Friday, May 3, 2013

Jobs Report: Good and Bad

U.S. ECONOMY ADDS 165,000 JOBS (Huffington Post)
“Employers added 165,000 workers to nonfarm payrolls in April, the Bureau of Labor Statistics said on Friday, and unemployment fell to 7.5 percent from 7.6 percent, the lowest since December 2008. Economists surveyed by Bloomberg had expected nonfarm payrolls to rise by 140,000 jobs and unemployment to hold steady at 7.6 percent.”

Good news right?  Well, not entirely…

“…there was a dark side to the report: …In April, companies hired 165,000 more workers, but they cut everyone’s hours (on average) by 12 minutes. That doesn’t sound like much of a decline, but spread out over the 135 million-strong work force, the decline in hours worked is the equivalent of firing more than 500,000 workers while keeping hours steady.”

Friday, the S&P 500 was up 1% to 1,614 (rounded), a new high for the S&P 500.

VIX was down 5% to 12.85.                 

Market internals have improved over the last week or so and now are signaling further advance is possible. The 10-dMA of %-advancing (the way I measure breadth) has broken the upper band of its descending channel, i.e. breadth is now moving in a positive direction.  On the other hand...   

The S&P 500 is 10% above its 200-dMA as of today’s close and that is a level at which corrections often begin.   This number did get as high as 18%-above the 200-dMA in the euphoria after the 2009 low before the market corrected.  Now, I don’t see this statistic getting much above 10% unless problems in Europe, China and Japan are all resolved.  It could happen; but it is not likely.  

Way back on 28 March I posted some analysis that showed that over the past several years a “correction-start” was signaled when the combined “Sentiment and percent-above-200dMA” reached a level of 6.9%.  See blog post at…
That STAT is now 6.9% so the market is topping when measured by several measures of market action.  Of course, this time is probably different…

Markets tend to correct when least expected.  So now that everyone on CNBC was celebrating new highs and a return to the bull-market today, we may see that correction that was “guaranteed” just a few weeks ago, but has been written off since then, start soon.

Friday, the NTSM analysis was again HOLD at the close. 

SENTIMENT is Sell due to its extreme bullish level of 66%-bulls as of Thursday’s close.  (That means that twice as much money is now bet long vs. short in the Guggenheim/Rydex funds I track.)  The VOLUME indicator (a variant of on-balance-volume) is positive.  PRICE and VIX are neutral.        

Again, today was a “statistically significant” day based on my analysis of price and volume action.   This usually results in a reversal the next day and the odds favor a down day for Monday.

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…
The NTSM system sold at 1575 on 16 April.  (This is just another reminder that I should follow the NTSM analysis and not act emotionally – I am under-performing my own system by about 2%!)

I have no problems leaving 20% or 30% invested.  If the market is cut in half (worst case) I’d only lose 10%-15% of my investments.  It also hedges the bet if I am wrong since I will have some invested if the market goes up.  No system is perfect.