Unemployment Claims Fall

FIRST TIME CLAIMS FOR UNDEMPLOYMENT FELL (CNNMoney)
“… and are now back to pre-hurricane levels.  About 343,000 people filed initial jobless claims last week, 29,000 fewer than those who sought help in the previous week, the Labor Department reported Thursday…Economists often prefer to look at a four-week moving average, which smooths out the volatility in the weekly numbers. That average fell to 381,500 last week, after also spiking in the wake of Superstorm Sandy.”  Full story at…
http://money.cnn.com/2012/12/13/news/economy/unemployment-benefits/index.html?iid=HP_LN

GRADE THE RECESSIOVERY (ZeroHedge)

“Here, for your comparative studies analytical viewing pleasure, is the current recession recovery in context. Across activity indicators, consumer behavior, labor market developments, and housing & construction, there is a little here for everyone. From vehicle sales to disposable income and from durable goods to industrial production, it seems grading this economy's performance is a matter of 'see no evil, hear no evil, speak no evil'.”  Charts at…
http://www.zerohedge.com/news/2012-12-13/grade-recessiovery

Zerohedge presents charts that compare this recession to previous ones.  For the most part, the charts show this “Great Recession” recovery to be on the low end of recovery and some charts show downtrends currently underway.  Surprisingly, unemployment claims didn’t appear to be out of line with past recessions, regardless of FOMC statements to the contrary.  Decide for yourself.

MEDICARE

As reported by Reuters, the White House said that raising the Medicare eligibility age is “off the table”.  This is distressing news.  Medicare is the elephant in the room.  If there is no significant change to Medicare, the deficit talks will yield almost nothing.  The dollar amounts under discussion (The current Democratic offer is $120-billion in tax increases per year - I can’t even find the spending cuts under discussion.) are way too low.  We are running budget deficits in excess of 1-trillion per year.  A “fix” that reduces the annual deficit by only 10% just kicks the ticking-bomb down the road.  

MARKET RECAP 

Thursday the S&P 500 was down 0.6% to 1419 (rounded).  VIX was up a bit less than 4% to 15.56.  

The markets were down almost all day until it “leaked” that Boehner was meeting with President Obama at 5 PM.  Stocks rallied a bit toward the end of the day only to fall off at the close.

NTSM

The NTSM analysis remained HOLD Thursday.  Indicators, like the market, are simply drifting. 

MY INVESTED POSITION

Based on the SELL signal, 7 November 2012, I moved out of the stock market at 1377 on the S&P 500.  Because of the extreme negativity I have noted from Hussman and others, I am currently invested in a range of near 15% invested in stocks and I am still holding short positions.

Still Out of the Market

MARKET RECAP 
Tuesday the S&P 500 was up less than a point to finish basically unchanged at 1428 (rounded).  VIX was up about 2.4% to 15.95.  

The markets were up a lot until Bernanke spoke.  CNBC wrote: “The Federal Reserve met market expectations Wednesday with another round of easing, this time with a pledge to keep interest rates low until unemployment falls below 6.5 percent and inflation tops 2.5 percent.” Full story from CNBC at http://www.cnbc.com/id/100306053

NTSM

The NTSM analysis remained HOLD Wednesday.  All NTSM indicators are neutral, but are now leaning toward a buy.

The S&P 500 has seen only 2-down days in the last 10.  Conversely, sentiment has fallen to 47%-bulls about where it was at the recent 1353 low.  There hasn’t been much change in market internals – see yesterday’s post.

I am slightly bullish in the short-term.  Longer term, I tend to be more pessimistic.  I have been wrong on my short position; but I have no problem being out of the market with longer term money.  This is not the time to be a hero by being overly invested. 

MY INVESTED POSITION

Based on the SELL signal, 7 November 2012, I moved out of the stock market at 1377 on the S&P 500.  Because of the extreme negativity I have noted from Hussman and others, I am currently invested in a range of near 15% invested in stocks and I am still holding short positions.

Exports Down/Business Sentiment Down

I am not looking for bad news; it just seems like the bad news is more dramatic now.

US SEES BIGGEST DROP IN EXPORTS IN NEARLY FOUR YEARS (CNBC)
The Commerce Department said on Tuesday the trade gap increased 4.9 percent to $42.2 billion even as imports declined to the lowest level in 1-1/2 years. September's trade gap was revised to $40.3 billion from the previously reported $41.6 billion... Economists polled by Reuters had expected the trade deficit to rise to $42.6 billion in October.  Full story at...
http://www.cnbc.com/id/100300319
 
SMALL BUSINESS SENTIMENT: TENTH LOWEST (Dec 11, 2012 Doug Short) 
The latest issue of the NFIB Small Business Economic Trends is out today (see report). The December update for November came in at 87.5. This is the tenth lowest reading in history of this series. From dshort.com at...
http://www.advisorperspectives.com/dshort/

 

NTSM RECESSION INDICATOR remains leaning toward recession.

CHART TRENDS

The 50-dMA was actually 1417 Monday (I should have researched the number rather than looking at the chart), so Monday’s close was higher than the 50-dMA and Tuesday the market cheered Monday's higher close.  There may have been some short covering too.

MARKET RECAP 

Tuesday the S&P 500 was up about 0.65% to 1428 (rounded).  VIX fell about 3% to 15.57.

NTSM

The NTSM analysis remained HOLD Tuesday.  All NTSM indicators are neutral, but are now leaning toward a buy.

My guess is that tomorrow will be a down day and the S&P may have seen a short term top after what was a statistically-significant day today (per NTSM stats).  Big days are often followed by moves in the other direction in the short term. 

Tuesday, longer term trends in market internals were mostly flat to slightly up – not really strong signals.  The market has not been showing much direction for some time. 

I am still holding short positions – never dump a short position on a big up-day – so I’ll continue watching for a better time to get rid of my shorts.  The market sold off after the last Fed meeting…we’ll see.  I don’t want to remain short over the Holidays unless I have a clearer view of the market direction.  Right now, it all seems clear as mud.  We still may re-test the 1353 low.

MY INVESTED POSITION

Based on the SELL signal, 7 November 2012, I moved out of the stock market at 1377 on the S&P 500.  Because of the extreme negativity I have noted from Hussman and others, I am currently invested in a range of near 15% invested in stocks and I am still holding short positions.

 

Jobs Report: Troubling Details and Downward revisions

JOBS REPORT (WSJ)
Here are some details from the Friday Jobs Report as reported by the Wall Street Journal Saturday/Sunday edition (excerpts repeated below are available on-line)…

“The economy added 146,000 jobs in November…around its recent average…..Service jobs were the biggest gainers…retailers alone added over 53,000 jobs.”

There were “…downward revisions to payroll figures for September and October.  Together the revisions wiped out 49,000 jobs….Economists often watch the direction of revisions for signs of where the job market is headed: Figures are often revised up in an improving economy and down in a worsening one.”  - WSJ

Longer term, one trend is a very problematic.  The share of total population working (chart below on the right from the WSJ) has been falling since the recession and is now at levels not seen since 1981.  This means that while the economy has been improving, it is not creating enough jobs to keep up with the growing population and, additionally, many have simply given up looking. (On a side note refering to 1981, I might add that the market peaked slightly before Jan 1981 and fell 25% to a bottom in 1982.  That was the end of the 1966-1982 Cyclical Bear market.)

 

 

Wall Street Journal at…

http://blogs.wsj.com/economics/2012/12/07/four-takeaways-from-novembers-jobs-report/

 

HUSSMAN ON JOBS REVISIONS (and recession)

“The September and October payroll figures are already being revised lower, consistent with the historical tendency (noted by the Economic Cycle Research Institute) for data to be revised higher prior to the start-date of a recession and then lower after the start-date...I continue to view the U.S. economy as being in a recession that began in the third quarter of this year...I would characterize the most recent data as being negative but stable – not accelerating to the downside.” – John Hussman, PhD, Weekly Market Commentary for 10 Dec 2012 from Hussman Funds at http://www.hussmanfunds.com/

 

MORE JOBS ANALYSIS – GALLUP SURVEY

(from Mish Shedlock, Mish’s Global Economic Trend Analysis)

“Gallup's seasonally adjusted unemployment rate is 8.3% for November, up nearly one percentage-point over October's rate. Gallup's underemployment jumped from 15.9% to 17.2%."

"The Gallup survey (released Thursday), which polls approximately 30,000 people monthly, was radically different from the BLS report that came out a day later...In the BLS report, the labor force magically shrunk by 350,000 artificially lowering the unemployment rate. No such thing happened in the Gallup survey for the unemployment rate to blast .9 percentage points higher...if the latest Gallup survey is correct, expect to see jumps in the BLS unemployment rate in the coming months.”  Full analysis and charts from Mike "Mish" Shedlock at http://globaleconomicanalysis.blogspot.com/#8KDzaRKkh7xlZ7lr.99

 

CMT:  It’s hard to be know which way to go with such opposing views on the jobs data.  Friday Doug Short said the data was “encouraging.”  I don’t like it though – John Hussman is beginning to look right at this point.  Time will tell. 

 

NTSM RECESSION INDICATOR

The NTSM recession indicator (comparing the Morgan Stanley Cyclical Index to the S&P 500 is now suggesting investors are positioning for a possible recession since the long-term trend is that the cyclicals are falling while the S&P 500 is flat.  On the shortest term (today) that wasn’t true and cyclicals out-performed.  All I can do is watch this and see which way the trend goes.  For now, it remains leaning toward recession.

 

CHART TRENDS

It turns out that the area of S&P 1420 that I mentioned in Friday’s blog is the 50-dMA and that is also a key point for the moving average followers.  The market broke above 1420 during the day, but couldn’t manage to close there.  If it can’t break 1420 we’ll be going down.

 

MARKET RECAP 

Monday the S&P 500 was up about 1/2-point to finish unchanged at 1418 (rounded).  VIX rose about 1% to 16.05.

 

NTSM

The NTSM analysis remained HOLD Monday.  All NTSM indicators are neutral.

 

Other market indicators are turning down.

Market internals have gone flat and look like they are rolling over to the downside along with the Smart Money (last hour) buying), so I say again…I think this bounce is ending.

 

MY INVESTED POSITION

Based on the SELL signal, 7 November 2012, I moved out of the stock market at 1377 on the S&P 500.  Because of the extreme negativity I have noted from Hussman and others, I am currently invested in a range of near 15% invested in stocks and I am still holding short positions.

 

Jobs report – No Big Deal

INVESTORS: JOBS REPORT DOESN’T CHANGE MUCH (USA Today)
Employers added 146,000 jobs in November, vs. 138,000 in October, the Bureau of Labor Statistics reported Friday. The unemployment rate fell to 7.7% from 7.9% in October… ‘It's a treading-water jobs report,’ says Greg McBride, senior analyst for Bankrate.com. ‘The unemployment rate went down, but not for the right reasons.’ The main reason the unemployment rate fell, McBride says, is because fewer people were in the labor pool.”   Full story at… http://www.usatoday.com/story/money/business/2012/12/07/nov-jobs-investors-analysis/1751735/

The Government Bureau of Labor Statistics stated, “Our analysis suggests that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November.”  If that is so, and the reason for the drop in unemployment rate is more job search “drop outs” one must be somewhat concerned about the spike in unemployment claims.

UNEMPLOYMENT CLAIMS

Chart from Doug Short at dshort.com…
http://advisorperspectives.com/dshort/updates/Weekly-Unemployment-Claims.php

ECRI WEEKLEY UPDATE: MORE RECESSION FLAG WAVING

(from dshort.com, Advisor Perspectives)
“Today ECRI's Lakshman Achuthan appeared on CNBC and repeated the gist of his November 29th video rounds, in which he focused on his company's version of the Big Four economic indicators I've been tracking for the past several months. (Not surprisingly, ECRI continued their ‘we-are-already-in-recession’ call.”)

Here’s Doug Short’s view…

“I believe the US economy is walking a tightrope. The average of the Big Four indicators has been wavering around a flat-line for the past several months...However, a post-Sandy rebound, satisfactory holiday sales and an intelligent outcome to Fiscal Cliff negotiations could easily put the economy into indisputable expansion mode. And today's growth in Nonfarm Employment, despite Sandy, was encouraging.”  Analysis, charts, and discussion a…http://www.advisorperspectives.com/dshort/

THE FISCAL GENTLE HILL

I’m still not convinced the market trouble we are experiencing is all Fiscal Cliff related.  Really, there will be no difference if the “cliff” is resolved on 17 December or 17 January.  The Congress will back-date any “deal” if it is late.  It seems impossible that there would be no deal at all.  There has been some talk that the Republicans may wait for the taxes to go up as the Bush tax cuts expire (after 1 January) and then agree to a deal that reduces taxes.  That way they will not have agreed to a tax increase.

CHART TRENDS (and the Kitty’s Tale)

As I look at chart trend lines, I see that the upper trend line is now well above the cat’s tale in the chart I posted a few days ago  (http://navigatethestockmarket.blogspot.com/2012/11/chart-patterns-predict-stock-market.html),  so on that measure, the downtrend has been broken and I am improperly holding a short position.  If the market breaks above the 1420 area, I’ll have to sell or sweat more by continuing to hold.  I’m not sure I have the nerve.  

I am not confident about the market so I have no problem staying out until the NTSM system gives a buy signal.  So far, all I have is lots of noise.

MARKET RECAP 

Friday the S&P 500 was up about 0.29%, to 1418 (rounded).  VIX fell about 4% to 15.90.

NTSM

The NTSM analysis remained HOLD Friday.

I noted yesterday that the NTSM fear of recession indicator is falling (that’s bad).  It is a long term indicator that compares cyclical stocks tot eh S&P 500: it is not likely to turn-around quickly.

MY INVESTED POSITION

Based on the SELL signal, 7 November 2012, I moved out of the stock market at 1377 on the S&P 500.  Because of the extreme negativity I have noted from Hussman and others, I am currently invested in a range of near 15% invested in stocks and I am still holding short positions.

Recession Indicator - Negative

NTMS RECESSION INDICATOR
My recession indicator, or (more accurately) my market “fear-of-recession” indicator, has reversed direction over the past several days. 

In the chart below, the S&P 500 is indicated in black and the Morgan Stanley Cyclical Index in blue.  The relative performance of the two indices is indicated by the solid red line in between the blue and black lines.  That solid red line is the indicator.  When the solid red line is moving up the, cyclical stocks are outperforming the S&P 500.  In general, when the red indicator line is going down, so is the S&P 500. 

Currently, cyclical stocks are falling when compared to the S&P 500.  It may be hard to see, but the solid-red indicator line that tracks the relative performance is falling steeply. Additionally, the indicator peaked at exactly the same value as it did in 2011 and 2012. To make the trend clearer, I added a black trend line on the S&P showing that it has been flat while the blue trend line on the cyclical index shows it falling.

During the 2011 and 2012 corrections, the indicator peaked about 6-weeks to 2-months prior to the top that preceded both corrections.  

FEAR OF RECESSION CHART

 

MARKET RECAP 

Thursday the S&P 500 was up about 0.33%, to 1414 (rounded).  VIX rose about 4% to 16.58.

VIX isn’t moving much in either direction so the VIX indicator isn’t giving any guidance at this point.  In fact, all of the indicators are in neutral territory.  The only cautionary indicator in the NTSM system is Sentiment.  Sentiment is up to 60%-Bulls.  That is in the overly-bullish, cautionary zone.  A sell indicator would be 67%-Bulls.

I have been expecting a fall back and retest of the recent low.  So far…no dice. 

NTSM

The NTSM analysis remained HOLD Thursday.

MY INVESTED POSITION

Based on the SELL signal, 7 November 2012, I moved out of the stock market at 1377 on the S&P 500.  Because of the extreme negativity I have noted from Hussman and others, I am currently invested in a range of near 15% invested in stocks and I am still holding short positions.

ISM Services Up...ADP Payrolls Down…

ISM SERVICES GAUGE UNEXPECTEDLY ROSE IN NOVEMBER (Bloomberg)
“The Institute for Supply Management’s non-manufacturing index rose to 54.7 from 54.2 in October...Economists projected the index would ease to 53.5, according to the median estimate in a Bloomberg survey. Readings above 50 signal expansion... Increased sales of autos, the start of the holiday shopping season, and a pickup in homebuilding are driving gains at companies that account for almost 90 percent of the economy.”  Full story at…
http://www.bloomberg.com/news/2012-12-05/ism-services-gauge-in-u-s-rose-to-54-7-in-november-from-54-2.html

What Cliff?

 

 

 

 

 

...Wylie Coyote coutesy of Warner Brothers Pictures

 

ADP PRIVATE PAYROLLS BELOW ESTIMATES (US News)

“The private sector added 118,000 jobs in November, payroll processing firm ADP reported today. The figure is the firm's lowest estimate since August and comes in nearly 40,000 below October's 157,000, as well as slightly below consensus estimates of around 125,000. The low November figure portends that Friday's jobs report from the Labor Department will come in well below October's 171,000 mark.”  Full story at…
http://www.usnews.com/news/articles/2012/12/05/adp-private-payrolls-added-118000-jobs-in-november

Oh...THAT cliff...but really; I think they will do a deal to avoid the fiscal cliff.  The question is, “What will the market reaction be to the deal?” Cuts in spending and higher revenues will not be good for the market, but maybe it won’t be too bad, either.  As always, we’ll have to wait and see.

AAPLE

“Come along Dorothy – you don’t want any of those apples.”  No one else does either.  Apple, the market leader just a few weeks ago, fell 6.5% today.  It’s down almost 25% in the past 3-months.

MARKET RECAP 

Wednesday the S&P 500 was up about 0.2%, to 1409 (rounded).  VIX fell about 4% to 16.45.

NTSM

The NTSM analysis remained HOLD Wednesday.

MY INVESTED POSITION

Based on the SELL signal, 7 November 2012, I moved out of the stock market at 1377 on the S&P 500.  Because of the extreme negativity I have noted from Hussman and others, I am currently invested in a range of near 15% invested in stocks and I am still holding short positions.