Payrolls … Factory Orders … Atlanta FED Lowers GDP Projections … Stock Market Analysis

PAYROLLS (Bloomberg)
“Payrolls rose less than projected in September, wages stagnated and the jobless rate was unchanged as people left the workforce, signaling the global slowdown and financial-market turmoil are rippling through the world’s largest economy. The addition of 142,000 jobs [in September] followed a revised 136,000 gain the prior month that was lower than previously estimated…” Story at…
http://www.bloomberg.com/news/articles/2015-10-02/payrolls-rise-less-than-projected-u-s-jobless-rate-steady
My cmt: Not only was the September report poor (below 200,000 needed to keep up with population growth), but the August report was revised down about 30% and the July report was revised down about 10%.
 
FACTORY ORDERS FALL (US News & World Report)
“Orders to U.S. factories fell in August by the largest amount in eight months, led by a drop in demand for commercial airplanes and weakness in a key category that tracks business investment spending. Factory orders declined 1.7 percent in August…” Story at…
http://www.usnews.com/news/business/articles/2015/10/02/orders-to-us-factories-down-17-percent-in-august
 
ATLANTA FED LOWERS GDP FORECAST (Global Economic Analysis)
“GDP Quarter by Quarter
1st  Quarter: 0.6%
2nd Quarter: 3.9%
3rd Quarter: 0.9% GDPNow Model

If those numbers hold, the average is about 1.8% annualized.” Commentary at…
http://globaleconomicanalysis.blogspot.com/

 
MARKET REPORT / ANALYSIS        
- Friday, the S&P 500 was up about 1.4% to 1951 at the close. (Futures fell 1% when the jobs report was announced, so today’s finish up was a surprise.)
-VIX finished down 8% at 22.55.
-The yield on the 10-year Treasury dipped to 1.99% as investors reacted to the poor jobs report by buying bonds.
 
Today’s news was bad and combined with the Atlanta FED revision of GDP projections it may be enough to send the markets lower.  Even more concerning, there have been predictions of another corporate earnings dedcline. FACSTSET noted last week: “For Q3 2015, the estimated earnings decline is -4.5%. If the index reports a decline in earnings for Q3, it will mark the first back-to-back quarters of earnings declines since 2009.” Source FACTSET Earnings Insight at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_9.25.15/view
FACTSET published a graph in the same Earnings Insight issue that showed the price on the S&P 500 has advanced ahead of earnings in the past year or two.  It would appear to me that another 10% drop is needed in the value of the S&P 500 to get the index back in line with current earnings.  If earning fall, that number would get worse.  All in all, the news is not pretty and is suggesting the Index will fall further before this correction ends. I can’t begin to explain the power move up today. If this were a true reversal, I'd expect the new-hi/new-lo data to reflect the reversal. It didn't.
 
The Death Cross remains in effect since the 50-dMA is below the 200-dMA for the S&P 500. This is a long term signal for many.  In 2011, the Death cross occurred about 7% before the low.  In 2010, the Death Cross first occurred at the low so it was not a good signal then.

This correction is very similar to the 2011 correction. In 2011, the correction lasted 108-trading-days. The current correction has lasted 93-trading-days so far.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) leapt up to 46% Friday vs. 41.8% Thursday.  (A number below 50% is usually BAD news for the markets.  On a longer term, the 50-day moving average of advancing stock rose to 48%.  That’s remains a negative.
 
New-lows outpaced New-highs Friday. The spread (new-highs minus new-lows) was minus-223. (It was -147 Thursday.)   The 10-day moving average of the change in spread fell to -12 Friday.  In other words, over the last 10-days, on average; the spread has fallen by 12 each day.  The internals remained neutral on the markets.

Market Internals are a decent trend-following analysis of current market action, but should not be used alone for short term trading. They are usually right, but they are often late.  They are most useful when they diverge from the Index.  In 2014, using these internals alone would have made a 9% return vs. 13% for the S&P 500 (in on Positive, out on Negative – no shorting).  Of course, few trend-following systems will do well in an extreme low-volatility, nearly straight-up year like 2014.
 
NTSM         
Friday, the NTSM long term indicator was HOLD. The Volume, Sentiment & Price indicators are neutral. The VIX indicator is negative. It does not appear to me that the Index has made a bottom.

MY INVESTED STOCK POSITION:

TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
G-Fund (Cash, risk-free yielding 2.1% over the last 12-months): 70%
C-Fund (S&P 500): 15%
I-Fund (EFA): 15%
 
This is a conservative allocation.  The number one priority now is return of capital; not return on capital.
 
If I am able to identify a BUY point before the close when the Index is in the 1868 region, I will post it late in the day.