struggling again. CELG fell to the 10 day EMA on rising trade. BIIB crashed through the 20 day EMA; not a good move.
Internet-based: TRLA continued lower. VIPS tested the 50 day MA; not bad. YY jumped upside. A few good, most still struggling.
Chips: Some nice moves, e.g. NVDA, BRCM, CAMT. Some decent setups e.g. ATML. Solar not bad, e.g. JASO, FSLR.
There are still leaders, but as with the indices many are finding traction difficult. Perhaps this is just a hitch in otherwise solid moves. We will see, but with this action we have to keep watch on current positions so they don't turn on us.
Stats: -10.28 points (-0.22%) to close at 4562.29
Volume: 1.679B (-8.69%)
Up Volume: 751.88M (-7.42M)
Down Volume: 952.67M (-127.33M)
A/D and Hi/Lo: Decliners led 1.49 to 1
Previous Session: Decliners led 1.76 to 1
New Highs: 103 (-28)
New Lows: 47 (+10)
Stats: -3.07 points (-0.15%) to close at 1997.65
NYSE Volume: 627.3M (+1.55%)
Up Volume: 1.18B (-170M)
Down Volume: 1.85B (+430M)
A/D and Hi/Lo: Decliners led 1.99 to 1
Previous Session: Decliners led 1.15 to 1
New Highs: 154 (-32)
New Lows: 28 (+12)
Stats: -8.7 points (-0.05%) to close at 17069.58
VIX: 12.64; +0.28
VXN: 13.78; +0.22
VXO: 11.67; +0.52
Put/Call Ratio (CBOE): 0.97; -0.03
Bulls and Bears:
Bulls bounce sharply: 52.1% versus 49.5%
Bears flop below the 16 to 17 range that held: 15.1% versus 16.2%
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: 52.5% versus 49.5%
49.5% versus 46.4% versus 50.5% versus 55.6% versus 56.5% versus 56.6% versus 60.6% versus 57.6% versus 60.2% versus 61.4% versus 62.6% versus 62.2% versus 58.3% versus 57.2% versus 55.1 versus 55.7 versus 54.7 versus 51.6 versus 50.5 versus 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: 15.1% versus 16.2%
16.2% versus 16.2% versus 17.1% versus 16.2% versus 17.2% versus 15.1% versus 15.2% versus 16.1% versus 16.3% versus 17.2% versus 17.4% versus 17.3% versus 18.3% versus 19.4% versus 20.6% versus 19.7% versus 21.7% versus 20.6 versus 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.
Wages continue their decline and it is heralded as a great thing.
This is no plug for the minimum wage. Getting that out up front. This comment is about how policies are impacting wages. A recovery that is not really a recovery, or is but is so skewed in favor of a small group that most not only don't feel it, they are losing ground.
Q2 productivity first revision was released Thursday. It was lower at 2.3% from 2.5%. Less productive. Increasing productivity was blamed for fewer jobs and lower pay in jobs. Okay, so wages should have risen in Q2 if productivity is lower, right? Not.
Unit labor costs were negative (-0.1% versus +0.6% in the first read). That is the fourth negative quarter in 6 the last quarters. Okay lower costs, good for companies as profits improve with lower labor costs. How great for the economy!
What pushed labor costs lower: hourly compensation fell to 2.3 from 3.1. Productivity lower, hourly wages lower. That goes against even the President's somewhat narrow vision of what drives hiring and wages.
So, wages continue to decline and real wages inflation-adjusted are negative. 6 years of giving away money, giving big business all the breaks, transferring massive amounts of wealth via taxes and regulation (e.g. the ACA), and we get wages continuing to fall. The economy will not last with these trends no matter what the 'seasonally adjusted' (read 'doctored') headlines say.
The irony is, all of this Administration's stimulus has been geared, we are told, to increase demand from the middle and lower classes. It is actually eroding, indeed decimating, the very class the administration says it so wants to uplift. Why not just write some executive orders requiring hiring the middle class at higher wages? If all it takes is spending more, whether by printing or taxing those who its policies have so enriched), why not do it? Wouldn't be surprised . . .
Ahead of the Friday jobs report we didn't do much other than position maintenance. GOOG tried to put in a good move, and though it closed with a gain, it gave up a lot of the move; after four days upside we passed on entering new positions.
This is, after all, still not a great risk/reward level. There is still leadership setting up good patterns to move higher, the indices are not giving in, instead attempting lateral or similar consolidations, but the last run has been less than solid for the market as the rotation from one area to another is rapid and disjointed, and all but NASDAQ and SP500 have still not shown they can take out next resistance. Sitting on top of a 4 week move and bumping resistance is not the prime risk/reward entry point, and in viewing the market, we have to keep that in mind. There are upside plays for sure, but there are also more than a few downside setups given the rally to resistance.
After the jobs report perhaps the market shows its hand as to direction. Giving up two early upside moves engendered by good news is not a good indication. No breakdown as noted, but where the indices are now there is clearly more downside risk. Doesn't mean they sell, but it is simply something to factor in when determining what you want to buy and how much you choose to place at risk. We have upside plays and downside plays ready to go, and we will see if the jobs report tips the balance one way or another.
Have a great evening!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4572.57
4633 is the lower November 2012 trendline
The 10 day EMA at 4555
The 20 day EMA at 4519
4486 is the July 2014 high
The 50 day EMA at 4448
4372 is the March 2014 high
The August low at 4321
4289 is the July 2000 recovery high
4277 is the March lower gap point
4246.55 is the January 2014 peak. Key level.
The 200 day SMA at 4238
4131 is the March 2014 low
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.
3968 is the February 2014 low
3946 is the April 2014 intraday low
S&P 500: Closed at 1997.65
1991 is the July 2014 high
The 10 day EMA at 1994
1994 is the December 2012 up trendline
The 50 day EMA at 1965
1939 is the lower trendline from 11/2012
1905 is the August 2014 low
1902 from early May was the intraday all-time high.
1897 is the prior all-time high hit in April 2014
1883.57 is the early March high.
The 200 day SMA at 1882
The December and January highs at 1848
The April 2014 low at 1814
1808 is the November and December 2013 twin peaks
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
Dow: Closed at 17,069.58
17,152 is the mid-July post bear market high
17,068 is the early July 2014 peak
16,970 is the June 2014 former all-time high
16,946 is the June 2014 peak
The 10 day EMA at 17,035
The 50 day EMA at 16,869
16,736 is the penultimate all-time high from May 2014
16,341 is the May low
16,334 is the August 2014 low
16,632 is the April 2014 all-time high
16,589 is the December 2013 all-time high
16,506 is the March 2014 peak
The 200 day SMA at 16,462
16,257 is the January 2014 low
16,179 is the November 2013 peak.
15,739 is the December 2013 low
15,696 is the September 2013 peak
15,659 is the August 2013 peak
September 2 - Tuesday
ISM Index, August (10:00): 59.0 actual versus 57.0 expected, 57.1 prior
Construction Spending, July (10:00): 1.8% actual versus 1.0% expected, -0.9% prior (revised from -1.8%)
September 3 - Wednesday
MBA Mortgage Index, 08/30 (7:00): 0.2% actual versus 2.8% prior
Factory Orders, July (10:00): 10.5% actual versus 11.0% expected, 1.5% prior (revised from 1.1%)
Auto Sales, August (14:00): 5.8M prior
Truck Sales, August (14:00): 7.4M prior
September 4 - Thursday
Challenger Job Cuts, August (7:30): -20.7% actual versus 24.4% prior
ADP Employment Chang, August (8:15): 204K actual versus 220K expected, 212K prior (revised from 218K)
Initial Claims, 08/30 (8:30): 302K actual versus 300K expected, 298K prior
Continuing Claims, 08/23 (8:30): 2464K actual versus 2525K expected, 2528K prior (revised from 2527K)
Trade Balance, July (8:30): -$40.5B actual versus -$42.0B expected, -$40.8B prior (revised from -$41.5B)
Productivity-Rev., Q2 (8:30): 2.3% actual versus 2.6% expected, 2.5% prior
Unit Labor Costs, Q2 (8:30): -0.1% actual versus 0.5% expected, 0.6% prior
ISM Services, August (10:00): 59.6 actual versus 57.8 expected, 58.7 prior
Natural Gas Inventor, 08/30 (10:30): 79 bcf actual versus 75 bcf prior
Crude Inventories, 08/30 (11:00): -0.905M actual versus -2.070M prior
September 5 - Friday
Nonfarm Payrolls, August (8:30): 220K expected, 209K prior
Nonfarm Private Payr, August (8:30): 200K expected, 198K prior
Unemployment Rate, August (8:30): 6.1% expected, 6.2% prior
Hourly Earnings, August (8:30): 0.2% expected, 0.0% prior
Average Workweek, August (8:30): 34.5 expected, 34.5 prior
By: Jon Johnson, Editor
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