Skip to main content

Payroll report last piece in the puzzle?


As so many economic reports have begun to show that the Great Recession is beginning to recede, many analysts have pointed to the employment situation as a nearly intractable problem. It was expected that employment would be picking up by now, given how many other indicators were showing recovery. Yet job creation has been lagging and layoffs have continued at uncomfortably high levels.

Friday, however, the Nonfarm Payrolls report delivered the last piece in the puzzle. The report was better-than-expected in a number of different dimensions. Only 11,000 jobs were lost in November, far less than the 125,000 median estimate. Prior months were revised to show smaller drops. Also providing a big surprise, the unemployment rate declined to 10.0%, from a previous reading of 10.2%.

So economic fundamentals are looking up. How are things doing from a technical analysis point of view?

The view from Alert HQ --

Charts of some of the statistics we track at Alert HQ are presented below:



This first chart presents our moving average analysis. We have observed that when the number of stocks above their 50-day moving average exceeds the number of stocks whose 20-day MA is above their  50-day MA, stocks tend to rally. Stated simply when looking at the chart above, when the yellow line moves above the magenta line, stocks should rise. That is the situation that is just beginning to play out now. A further move in this direction should lead to clear new highs in the major market averages.

Not shown in the chart above is that we now have 4426 stocks and ETFs above their 20-DMA compared to only 2811 at the end of the previous week. That shows stocks are beginning to surge and bodes well for further gains.

The next chart provides our trending analysis. It looks at the number of stocks in strong up-trends or down-trends based on Aroon analysis.



Here we also see some very positive developments. Finally, after several weeks when this chart has been essentially non-committal, the number of stocks and ETFs in strong up-trends is beginning to move up noticeably. Now, as the yellow line surges upward, it becomes very unlikely that stocks will weaken.

Conclusion --

The Alert HQ statistics are painting a bullish picture. Last week's economic reports supported the bullish outlook.Yet stocks didn't break out to significant new highs. What catalysts can we expect?

A very modest set of economic reports is due this week. We will see consumer credit, wholesale inventories, crude inventories, initial jobless claims, continuing claims, export and import prices, retail sales, University of Michigan consumer sentiment and business inventories. The focus, therefore, will primarily be on the consumer this week, which takes on added importance during this holiday shopping season.

The other factor that will influence stocks is the dollar. Appreciation in the dollar was credited with keeping a lid on Friday's rally. With many analysts saying the dollar is still oversold, the dollar could play the spoiler here. On the other hand, I find it unlikely that stocks will reverse their up-trend and begin to head down.

In summary, the pieces of the puzzle are falling into place. Maybe employment is not yet on a new positive trajectory but "less bad" has almost become "better".

Comments

Popular posts from this blog

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position.

This first post in the series starts at the beginning: getting good investment ideas.

Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets.

As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professionals and …

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas.

Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what to lo…

Running TradeRadar on Windows 7 and Windows 8

Development of the original TradeRadar Stock Inspector software was begun back in the days before Windows 7 and Windows 8 were available.

As these newer versions of Windows have become more popular, we have heard from some users that they are having problems installing and running TradeRadar on their newer PCs.

The good news is that TradeRadar will work just fine on Windows 7 and Windows 8. All you have to do is adjust the Windows Compatibility Settings to ensure TradeRadar runs as intended.

It is recommended that you can apply Compatibility Settings when running the initial installation; however, it is also possible to apply Compatibility Settings after the program has been installed.

Prior to installation
After downloading the install program, go to the folder where you have stored the TradeRadarStkInsp_7_Setup.exe or TradeRadarStkInsp_7_PRO_Setup.exe executable. Right-click on the executable file and select Properties. Click the Compatibility tab. Adjust the Compatibility mode to …