Jobs Report Touches the Right Buttons

MARKET SUMMARY

- Stocks continue the Thursday rebound as Jobs Report touches the right buttons.
- Large cap NYSE indices post nice gains, growth indices rally but patterns lag.
- Low paying jobs heralded in 'jobs recovery' that shows 4 of 5 jobs in the Wal-Mart greeter category.
- Drugs, Healthcare still outperforming in a rather defensive tone.
- New month for the month has taken its shot. Now we see if there is any left and if sellers take their shot.

It's not just the number of jobs, it's type of jobs.

Friday morning the headlines post-jobs report heralded a 'triple digit Dow futures move on jobs.' For the record, Dow futures were sharply higher, just below triple digits before the report's release as stocks continued the Thursday intraday reversal from another sharp decline. The news certainly didn't hurt as Dow futures did top triple digits after the news, but saying the jobs report caused triple digit gains is the same as saying a solo home run in the top of the ninth giving you a 5 run lead won the game; it prevented you from losing to a grand slam in the bottom of the ninth, but it didn't win the game.

September Non-Farm Payrolls: 248K versus 210K expected, 108K prior (from 142K)
Unemployment rate: 5.9% versus 6.1% expected, 6.1% prior
Surely jobs nirvana, surely an economic bonanza is here.

So with the jobs beat in the bank stocks opened higher. Yes, but they tried to throw it away in the first five minutes as some sellers entered. They didn't have enough ammunition, however, and were overrun with a morning upside surge adding onto the higher market open. The Thursday reversal had legs as it appeared the delay in putting new money to work for October ended. Stocks rallied into mid-afternoon and peaked, coasting into the close.

SP500 21.73, 1.12%
NASDAQ 45.43, 1.03%
DJ30 208.64, 1.24%
SP400 0.67%
RUTX 0.76%
SOX 0.56%

VOLUME: NYSE +1.5%, NASDAQ -19%

A/D: Decent at 2:1 NYSE, 1.97:1 NASDAQ

Heady gains but as you can see, the growth indices lagged with gains well below 1%. NASDAQ did manage to crack about 1% but its pattern, along with the smaller growth indices, leaves something to be desired in terms of the upside.

Specifically, NASDAQ gapped and rallied to the 50 day MA, tapping it on the high, fading modestly to the close. Nice reversal, but already at resistance on lower trade. SP400 and particularly RUTX and SOX look very much like modest bounces up off ugly selling, showing doji below resistance and looking a lot like bear flags. Even SP500 has something to prove at its resistance, though it still looks good.

As noted last week, it is still very early in October and the indices have suffered just a single leg lower. Perhaps the large cap NYSE stocks will lead a recovery and pull growth with them. Likely, however, they all need a test of the recent lows to set a sound bottom to rally out of October and into year end.


THE ECONOMY

Jobs numbers again viewed as strong by the gross numbers, but the headlines are not that great and the makeup shows the same weakness.

I suppose you can argue that 248K jobs is a strong number, particularly when compared to 210K expected and 180K (revised from 142K) in August. Nonetheless, 248K jobs only looks good when you have a history of 200K average.





After the initial recovery from the lows, going nowhere the past four years.

A LOOK AT THE REAL NUMBERS

1. Wherefore art thou, workers?

The unemployment rate dropped 0.2% to 5.9% from 6.1%. More employed, right?

Employed +232K. Unemployed -329K. Looks promising.

But, factor in the facts of life:

Participation rate: 62.7%, down from 62.8% in August. From 66.0% in 2008.
That ties the low at February 1978. Recall what a banner year that was for the economy, 2 years after Jimmy Carter's election. A stumbling, bumbling economy that had ups and downs but was a best a malaise. The parallels with the current economy are frighteningly similar.

Workforce overall lost 97K workers

Those Not in the Workforce: +315K
Total not in the Workforce to 92.6M, a NEW ALL-TIME HIGH.

Working age population growth, last 6 years: 248.4M from 234.6M (14M) versus labor force growth of 155.9M from 154.9M (1M). In other words, the labor force grew just 7% of the gain in the working age population (1M versus 14M).

Not in workforce + unemployed = 102M or 41% of the US' adult population.

So, a 'whopping' 248K jobs added but those working continued to fall. Finding it easier not to work than work? Why? Take a look at the jobs quality.


2. Wherefore art thou, jobs quality?

248K jobs created. 207K or 84% were in the services sector, the lowest paying scale of jobs.




Average hourly wages:





Services jobs again dominate the recovery over 'breadwinner' construction, manufacturing jobs and thus it is no surprise the hourly earnings are falling. Note how the hourly earnings are well, well off of the pre-crisis levels. Simply no recovery because of low quality jobs.

3. Wherefore art thou, workers in their prime?



55+: Gained 230K of the 248K jobs, or 93% of all jobs. All-time record high at 32.6M workers. From 12/07 this group has gained 5.5M jobs.

25-54: -10K jobs. Since 12/07 this group is -2.04M jobs!!



SUMMARY OF THE JOBS REPORT:

84% of the jobs created were in the service sector. 93% of the new hires were in the 55+ age group. The breadwinner jobs were just 8% of the total for the month and the important 25-54 demographic lost 10K jobs, sliding further into the hole.

So, the economy and jobs market remains in the 'Hello, welcome to Wal-Mart where I work as a greeter so I can try to scratch out a living in my golden years thanks to the financial crisis and the Administration's worst recovery in US history mode. Been there for 6 years, the entirety of the 'recovery.


But . . . the unemployment rate is 5.9% because more and more people are realizing they don't need to work or even look for work, particularly when it is for the low wage service jobs that dominate the job creation (4 of 5 jobs). Instead, just go ahead on and take disability, childcare assistance, free phones, food stamps, etc. AND take some cash side jobs (of course not paying taxes on those earnings) and come out in better shape than that poor sap working two or three 29 hour a week (thanks to the ACA's hour limits) part-time jobs wondering what the hell he is working so hard for so little for. But don't feel bad for the worker; with the participation rate hitting a 36 year low (1978, remember those golden years?) and keeps falling, the trend in participation shows that 'sap' is wising up and leaving the workforce, adopting a better or equivalent pay scale for much less work.


THE MARKET

CHARTS

SP500: Gapped modestly higher and ran well to close at the lower trendline of the 11/12 channel. That also leaves SP500 just below the 50 day EMA. Good recovery, but after such a selloff of course there is important resistance to take on.

DJ30: Strongest in terms of improvement of pattern, moving up through the 50 day MA up to the 20 day EMA on the high. Cleared some resistance on rising volume. Overall pattern, however, is still somewhat frightening with those twin peaks still in the way, still unable to take them out.

NASDAQ: Gapped and rallied off the Thursday doji, reaching the 50 day EMA on the high. Now is the moment of truth for NASDAQ on a bounce: back at the twin highs from July, the last highs before the September top. Broke them last week, gapped and ran back up. Much lower, average trade after three sessions of really strong volume indicates the Friday move was not that strong and has a more bear flag flavor.

RUTX: Gapped to a doji below the 10 day EMA, tapping at the August low on the high. A long way to recover for the small caps. Way oversold, needed a bounce, but as with NASDAQ, this has the look of a weaker relief bounce, setting up more of a bear flag.

SP400: Moved up off the doji and to the August low. As with RUTX, way oversold and rebounding, thus far in a relief move.

SOX: Very modest gain to a doji off of the Thursday big doji with tail. Gapped upside to a tight doji well below the 50 day SMA. Not a lot of power here.

As noted above, growth lagged. SOX, RUTX look quite weak on the bounce. Up, but lagging the large cap NYSE and also with patterns that are not inspiring in terms of upside.


LEADERSHIP

Drugs/Healthcare: The main market leadership group. CELG, BABY, TKMR, VRTX.

Financial: Another clear market leader. GS surged again. JPM jumped back up off the 50 day EMA.

Tech: Software looks pretty interesting. SPLK, CRM.

Big Names: GOOG looks ready to bounce up in its range. NFLX gapped back over the 50 day EMA on decent trade. AAPL holding at the 50 day EMA where it has held for the entire week.

Chips: Some struggles continue. SWKS trying to recover. ALTR bounced Thursday but flopped Friday. MU continues to set up for some upside.


MARKET STATISTICS

NASDAQ
Stats: +45.43 points (+1.03%) to close at 4475.62
Volume: 1.726B (-19.01%)

Up Volume: 1.29B (+200M)
Down Volume: 445.01M (-547.27M)

A/D and Hi/Lo: Advancers led 1.97 to 1
Previous Session: Advancers led 1.78 to 1

New Highs: 36 (+12)
New Lows: 77 (-113)

S&P
Stats: +21.73 points (+1.12%) to close at 1967.9
NYSE Volume: 812.4M (+1.56%)

A/D and Hi/Lo: Advancers led 2.06 to 1
Previous Session: Advancers led 1.13 to 1

New Highs: 30 (+19)
New Lows: 81 (-172)

DJ30
Stats: +208.64 points (+1.24%) to close at 17009.69


SENTIMENT INDICATORS

VIX: 14.55; -1.61
VXN: 17.54; -1.09
VXO: 13.59; -1.84

Put/Call Ratio (CBOE): 0.92; -0.1

Bulls and Bears:

Bulls continue their tumble, not surprising given the market losses: 48.0% versus 52.5% versus 57.6%

Bears flat-lined: 15.3% versus 15.2% versus 14.1%

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.




Bulls:
48.0% versus 52.5% versus 57.6% versus 56.1% versus 52.5% versus 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

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

Bears:
15.3% versus 15.2% versus 14.1% versus 13.3% versus 15.1% versus 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%

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.


OTHER MARKETS

Bonds: 2.44% versus 2.44% versus 2.41% versus 2.49% versus 2.48% versus 2.53% versus 2.51% versus 2.56% versus 2.53% versus 2.56% versus 2.58% versus 2.63% versus 2.62% versus 2.59% versus 2.59% versus 2.61% versus 2.55% versus 2.54% versus 2.50% versus 2.47% versus 2.45% versus 2.45% 10 year.

Strong week, bouncing Friday after a Thursday pause. Resistance from the August peak is close at hand, a serious test to this three week move.

Oil: 89.74, -1.27. Turned down from a tap at the 10 day EMA on the high.

Gold: 1192.90, -27.10. Ugly crash below the lows of the past two weeks.

$/JPY: 109.76 versus 108.42 versus 109.21 versus 109.63 versus 109.390 versus 109.287 versus 108.70 versus 109.12 versus 109.04 versus 108.89 versus 108.78 versus 108.982 versus 109.17 versus 108.265 versus 107.13 versus 107.19 versus 107.34 versus 107.13 versus 106.80.

Surging off the Thursday doji after the Wednesday yen rally.

Euro/$: 1.2516 versus 1.2669 versus 1.2608 versus 1.2631 versus 1.2685 versus 1.2747 versus 1.2780 versus 1.2847 versus 1.2850 versus 1.2831 versus 1.2916 versus 1.2875 versus 1.2960 versus 1.2940 versus 1.2963 versus 1.2912.

Exploding higher to a higher high on this long run from July.


MONDAY

Jobs are out of the way, some new money finally came in after a delaying entry Wednesday and part of Thursday. Earnings are starting up this week along with likely some more pre-announcement warnings.

The market is definitely set up to rally into earnings, and we have some plays from last week and this week that can take advantage of that move, e.g. GS. Juxtapose that with the patterns on RUTX, SOX, SP400 and even NASDAQ: bounced in relief but no volume and very shaky rebound patterns.

More upside from here is a definite possibility as the indices rebound from an oversold condition, very oversold on RUTX and SP400. I guess that is part of the irony: they are so much more oversold than the other indices, but their bounces lagged. That simply shows how they are still very much underperforming the rest of the market.

Thus while there can be more upside from here, the gains are likely limited with the indices bouncing, hitting resistance, then fading again to test the recent lows or more. There they put in some type of bottom for a move higher into year end.

That is the typical scenario during these fall selloffs and that is why we like to play the downside when it presents because the moves can be quite deep if a bit fast. That is also why we look at upside plays that hold the line, holding support and building good patterns to use for a run toward year end when the selling relents. This weekend we look at both upside and downside to take advantage of this scenario. We may not enter the upside for a bit, and there may be a bit more bounce in the market before we enter for the next leg higher, but you have to be ready for when that move starts.

Let's have a great week ahead!


SUPPORT AND RESISTANCE

NASDAQ: Closed at 4475.62

Resistance:
4486 is the July 2014 high
The 50 day EMA at 4490
4610 is the September 2014 post-bear market high.

Support:
4372 is the March 2014 high
The August low at 4321
The 200 day SMA at 4293
4289 is the July 2000 recovery high
4277 is the March lower gap point
4246.55 is the January 2014 peak
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 1967.90

Resistance:
1969 is the lower trendline from 11/2012
The 50 day EMA at 1976
1991 is the July 2014 high
2011 is the all-time high
2021 is the December 2012 up trendline

Support:
1905 is the August 2014 low
1902 from early May was the intraday all-time high.
The 200 day SMA at 1902
1897 is the prior all-time high hit in April 2014
1883.57 is the early March high.
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 17,009.69

Resistance:
17,152 is the mid-July post bear market high
17,351 is the September 2014 all-time high.

Support:
17,068 is the early July 2014 peak
The 50 day EMA at 16,976
The 50 day SMA at 16,925
16,970 is the June 2014 former all-time high
16,946 is the June 2014 peak
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
The 200 day SMA at 16,579
16,506 is the March 2014 peak
16,334 is the August 2014 low
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


ECONOMIC CALENDAR

September 29 - Monday
Personal Income, August (8:30): 0.3% actual versus 0.3% expected, 0.2% prior
Personal Spending, August (8:30): 0.5% actual versus 0.4% expected, 0.0% prior (revised from -0.1%)
PCE Prices - Core, August (8:30): 0.1% actual versus 0.0% expected, 0.1% prior
Pending Home Sales, August (10:00): -1.0% actual versus -0.2% expected, 3.2% prior (revised from 3.3%)

September 30 - Tuesday
Case-Shiller 20-city, July (9:00): 6.7% actual versus 7.4% expected, 8.1% prior
Chicago PMI, September (9:45): 60.5 actual versus 61.5 expected, 64.3 prior
Consumer Confidence, September (10:00): 86.0 actual versus 92.0 expected, 93.4 prior (revised from 92.4)

October 1 - Wednesday
MBA Mortgage Index, 09/27 (7:00): -0.2% actual versus -4.1% prior
ADP Employment Chang, September (8:15): 213K actual versus 202K expected, 202K prior (revised from 204K)
ISM Index, September (10:00): 56.6 actual versus 58.5 expected, 59.0 prior
Construction Spendin, August (10:00): -0.8% actual versus 0.4% expected, 1.2% prior (revised from 1.8%)
Crude Inventories, 09/27 (10:30): -1.363M actual versus -4.273M prior
Auto Sales, September (14:00): 6.2M prior
Truck Sales, September (14:00): 7.9M prior

October 2 - Thursday
Challenger Job Cuts, September (7:30): -24.4% actual versus -20.7% prior
Initial Claims, 09/27 (8:30): 287K actual versus 297K expected, 295K prior (revised from 293K)
Continuing Claims, 09/20 (8:30): 2398K actual versus 2458K expected, 2443K prior (revised from 2439K)
Factory Orders, August (10:00): -10.1% actual versus -9.3% expected, 10.5% prior
Natural Gas Inventor, 09/27 (10:30): 112 bcf actual versus 97 bcf prior

October 3 - Friday
Nonfarm Payrolls, September (8:30): 248K actual versus 210K expected, 180K prior (revised from 142K)
Nonfarm Private Payrolls, September (8:30): 236K actual versus 205K expected, 175K prior (revised from 134K)
Unemployment Rate, September (8:30): 5.9% actual versus 6.1% expected, 6.1% prior
Hourly Earnings, September (8:30): 0.0% actual versus 0.2% expected, 0.3% prior (revised from 0.2%)
Average Workweek, September (8:30): 34.6 actual versus 34.5 expected, 34.5 prior
Trade Balance, August (8:30): -$40.1B actual versus -$40.9B expected, -$40.3B prior (revised from -$40.5B)
ISM Services, September (10:00): 58.6 actual versus 58.9 expected, 59.6 prior


October 7 - Tuesday
JOLTS - Job Openings, August (10:00): 4.673M prior
Consumer Credit, August (15:00): $20.0B expected, $26.0B prior

October 8 - Wednesday
MBA Mortgage Index, 10/04 (7:00): -0.2% prior
Crude Inventories, 10/04 (10:30): -1.363M prior
FOMC Minutes, 9/17 (14:00)

October 9 - Thursday
Initial Claims, 10/04 (8:30): 295K expected, 287K prior
Continuing Claims, 09/27 (8:30): 2425K expected, 2398K prior
Wholesale Inventories, August (10:00): 0.3% expected, 0.1% prior
Natural Gas Inventor, 10/04 (10:30): 112K prior

October 10 - Friday
Export Prices ex-ag., September (8:30): -0.3% prior
Import Prices ex-oil, September (8:30): 0.1% prior
Treasury Budget, September (14:00): $75.1B 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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