Getting Technical: Weekend Update
by Chart School - February 3rd, 2012 10:35 pm
Courtesy of Doug Short.
Here’s the latest weekend update from Serge Perreault, a Chartered Accountant and market technician located near Montreal, Canada. Serge has been following the U.S. market in a series of weekly charts. Here is his update on the S&P 500.
The S&P 500 resumed its ascension, on 7% above-average and on strong but near resistance momentum. The index is about to test 2 resistances, 19 points or 1.4% below its April 2011 weekly close peak.
Note: For newcomers to technical analysis, here are brief explanations for the two key indicators that Serge features:
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DiggS&P 500 Snapshot: Strong Rally to Close the Week
by Chart School - February 3rd, 2012 5:35 pm
Courtesy of Doug Short.
A much better than expected monthly jobs report triggered a surge at the open followed by a smaller pop at 10 AM when a strong ISM Services number was reported. The index drifted even higher in the afternoon for a closing gain of 1.46% for the day and 2.17% for the week. The index is up 6.94% year-to-date and only 1.37% below its interim high at the end of April 2011.
From an intermediate perspective, the S&P 500 is 98.8% above the March 2009 closing low and 14.1% below the nominal all-time high of October 2007.
Below are two charts of the index, with and without the 50 and 200-day moving averages.
For a better sense of how these declines figure into a larger historical context, here’s a long-term view of secular bull and bear markets in the S&P Composite since 1871.
For a bit of international flavor, here’s a chart series that includes an overlay of the S&P 500, the Dow Crash of 1929 and Great Depression, and the so-called L-shaped “recovery” of the Nikkei 225. I update these weekly.
These charts are not intended as a forecast but rather as a way to study the current market in relation to historic market cycles.
Some Facts About the ”Falling” Unemployment Rate
by Chart School - February 3rd, 2012 3:35 pm
Courtesy of Doug Short.
Here are some quick notes about the today’s announcement of a “falling” unemployment rate.
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Some of those labor force numbers are due to annual revisions. However, the point remains: People are dropping out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low.
Jobs Report at a Glance
Here is an overview of today’s release.
- US Payrolls +243,000 – Establishment Survey
- US Unemployment Rate Declined .2 – Household Survey
- Average workweek for all employees on private nonfarm payrolls was +.1 to 34.4 hours
- The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged higher 0.1 hour to 33.7 hours in November.
- Average hourly earnings for all employees in the private sector rose by 4 cents to $23.24
Recall that the unemployment rate varies in accordance with the Household Survey not the reported headline jobs number, and not in accordance with the weekly claims data.
January 2012 Jobs Report
Please consider the Bureau of Labor Statistics (BLS) January 2012 Employment Report.
Total nonfarm payroll employment rose by 243,000 in January, and the unemployment rate decreased to 8.3 percent, the U.S. Bureau of Labor Statistics reported today. Job growth was widespread in the private sector, with large employment gains in professional and business services, leisure and hospitality, and manufacturing. Government employment changed little over the month.
Unemployment Rate – Seasonally Adjusted
Nonfarm Employment – Payroll Survey – Annual Look – Seasonally Adjusted
Actual employment is about where it was in 2001.
Nonfarm Employment – Payroll Survey – Monthly Look – Seasonally Adjusted
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What would you do? A big opportunity was at hand the first of December, is it still?
by Chart School - February 3rd, 2012 1:58 pm
Courtesy of Chris Kimble.
CLICK ON CHART TO ENLARGE
What would you do at (3)? Is this another opportunity to be long the 500 index or be a buyer at (3)? Is the tool in the top half of the chart a good tool to help build portfolios?
In hindsight…If you knew of this tool in early December would it have helped you go long this market?
Send me an email with your thoughts and opinions or if you like to know more about the tool in the top half. Send your email to kimblechartingsolutions@gmail.com I will post the complete chart on Monday.
Hope all of you have a great Super bowl weekend…Chris
Tech Note: The Bouncing Austrailan Dollar
by Chart School - February 3rd, 2012 1:35 pm
Courtesy of Doug Short.
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
The S&P 500 and the Australian Dollar have shown interesting degree of correlation over the past couple of years.
Over the past year several peaks in the 500 index coincided with peaks in the Aussie Dollar. Keep a close eye on the AUD$ to see how it acts at prior key resistance.
If history is a guide, a breakout in the AUD$ would be a positive for the 500 index at resistance and would suggest higher prices are ahead for the 500 index.
(c) Kimble Charting Solutions
blog.kimblechartingsolutions.com
ECRI Recession Call: Growth Index Contraction Eases Again
by Chart School - February 3rd, 2012 12:35 pm
Courtesy of Doug Short.
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -5.2 in its latest reading, data through January 27. The latest public data point is a reduced contraction from last week’s -6.6 (a slight downward revision from -6.5). This is the highest level (i.e., least negative) since late August. The underlying WLI increased fractionally from an adjusted 122.7 to 123.2 (see the third chart below).
Early last December Lakshman Achuthan, the Co-founder of ECRI, spoke with Tom Keene on Bloomberg Television’s Surveillance Midday. You can watch the video on the ECRI website here, with bold heading Recession Update. The eight-minute video is well worth watching in its entirely. I’ve retained this link in my commentary since my December 9th weekly update because ECRI continues to feature it as the lead on its website, which I interpret as an ongoing affirmation of their recession call.
Obviously, ECRI’s recession call remains quite controversial in financial circles. The perma-bears are generally supportive of the forecast, while the predominantly bullish mainstream financial view ranges from highly skeptical to dismissive. The credibility of the ECRI call has been undermined by a number of recent economic indicators, including today’s better-than-expected decline in the unemployment rate. Likewise the unabated rally in major US indexes since the ECRI call casts additional doubt on their position.
For a detailed analysis of the ECRI WLI, see these fascinating articles by Dwaine van Vuuren, CEO of PowerStocks Investment Research:
- US Recession – An Opposing View (January 3)
- Using the ECRI WLI to Flag Recessions (January 10)
- Further Improving the Use of the ECRI WLI (January 17, coauthored with Georg Vrba)
Here is Dwaine’s latest snapshot of the WLI, including today’s data, which should be studied in the context of his January 17 article with Georg Vrba:
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500 Index and Australian $ bouncing together…watch the AUD$ right now!
by Chart School - February 3rd, 2012 11:48 am
Courtesy of Chris Kimble.
CLICK ON CHART TO ENLARGE
The S&P 500 and the Australian $ have a decent correlation ratio over the past couple of years.
Several peaks in the 500 index took place right along with peaks in the Australian $ over the past year. Keep a close eye on the AUD$ to see how it acts at prior key resistance.
If history is a guide, a breakout in the AUD$ would be a positive for the 500 index at resistance!
Employment Rate Down 0.2% to 8.3% on 243K New Jobs
by Chart School - February 3rd, 2012 10:35 am
Courtesy of Doug Short.
Note from dshort: Today’s release from the Bureau of Labor Statistics includes revisions as a result of the annual benchmarking process and the updating of seasonal adjustment factors. Also, household survey data for January 2012 reflect updated population estimates.
Here is the lead paragraph from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:
Total nonfarm payroll employment rose by 243,000 in January, and the unemployment rate decreased to 8.3 percent, the U.S. Bureau of Labor Statistics reported today. Job growth was widespread in the private sector, with large employment gains in professional and business services, leisure and hospitality, and manufacturing. Government employment changed little over the month.
Today’s numbers are better than the briefing.com consensus, which was for 155K new nonfarm jobs and an unemployment rate of 8.5%. Briefing.com’s own estimate was closer at 225K nonfarm jobs and an 8.4% rate.
The unemployment peak for the current cycle was 10.0% in October 2009. The chart here shows the pattern of unemployment, recessions and both the nominal and real (inflation-adjusted) price of the S&P Composite since 1948.
Unemployment is usually a lagging indicator that moves inversely with equity prices (top chart). Note the increasing peaks in unemployment in 1971, 1975 and 1982. The inverse pattern becomes clearer when viewed against real (inflation-adjusted) S&P Composite, with its successively lower bear market bottoms. The mirror relationship seems to be repeating itself with the current and previous bear markets.
The second chart shows the unemployment rate for the civilian population unemployed 27 weeks and over. The January number is 3.6% — unchanged from last month. This measure gives an alternative perspective on the relative severity of economic conditions. As we readily see, this metric remains significantly higher than the peak in 1983, which came six months after the broader measure topped out at 10.8%.
The next chart is…
Dollar breaking steep falling resistance…harvest shorts!
by Chart School - February 3rd, 2012 9:53 am
Courtesy of Chris Kimble.
On 1/12 the “Power of the Pattern” reflected a bearish wedge was in place in the U.S. $, which reflected a two-thirds chance the dollar would move lower in price. (see post here) For those that took this pattern as an opportunity to short the Dollar, its been a good ride. See below for action to be taken…
CLICK ON CHART TO ENLARGE
For those of you that have be short/scoring on defense in the Dollar, harvest the gains. The day is long from over for sure and the Dollar could turn tail and keep moving south. Due to support being at hand, add some pocket change by taking profits.
Earning Less – Why The Poor Get Poorer
by Chart School - February 2nd, 2012 6:35 pm
Courtesy of Doug Short.
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
Working harder – earning less. That is what today’s release of productivity and labor costs showed us. With that report also comes the suspicion that a lot more people would be reciting the classic prose of Johnny Paycheck’s “Take This Job And Shove It” if they thought they had an option to find work elsewhere.
This report, of course, shines the light on one of the primary reasons why the poor keep getting poorer, even as the economy struggles to recover at the weakest rate of any post-WWII period on record. In the most recent release of the data, productivity slowed in the fourth quarter even as hours worked rose. Nonfarm business productivity eased to an annualized 0.7 percent in the fourth quarter as hours worked increased an annualized 2.9 percent after a 0.9 percent gain the third quarter. This in turn is also a bad sign for corporate profit margins as unit labor costs rose sharply at an annualized 1.2 percent, following a 2.1 percent decrease in the third quarter. Can you say “margin compression?”
Compensation did rise slightly in the 4th quarter but is still running at a negative rate of 1.2% from last year. Working longer hours but earning less — the plight of the average American continues.
However, beyond the media headlines, there is more to the current levels of productivity and labor costs than meets the eye. The decline in real hourly compensation has also dragged output per hour of all persons lower. This is an interesting data point as the media continues to try and point to all the reasons why we are NOT currently in a recession. However, the last time we had falling output and negative real compensation was during the last recession in 2008.
Furthermore, when it comes to a recovery in employment, it is cheaper, particularly when the government keeps extending 100% tax credits for businesses capital good spending, to implant technology whenever possible to keep employment down. Businesses remain keenly focused on the bottom line, particularly as payroll and benefit costs continue to climb each year as aggregate demand drags. However, if businesses can increase productivity without increasing employment, those net gains…
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