- June jobs report beats by as much as May missed, stocks launch. - SP500 flirting with the all-time high. - 'Whopping' jobs report is not so whopping historically, and it is also more of the same in terms of underwhelming internals. - SOX, DJ30 longer term patterns trying to make a silk purse out of the 21 month rounded top
I styled Thursday as a pre-Jobs Report holding pattern. A better description should have been a session on the launch pad waiting for the go ahead to launch. The Friday Jobs Report provided the go ahead for launch as non-farm payrolls added 287K, over 100K more than expected and wiping away the May revised 11K. We won't go into the details -- yet -- because the market didn't go into details. Massive miss, massive beat, Fed on hold, other central banks easing, time to rally.
VOLUME: NYSE +3%, NASDAQ +16%. NYSE trade higher but still below average. NASDAQ trade back up to average. Stronger volume is better on the upside if you are looking for a more sustainable move, though volumes were not blowout great.
A/D: NYSE 7.4:1, NASDAQ 4.8:1. Impressive breadth as all areas of the market jumped and of course the small cap lead in percentage gain, by a wide margin sans SOX, shows the strength of the overall market on the session.
RUTX and SOX posted the strongest percentage gains, but I suppose the session's highlight was SP500's flirtation with its all-time high. SP500 gapped higher, stormed through the June 2016 and November 2015 highs, and on its high traded past the May 2015 closing high (2132.82). Couldn't hold that move, but at this point that may just be semantics: SP500 not only put in a Brelief move from Brexit, it avoided a Brollover and is trying to put in a Brew High. With RUTX and SOX putting in strong performances as well, the market was only heading higher.
The question is always can it hold. Long rounded top/range, several sharp selloffs, questionable economics despite some recent reports. Yet, the market comes back, and it comes back thanks to the willingness of central banks to avoid any kind of possible upset. They were taken aback by the viciousness of the January to February selling and that had Janet Yellen on the phone with the BOE head when the indices were hitting lower lows. That day, starting about 20 minutes after her appointment book showed the telephone conversation ended, the stock indices reversed off the lows. The next day she was on the phone with Mario Draghi, and about a half hour after their conversation, voila, European and US markets jumped higher again. A miracle.
This last episode it did not even take a selloff, just the threat of a selloff as a result of a political vote. Get the plunge protection gear out and start hosing down the market to prevent any fires breaking out. The markets didn't even get started lower in terms of a percentage move when the BOE was out with stimulus and promising more, the ECB saying there was no limit to what it could buy (other than just not being enough assets for it to purchase), the IMF demanding central banks step in to prevent what would surely be the end of the world.
Again: it did not even take a serious drop to get the central banks in the market yet again, protecting them from the foolishness of the proletariat that had the nerve to vote to wrest back some control over their lives.
With that background, yes Virginia, there likely really are new highs coming. Better data, compliant central banks. It just doesn't get better than that.
So what was all the excitement over? After a May jobs report that missed by 5 standard deviations downside, a June report that beat by 5 standard deviations upside. Nothing like pinpoint accuracy from our leading economists who are, as it is turning out, about as accurate as weathermen, whether trying to predict the next rain storm or the climate in the future.
Of course you cannot lay all of the blame at their feet. You have a BLS full of professionals whose job is to compile this data accurately and without any consideration of the political consequences. Thus just before the 2012 election the jobs numbers steadily improved to the magic numbers, defying all measures of the economy. Shockingly (?) it was later confirmed that some of the BLS professionals had fudged the data. Oh you fun-loving federal employee rascals. We need to watch you guys.
The upshot: you got a May report that had everyone worried about the economy but rejoicing the Fed was on hold. In June you get a report that has everyone initially joyous but likely to start worrying the Fed is not on hold. Indeed, the pundits and the futures contracts are now giving September a shot at a rate hike, though bond rates, gold, and just about everything else does not appear to be nearly convinced.
Think about it. The jobs market is so solid, yet businesses are not investing at all in capital equipment or anything else. As David Rosenberg put it: "It makes little or no sense that the business sector would be so cautious over committing capital to the real economy and at the same time embark on a sustained hiring spree."
Jobs Report
Non-farm jobs, June: 287K vs 175K exp vs 11K prior (from 38K)
3 month average: 147K/month
Unemployment: 4.9% vs 4.8% exp vs 4.7% prior
Average Hourly earnings: 0.1% vs 0.2% exp vs 0.2% prior. Year/year 2.6% vs 2.7% expected as jobs mix remains tilted toward lower pay, hourly.
Workweek: 34.4 vs 34.4 exp vs 34.4 prior. Just cannot get the workweek rising.
The Non-Farms portion of the Jobs Report was termed 'whopping' just about anywhere you looked. While it was indeed much larger than the 11K from May, sub-300K is historically not whopping for the US economy, at least if you look earlier than the last 15 years.
As I have written many times, the years of mediocre, substandard growth levels have dumbed down our historical perception of what is strong and what is mediocre for the US economy. I wrote over 5 years ago this would be the case and it is exactly what has happened.
Thus we get 'wowed' by data that in the 1980's and 1990's would have been on the low end. In September 1983 1.1M jobs were created. The following 10 months averaged 354K per month. And these were GREAT jobs. Tech companies were birthed, companies invested massive amounts in plants, equipment, and people. These were full-time, high quality, breadwinner jobs, the kind we mostly dream about right now.
Household Survey: Something of the counterbalance to the Non-Farms 'establishment' survey. It is said by economists, that in turns in the jobs market the household survey is the more accurate forecast. If that is the case, then the prognosis is not great. Indeed, even with the June non-farms number, the overall trend in jobs is not up but is still lower. Throw out May and June, both apparent outliers, and you still have jobs trending lower.
Household Survey: +347K unemployed versus +37K employed. Long-term unemployed: +211K Unemployed: rose to 7.783M
Participation rate: 62.7% vs 62.6%. 191K moved into the workforce though those out of the workforce remains just over 94M.
Participation still at 30+ year lows. Much rejoicing. Yea.
Jobs gains dominate in the lower pay areas again: According to the Non-Farm establishment Survey: Leisure & Hospitality: 59K Health: 58K Information 44K (Verizon strike over) Professional & Business services: 38K Retail: 30K Manufacturing: +14K (a miracle! What an economy!)
Jobs losses: Mining: -6K
Age Breakdown: Age 55 - 69: +259K Age 25 - 54: +28K Age 20 - 24: -67K Age 16 - 19: -40K
Thus, 90% of jobs in the household survey went to the 55+ group, the norm in this entire recovery.
Indeed, if you go back to when the recession started in December 2007: Age 55+: +8.2M jobs All other age groups: -3.4M jobs, still underwater, from the peak. Jobs have been created, but they had more jobs well into 2008 than they have now.
Another report, heralded as a 'whopper,' but historically it is average at best.
THE MARKET
CHARTS
The big top still remains, but the indices are trying to turn it into something upside, thanks to the power of central banks.
SOX: All over the map is an accurate description of SOX the past two weeks, from a breakout the day of Brexit voting to a plunge to the 200 day SMA to a Brelief move that still has about 15 points to match the Prexit high. Good recovery, still work to do. On a grander picture, one from 2012, SOX has put in a double bottom at the 50% Fibonacci retracement, with lows in August 2015 and January/February 2016. It formed a handle and broke higher in late May, and during Brexit it tested that breakout. Now it is bouncing. With this analysis, and with the central banks willing to help, SOX would have a target at 750. Not a bad prognosis, another 7%.
SP500: Gapped and rallied through the June high and the November/December 2015 range. As noted earlier, toyed with the summer 2015 all-time highs, closed below them, but showing plenty of momentum.
DJ30: Same type of pattern as SOX, i.e. a strong rally from 2012 to early 2015, the big selloffs in 2015 and early 2016 after the mid-2015 all-time high, the recovery, the three month lateral move forming a handle. A double bottom with handle formed at the 38% Fibonacci retracement of the 2012 to 2015 run. Now DJ30 is approaching the prior high in 2015, and as it was a 38% retracement, typically it should move through that level and put in higher highs.
NASDAQ: The 'tech heavy' index does not sport as convincing a pattern as DJ30 or SOX. Broke to a lower low on the Brexit selling, selling that was already underway. Friday recovered back to the April/June highs, or actually just under them, and now has to show it can continue the move. If DJ30, SP500 lead, NASDAQ likely follows.
RUTX: Over the past 5 weeks RUTX has formed, thanks to the Friday surge, a short inverted head and shoulders. That is trying to act as the right shoulder to a larger 10 month inverted head and shoulders formed in the selloff from the June 2015 high. That suggests there is room upside.
SP400: Almost fully recovered from Brexit, indeed surpassing the late June high and now working on the June high. That is the last peak before the mid-2015 range housing the all-time high. Somewhat similar to RUTX with the inverted head and shoulders, though a bit skewed to the upside for the right shoulder. Looks as if it wants to make a run at that old high at 1551 (closed at 1520).
LEADERSHIP
Pretty much everything was moving higher, but leadership is about stocks in good patterns moving higher, stocks moving to new highs -- that sort of thing. Thus while many stocks were up, not all are leaders. There are quite a few areas with good patterns that are moving well, however.
Oil: Oil is not necessarily one of them. Not bad, and perhaps just needs to take a break after leading the market during a choppy time. PTEN is not bad with a nice base in the bigger picture. APC continues its recovery off its January low, putting in a new recovery high on the week. CWEI keeps working on its attempt at the 200 day SMA. HAL and SLB are in solid larger bases but have more work to do. NBL, SWN, SPN, COG and others are all trying to hold on and set up for a new move higher.
Industrials: HON broke to a higher high Friday. MMM at a higher high. UTX breaking higher from an 8 week consolidation. CAT, CMI trying to break upside.
Biotech/Drugs: BLUE enjoyed a good week upside. OPHT broke higher Friday, continuing its move off the 50 day EMA.
Chips: Big surge Friday as SOX tries to fix its pattern. KOPN jumped higher Friday. AVGO is breaking higher off the bottom of its uptrending channel. AMKR looks interesting. ARMH is trying to make a new break higher. LRCX is trying to break from a 19 month base. EXAR is working in a big double bottom with handle.
Financial: Stormy week, still not great patterns given the central bank action, but with stronger jobs reports and stronger services PMI, financial stocks may try to build in some possible rate hike upside. GS has a double bottom trying to shape up, but MS is still mushy, JPM is up but at the 200 day SMA. BAC is still struggling below the 20 day EMA.
Retail: AMZN at a new high on the week. WWW shot higher Thursday and Friday, making us some good money. Department stores are still working on their patterns, e.g. JWN, M, DDS; broke higher Friday and showing some promise.
Software: Making some moves, e.g. ROVI, CALD, CYBR.
Metals: Not just precious metals started looking better. CENX looks ready to make the next move higher. AKS is improving. SID is still looking solid. SCHN rallied nicely on the week. FCX is working laterally in a rather tight 9 week trading range.
MARKET STATISTICS
NASDAQ Stats: +79.95 points (+1.64%) to close at 4956.76 Volume: 1.97B (+15.88%)
Up Volume: 1.67B (+560M) Down Volume: 252.13M (-251.93M)
A/D and Hi/Lo: Advancers led 4.75 to 1 Previous Session: Advancers led 1.34 to 1
New Highs: 159 (+71) New Lows: 25 (-7)
S&P Stats: +32 points (+1.53%) to close at 2129.9 NYSE Volume: 906M (+3.14%)
A/D and Hi/Lo: Advancers led 7.43 to 1 Previous Session: Advancers led 1.18 to 1
New Highs: 267 (+134) New Lows: 12 (-10)
DJ30 Stats: +250.86 points (+1.4%) to close at 18146.74
14 of 18 over 1.0. 14 of the last 30 below 1.0. 34 of 50 over 1.0. Overall still some very nervous action.
Bulls and Bears: Massive drop in bulls, but of course that was immediately countered by the recovery, so this reading is all in flux right now.
Bulls: 47.1 versus 41.6. Right back up, from Brexit to Brelief.
Bears: 24.5 versus 23.8. Unlike bulls, bears are not buying it.
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: 47.1% 41.6% versus 47.5% versus 45.9% versus 47.3% versus 45.4% versus 35.4% versus 40.2 versus 39.2 versus 40.2% versus 44.3% versus 47.4% versus 41.2% versus 45.4% versus 43.3% versus 47.4% versus 44.4% versus 39.4% versus 36.4% versus 34.7% versus 26.5% versus 24.7% 34.0% versus 29.2% versus 26.8% versus 28.6% versus 34.7% versus 36.7% versus 37.8% versus 44.9% versus 41.2% versus 45.4%
Bears: 24.5% 23.8% versus 23.2% versus 23.5% versus 23.8% versus 23.7% versus 24.0% versus 21.7% versus 21.6% versus 21.7 versus 20.6% versus 21.7% versus 27.8% versus 27.8% versus 28.9% versus 27.8% versus 30.3% versus 35.4% versus 34.3% versus 35.7% versus 39.8% versus 39.2% versus 38.1% versus 35.4% versus 36.1% versus 35.7% versus 31.6% versus 29.6%
OTHER MARKETS
Bonds (10 year): 1.36% versus 1.39%. After the jobs report, the 10 year yield rose to 1.43%. By the close, however, even with large index gains, bonds rallied back and dropped the yield. Despite 'better' data that should reduce the risk in the economy and the improve the odds of a Fed rate hike, bonds are rallying.
Historical: 1.39% versus 1.373% versus 1.367% versus 1.44% versus 1.475% versus 1.51% versus 1.468% versus 1.46% versus 1.57% versus 1.74% versus 1.68% versus 1.70% versus 1.67% versus 1.61% versus 1.57% versus 1.58% versus 1.62% versus 1.61% versus 1.64% versus 1.68% versus 1.70% versus 1.72% versus 1.73% versus 1.70% versus 1.80% versus 1.84% versus 1.85%
EUR/USD: 1.10502 versus 1.10634. Overall the euro was down on the week, closing in the range formed after the Brexit dump lower.
Historical: 1.10634 versus 1.10891 versus 1.1056 versus 1.11396 versus 1.1106 versus 1.11256 versus 1.10736 versus 1.10226 versus 1.1101 versus 1.14070 versus 1.13324 versus 1.1251 versus 1.13131 versus 1.13749 versus 1.12778 versus 1.12554 versus 1.12731 versus 1.2104 versus 1.1297 versus 1.12526 versus 1.13149 versus 1.1412 versus 1.13570
USD/JPY: 100.59 versus 100.768. Doji near the June low, keeping the possibility of a double bottom bounce for the dollar in place.
Historical: 100.768 versus 101.15 versus 100.89 versus 102.497 versus 103.128 versus 102.912 versus 102.60 versus 101.93 versus 102.32 versus 106.73 versus 104.87 versus 104.788 versus 103.98 versus 104.58 versus 104.12 versus 104.68 versus 105.62 versus 106.085 versus 106.019 versus 106.933 versus 106.966 versus 106.66 versus 107.347 versus 107.72 versus 106.55 versus 106.66 versus 108.86 versus 109.99 versus 111.285
Oil: 45.12, -0.07. Tough week, down Tuesday and Thursday, moving below the 50 day MA's hard to a lower low, undercutting the three week range. Doji Friday but oil is struggling.
Gold: 1367.40, +5.60. Big week and was up Friday even with the jobs data. Sold off for sure, but held near the 10 day EMA and roared back to a gain. Gold is not buying any increased rate hike odds.
MONDAY
Perhaps there will be some give back to start next week after such a strong move to close out the post-Brexit, but the momentum is strong and it appears the market is hell bent on making new highs for SP500 and DJ30 in rather short order. With SOX and RUTX trying to take the lead again with their strong percentage gains, the move has backing. If it continues of course the move is to continue picking up great patterns to the upside.
Sure the Fed continues playing a roll: will she or won't she raise rates and when will that occur? Then there is Brexit. Will the powers that be decide the people are fools and don't know what is good for them, rolling it back? Not unprecedented in this world we now live in.
Don't want to over think it. Sure the market can still top out with the massive post-QE rounded top, but the indices, as pointed out in the charts, are trying their best to set up a new upside move, central bank aided, of course. As long as good patterns set up and break higher, it behooves us to be in. Great analysis, huh? Again, don't over think it.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4956.76
Resistance: 4960 is the September 2015 intraday high, an important reversal point for NASDAQ. 4969 is the April 2016 recovery high 4980 is the June 2016 peak 4999 is the October upper gap point 5007 is the 12/31 upper gap point from that big gap lower 5008.57 is the early March 2015 post-bear market high 5042 is the March 2015 high 5100 from the April peak and early May peak 5162 is the early November peak, 5176 is the December intraday peak
Support: 4920 is the lower gap point from mid-October 2015, the January 2016 lower gap point 4916 is the mid-November 2015 low 4899 - 4902 from the September 2015 peak, July 2015 low 4894 is the September 2015 closing high 4836 is the March 2016 peak The 50 day SMA at 4827 The 200 day SMA at 4818 4815 is the December 2014 peak 4811 is the November 2014 peak (intraday) 4774 is the January 2-15 high 4751 is the January 2015 lower high 4684 is the May 2016 test low 4637 is the February intraday high 4620 is the February 1 closing high 4615 from September 2014 highs, October 2014 upper gap point, late August 2015 low. 4574 is the June 2015 low 4517-4506 from the September 2015 and August 2015 closing lows 4485 are the twin July 2014 peaks 4471 is the January 2016 closing low 4425 is the late February intraday low 4363 is the February upper gap point 4352 is the March 2014 peak 4313 is the January 2016 intraday low 4292 is the August 2015 low 4212 is the February intraday low
S&P 500: Closed at 2129.90
Resistance: 2130 is the June 2015 peak 2135 is the May 2015 all-time high
Support: 2126 was the April 2015 prior all-time high 2120 is the June 2016 peak 2119 is the February 2015 intraday high 2116 is the November 2015 high 2111 is the April 2016 recovery high 2104 is the December 2015 high 2094 is the December 2014 high 2079 is the intraday all-time high from November 2014 The 50 day EMA at 2076 2062 is the January 2015 lower high 2046 is the July 2015 closing low 2040 is the March 2015 closing low 2026 is the May 2016 low The 200 day SMA at 2026 2023 is the November 2015 low 2020 is the September 2015 intraday high 2011 is the September prior all-time high 1995 is the September 2015 recovery peak 1991 is the July 2014 high 1972 is the December 2014 low 1947 is the February 2016 intraday high, the late February peak 1940 is the January 2016 recovery bounce peak closing high 1913 is the early September 2015 closing low testing the bounce from the August selling 1905 is the August 2014 low 1902 from early May was the intraday all-time high. 1897 is the prior all-time high hit in April 2014 1891 is last week's intraday low prior to the miraculous reversal. 1872 is the September 2015 test low of the August low 1867 is the August 2015 low
Dow: Closed at 18,147.40
Resistance: 18,168 is the April 2016 recovery high 18,288 from March 2015 18,351 is the all-time high from May 2015
Support: 18,100 to 18,181: interim peaks in the December 2014 to July 2015 range 18,016 is the June 2016 peak 17,978 is the November 2015 peak The 50 day EMA at 17,731 17,600 is the rough bottom of the April to June range. 17,351 is the September 2014 all-time high. The 200 day SMA at 17,293 17,265 is a December 2015 closing low 17,245 is the November 2015 closing low 17,152 is the mid-July 2014 post bear market high 17,068 is the early July 2014 peak 17067 is the December 2014 low 17,063 is the June 2016 low 16,970 is the June 2014 former all-time high 16,946 is the June 2014 peak 16,933 is the September 2015 recovery intraday peak 16,740 is the mid-September peak and potential apex for a right shoulder to a head and shoulders pattern 16,736 is a prior all-time high from May 2014 16,670 is the December 2014 peak and the recent August 2015 relief bounce peak. 16,665 is the late August 2015 closing high 16,632 is the April 2014 peak 16,621 is the late February 2016 peak 16,589 is the December 2013 former all-time high 16,526 is the early January resistance 16,511 is the January 2016 intraday high 16,506 is the March 2014 peak 16,466 is the January 2016 recovery closing peak. 16,368 is the August 2014 low
ECONOMIC CALENDAR
July 8 - Friday Nonfarm Payrolls, June (8:30): 287K actual versus 175K expected, 11K prior (revised from 38K) Nonfarm Private Payr, June (8:30): 265K actual versus 170K expected, -6K prior (revised from 25K) Unemployment Rate, June (8:30): 4.9% actual versus 4.8% expected, 4.7% prior Hourly Earnings, June (8:30): 0.1% actual versus 0.2% expected, 0.2% prior Average Workweek, June (8:30): 34.4 actual versus 34.4 expected, 34.4 prior Consumer Credit, May (15:00): $18.6B actual versus $15.3B expected, $13.4B prior
July 12 - Tuesday Wholesale Inventories, May (10:00): 0.2% expected, 0.6% prior
July 13 - Wednesday MBA Mortgage Index, 07/09 (7:00) Export Prices ex-ag., June (8:30): 1.0% prior Import Prices ex-oil, June (8:30): 0.3% prior Crude Inventories, 07/09 (10:30) Treasury Budget, June (14:00): $50.5B prior
July 14 - Thursday Initial Claims, 07/09 (8:30): 265K expected, 254K prior Continuing Claims, 07/02 (8:30): 2124K prior PPI, June (8:30): 0.3% expected, 0.4% prior Core PPI, June (8:30): 0.1% expected, 0.3% prior Natural Gas Inventor, 07/09 (10:30)
July 15 - Friday Empire Manufacturing, July (8:30): 5.0 expected, 6.0 prior Retail Sales, June (8:30): 0.2% expected, 0.5% prior Retail Sales ex-auto, June (8:30): 0.4% expected, 0.4% prior CPI, June (8:30): 0.3% expected, 0.2% prior Core CPI, June (8:30): 0.2% expected, 0.2% prior Capacity Utilization, June (9:15): 75.0% expected, 74.9% prior Industrial Productio, June (9:15): 0.2% expected, -0.4% prior Business Inventories, May (10:00): 0.2% expected, 0.1% prior Mich Sentiment, July (10:00): 93 expected, 94.3 prior