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

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation

Thursday Bounce: Trend Busters, Swing Signals and Trend Leaders for July 9, 2009

This is a quick post to announce that we have published Thursday's Trend Leaders, Swing Signals and Trend Busters at Alert HQ . All are based on daily data. Today we have the following: 72 Swing Signals -- A couple of days ago we had 35 signals, today we have twice as many. Happily, we now have 65 BUY signals, a mere 4 SELL Signals plus 3 Strong BUYs. Whoo-hoo! 56 Trend Leaders , all in strong up-trends according to Aroon, MACD and DMI. There are 18 new stocks that made today's list and 60 that fell off Tuesday's list. 48 Trend Busters of which 5 are BUY signals and 43 are SELL signals The view from Alert HQ -- Talk about mixed signals. If you look at our Swing Signals list you would think the market was in the middle of a big bounce. BUY signals are swamping the SELL signals and we even have a few Strong BUYs. Yes, there's a good sprinkling of tech stocks and tech ETFs but the distribution is pretty broad-based with a good number of different sectors represented, eve

Trade Radar gets another update

Some of our data sources changed again and it impacted our ability to load fundamental/financial data. In response, we are rolling out a new version of the software: 7.1.24 The data sourcing issues are fixed and some dead links in the Chart menu were removed. So whether you are a registered user or someone engaged in the free trial, head over to our update page and download the latest version. The update page is here:   https://tradingstockalerts.com/software/downloadpatch Contact us if you have questions or identify any new issues.