Wednesday, October 2, 2013

ADP Jobs Disappoint…Today was a Fake out Day

“Private sector employers added 166,000 jobs in September, slightly below economists' forecasts and little changed from prior months. Employers added 159,000 jobs in August and 161,000 jobs in July, according to revised figures…’The job market appears to have softened in recent months," said Mark Zandi, chief economist of Moody's Analytics, which helps compile the ADP report. "Fiscal austerity has begun to take a toll on job creation [and the] run-up in interest rates may also be doing some damage to jobs in the financial services industry…’"  Full story at…

The ADP report revised July numbers down by 37,000 jobs (a19% revision) and August numbers down by 17,000 jobs (a 10% revision).  With those large revisions, the hiring trend in the ADP data is only slightly better than flat since March.   Looking at a longer timeframe published by ZeroHedge, the trend looks worse.

Historical Trend - Change in Total Nonfarm Private Employment

“…to avoid a breach of the nation’s debt limit, Treasury Secretary Jacob J. Lew said as he pressed Congress to increase borrowing authority “immediately.”  Lew, in a letter addressed to House Speaker John Boehner dated yesterday, repeated that the measures will be exhausted no later than Oct. 17.”  Story at…

Wednesday, the S&P finished down 0.1% (1pt) to 1,694 (rounded) at the close.
VIX was UP 7% to 16.60.

The 10-day moving average of stocks advancing on the NYSE fell to 47% Wednesday from 51% Tuesday.  (A number below 50% for the 10-day average is generally bad news for the market.) 

New-highs outpaced new-lows Tuesday, leaving the spread (new-hi minus new-low) at +80 (it was +177 Tuesday).  The 10-day moving average of change in the spread is minus 21. That just means that over the last 10-days, the spread has been getting worse.  This stat has been bouncing back and forth recently.  Overall though…
…Market Internals are now negative on the market for this short term indicator.

Today looked like a good day right?  The market was down nearly 1% in the morning, when it touched the 50-day moving average at 1680, but it came back all day and finished at the highs, down just a whisker.  Usually, that would be pretty good news.  Lurking beneath the surface are 2-troubling stats.  First, breadth was down significantly.  Of the (roughly) 3,000 stocks traded on the NYSE, only 1300 or so (44%) were up today.  Had only 44% of stocks in the S&P 500 advanced, it is likely the S&P 500 would have been down a lot. (I am ignoring the fact that the index is weighted by size, but let’s not confuse the issue with too many facts.)

Second, VIX was UP nearly 7% today.  Again, one would expect the S&P 500 to be down more than a point for a 7% rise in VIX.  That’s an indication that the options boys don’t necessarily agree that the indices are fairly priced.

Usually, this kind of divergence goes to the majority.  Since the VIX and most stocks fell Wednesday, I’d expect the S&P 500 to catch-up Thursday and fall too.

Wednesday, the overall long-term NTSM analysis remains HOLD at the close.

The 5-day, percent-bulls (bulls/(bulls+bears) in the Guggenheim/Rydex funds I track remains 69%-bulls as of Friday’s close. That is an extreme bullish value (no, make that super extreme bullish value) that is usually a negative for the markets.  “USUALLY” is the key word here.  I suspect the crowd is betting that the political impasse will be resolved easily. 

If it is, the bet might be right.  On the other hand, it is not clear to me that the market is falling solely due to political wrangling.

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  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.