by phil - October 3rd, 2014 8:07 am
Ouch, that really stings!
They say you can't keep a good market down but it remains to be seen whether or not we have a good market with almost all of August and September's BS gains (see any of my posts for warnings and hedge ideas) erased just 3 days into October.
As you can see from our Big Chart, the Russell, in particular, completed it's 10% drop yesterday and, as I said to our Members in yesterday's live Chat Room as we neared the bottom:
/TF/Jasu – Just a bit oversold and, as noted yesterday (and above) it's completing a 10% drop from 1,200 at 1,080, so that's a very firm line for a bounce and that's 20% of a 120-point drop, so we're looking for 25-point bounces to 1,105 (weak) and 1,130 (strong) now. Anything less than 1,105 today is a failure and, if not tomorrow, then expect more downside next week.
/TF is the Futures on the Russell 2000 index and already this morning we're back to 1,097, which is up $1,700 per contract (see how easy this is?) from our 1,080 entry and just a little shy of our expected weak bounce.
We do expect resistance at 1,100 so this is a good time to take profits off the table and we can go long again over that line or flip to the S&P Futures (/ES) over 1,950 or Nasdaq (/NQ) over 4,000 or the Dow (/YM) over 16,800. As long as they are all performing, we can be confident on the long side.
As we discussed with our Members earlier this morning, there's no particular reason to get bullish – this is just a technical bounce we expect off our 5% lines per our 5% Rule™ and, if they trun out to be weak bounces, then we can expect another 2.5-5% of downside next week. That means we can use those same index lines to go short if they fail as we would to go long if they succeed this morning – that will be all up…
by ilene - October 9th, 2010 1:43 am
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The September Non-Farm Payrolls report was not good news.
This is a remarkably unnatural US economic recovery, with gold, silver, and other key commodities soaring in price, the near end of the Treasury curve hitting record low interest rates, and stocks steadily rallying as employment slumps and the median wage continues to decline.
The US is a Potemkin Village economy with the appearance of prosperity hiding the rot of fraud, oligarchy, and political corruption.
As monetary power and wealth is increasingly concentrated in fewer hands, the robust organic nature of the economy and the middle class continues to deteriorate.
This is what is happening, and monetary policy cannot affect it. The change must come from the source, which is in political and financial reform. And the powerful status quo is dead set against it.
The long term trend of employment has not yet turned lower which would make the second dip ‘official’ from our point of view. But the prognosis does not look good.
by ilene - September 6th, 2010 5:15 am
Courtesy of JESSE’S CAFÉ AMÉRICAIN
When the US government announced a ‘better than expected’ headline growth number in its non farm payrolls report for August, a loss of ‘only’ 54,000 jobs versus a forecasted loss of 120,000 jobs, people had to wonder, ‘How do they do it? We do not see any of this growth and recovery in our day to day activity.’
Here’s one way that those reporting the numbers can ‘tinker’ with them to produce the desired results.
As you may recall, there is often a very large difference between the raw, unadjusted payroll number and the adjusted number. Seasonality plays the largest role, although there can occasionally be special circumstances. Since this is designed to be a simple example I am going to lump all the various adjustments that could be and call them the ‘seasonality factor’ since it is most usual and signficant.
Here is a chart showing the unadjusted and the adjusted numbers. As you can see, a seasonal adjustment can legitimately normalize the numbers for the use of planners and forecasters. This is a common function in businesses affected by seasonal changes. Year over year growth rates, rather than linear, comparisons, can also serve a similar function.
Quite a variance in numbers that are very large.
Since it probably is in the back of your mind, let’s address the infamous "Birth Deal Model" now, which I have advised may not be such a significant factor as you might imagine. This is an ‘estimate’ of new jobs created by small businesses. A comparison of the last few years demonstrates rather easily that this number is what is called ‘a plug.’
How can the growth of jobs from small business not been significantly impacted by one of the greatest financial collapses in modern economic history?
Certainly the Birth Death model offers room for statistical mischief. It is important to remember that it is added to the RAW number before seasonal adjustment, and that number has huge variances. So the effect of Birth Death is mitigated by the adjustment for seasonality. If it were added to the Seasonal number from which ‘headline growth’ is derived it would be a huge factor. But it is not the case, although the timing of the significant annual adjustments and additions is highly cynical, and supportive of number inflation.…
by ilene - July 2nd, 2010 10:30 pm
Courtesy of JESSE’S CAFÉ AMÉRICAIN
I like Mish Shedlock. He has intellectual integrity, and even when we occasionally disagree, as I recall over the inevitability of deflation and some of its particular consequences and manifestations, I listen to his arguments carefully. He draws conclusions that are difficult to fault. Most of the time we seem to be in agreement.
In his most recent blog, he indirectly poses an interesting question.
"Hidden beneath the surface the BLS Black Box – Birth Death Model added 145,000 jobs. However, as I have pointed out many times before, the Birth/Death numbers cannot be subtracted straight up to get a raw number. It contributed to this month’s employment total for sure, but the BLS will not disclose by how much."
Mish Shedlock, Jobs Decrease by 125,000
Here are the Imaginary Jobs added to the Non Farm Payrolls from the Birth Death Model of the BLS. As Mish reminds us, (thank you Mish. I have been nagging bloggers about this for years), the Imaginary Jobs are added to the unadjusted payroll numbers, which are dramatically impacted by the seasonal adjustments, which are sometimes quite significant.
I include this second chart show the Birth – Death numbers over time to show the historical trend. It is remarkable how ‘regular’ this number has been over the past six years despite an epic recession that devastated small businesses, which is purportedly what this model tracks.
Here is a visual depiction of the Seasonally Adjusted and the Unadjusted Non-Farm Payroll Numbers. As you can see, the adjustment is sometimes very significant. Remember, the Birth Death imaginary jobs are added to the unadjusted number, which is indicated in maroon on this chart.
So obviously one can calculate the ‘seasonality factor’ using a simple formula
Seasonality Factor (SF) = Seasonally Adjusted Number (SA) / Non-Seasonally Adjusted Number (NSA)
I do this each month in the Payrolls Spreadsheet that I maintain. I like to see if the BLS changes its calculations and assumptions over time, especially when they do major revisions.
by ilene - June 6th, 2010 11:41 pm
Was I too tough on President Obama this weekend, perhaps being a bit unfair about how responsible he now is for this wreck of an economy? Maybe.
But here’s a fact:
President Obama sandbagged The Street and many economists last Wednesday by telling us in his remarks to expect a "strong jobs number on Friday". These comments, which other Presidents have been smart enough not to make so close to an economic release of data, encouraged many analysts to take their numbers up for the May non farm payrolls release. Goldman went up into the 600 thousand range with the consensus in the low 500 thousands.
This sandbagging led to a 3% bludgeoning of the nation’s wealth when all major markets sold off as a result of the data being anything but an upside surprise.
The President’s off-handed comments, combined with his weaker-than-expected recovery’s job gains, were the proximate causes of this massive sell-off.
Here’s Ex-Wirehouse, writing at the Davian Letter, with the only take on Friday’s number you need to read:
The unmitigated disaster that was the most recent release of the NFP report leaves me in such a grim mood I will skip the cute part and get right to the issue at hand. For the month we created 435,000 jobs of which 411,000 were part time census workers for a total of only about 20k private sector jobs created. The consensus was any where from 150k to 200k (note to self short anything out of VP Joe Bidens Mouth) so it was a miss by a country mile.
I say it again, stop making speeches and start giving businesses a reason to hire.
Picture credit: Jr. Deputy Accountant
by ilene - February 5th, 2010 11:19 am
Courtesy of Jesse’s Café Américain
Well, we ‘hit’ the projected headline number on the nose, with a loss of 20,000 jobs. No credit to us, it was as much a judgement call (aka SWAG) as any product of careful measurement.
As you may have heard, the BLS did a ‘benchmark revision.’ This is Washingtonian for ‘revised the numbers back as far as anyone might care to remember.’
Here is a simple picture of the old and new headline numbers, back to the beginning of the spreadsheet we happen to be using these days.
[click on charts to enlarge]
The change is subtle, but pervasive. One thing of note is the shoving of more job losses into the past, setting up a more solid base for great job gains in the future, without embarrassing oneself by getting out of synchronization with the actual growth of the civilian population. There will be more ‘truing up’ of the numbers in the future.
Unemployment Rate as Cruel Farce
Regarding that ‘surprise drop’ in unemployment to 9.7%, this is wholly due to people falling off the unemployment benefits radar, and is essentially meaningless, if not downright misleading.
One may as well solve an unemployment problem by shipping people to Australia. Well, that has some historical precedent. Hard to tell who has gotten the better deal on that one, at least over time.
A better measure of unemployment is the Labor Force Participation Rate, which provides information about the total number of people employed as a percent of the population, without benefit of official banishment.
That number continued to drop again in January, from 64.9% to 64.6%.
by ilene - February 4th, 2010 12:33 pm
Courtesy of Jesse’s Café Américain
The markets breathlessly await the latest Non-Farm Payrolls Report for the US, which will be released tomorrow morning. January is the month in this report that contains the largest seasonal adjustments by far.
Here is a projection of what tomorrow’s numbers may look like, and their historical context. The raw number unadjusted for seasonality may be a loss of around 4,000,000 jobs.
It is no accident that the BLS does the major adjustment to its Birth-Death Model in January. Keep in mind that the Birth-Death adjustment is applied BEFORE seasonal adjustment, that is, to the raw, unadjusted number.
Given that the expected raw number will probably be around 3.5 million jobs lost, and then adjusted to a headline number much closer to zero, adding even 380,000 or so job losses to that does not result in such an enormous adjustment in January.
In other words, the adjustment is largely adjusted away by the seasonality. Nonsense, hardly connected to the real world, but quite clever bureaucratic sleight of hand really.
Saying all this, it seems almost needless to stress that any projection of the headline number is a tough call in January, because the seasonality has such enormous latitude. More in the nature of a SWAG than a proper forecast.
Then there is also the matter of the revisions to the prior two months at least, and the possibility of a revision to the whole series going back two years, which sometimes occurs.
So, we’ll look for a ‘headline number’ closer to zero than not, with a shade to the negative, maybe a loss of 20,000 or so. But we are very prepared to be surprised to the upside to a positive number, and downside to a loss of around 80,000. That speaks less to our inability to forecast, we hope, and more so to the arbitrary nature of the government’s willingness and ability to fiddle with the numbers.
With pretty colors, it may look more like a sideways chop than a plunge, especially in light of a greater negative from December which will be adjusted but not higher.
And as for the reaction of US equity markets in anticipation today?