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Next Session Video
- Jobs report beats, spurs market advance, but reality hollows out the move.
- Stocks rallying in anticipation of 'great' jobs report? As always the monthly report glosses the erosion of the US employee class.
- Ukraine situation getting worse not better.
- Leadership is still solid but some cracks are showing up and most quality areas are overextended after the last run.
Jobs report beat bounces stocks but they cannot hold the move as Ukraine situation intensifies.
Futures were totally flat ahead of the Friday jobs report. Not bad given the headlines from Europe revealing the Ukraine/Russia conflict is devolving, something we noted as a market issue on Thursday night.
Russia remains in Crimea. Russia is conducting new, some say massive, air exercises just off the Ukraine border. Russia closed the Crimean broadcast center leaving Russia the only news source (how Soviet-like). A third ship was scuttled in order to block Crimean ports from attack. Russia seemingly continually threatens counters to any sanctions imposed, suggesting they would 'boomerang' on the US and Europe. Gazprom, the natural gas supplier from Russia, is threatening to cut off Ukraine as in 2009, claiming that payment for gas is due right now or else.
China is again joining with Russia stating that China disapproves of the 'easy use' of sanctions and the 'threat' of sanctions against other nations.
Ironic, is it not? China takes the moral high ground against sanctions but it is okay for Russia to invade Crimea for the sole purpose of ensuring Russia's access to a warm water port, claiming of all things, it is protecting the human rights of Crimean citizens. Or how about Gazprom using threats to cut off energy supplies in winter under the guise of contract law? What would be the better choices, sanctions or just say to hell with it and go in and kick Russia out just as we should have done back in the 1940's when the USSR slapped up a makeshift wall in the middle of Berlin? We should have just bulldozed the damn thing down right then and there and the Soviets would have backed off or we would have kicked their butts right then and there. Instead we did nothing and thousands upon thousands died or lived in oppression and squalor for the next 40 years because nothing was done. Maybe we should just go in and dust it up. But we won't. We are no longer the supreme power in the air and on the sea according to our Defense Secretary.
Of course, I digress.
So futures jumped nicely and stocks jumped nicely at the open, rallying for . . . a few minutes. They spent the morning giving back gains and flipping into negative territory. Each session to the upside is met with selling. To the contrary, each slow open leads to gains. With the Russian 'situation' worsening, the half-life of better than expected, though frankly lackluster jobs growth, was about the time it took the opening bell to finish ringing.
Stocks did bottom midmorning and rallied off of that low, but 'rally' is an overstatement. They slowly crawled up off the lows but that is all they could manage. The large cap NYSE indices scratched out a small gain, but at best the action was again sluggish. The market was sluggish heading into the number, it tried to pick up afterward, but there was simply not enough good news to drive stocks in the face of the uncertainties.
SP500 1.01, 0.05%
NASDAQ -15.91, -0.37%
DJ30 30.83, 0.19%
Volume: Up on NYSE (8.5%), modestly higher on NASDAQ (1.75%). Some churn on the NYSE indices as they really could not advance but volume did. Similar on NASDAQ as it lost some ground on rising, above average volume. Not great action but not massively negative.
A/D: Pretty tame as you would expect given the index reads: -1.3:1 NYSE, -1.1:1 NASDAQ.
In the end the indices went nowhere and sit on top of a 5 week rally that has cracked some resistance but has not buried it. A test is not a bad thing at this point. The concern, of course, is whether the Russian/Ukraine situations devolves further and that is the biggest risk to stocks, at these levels, is that conflict.
Leadership is still good overall though a bit extended in some cases similar to the indices. In others there is ongoing rotation, e.g. large biotechs such as CELG, BIIB, GILD lose ground while financials gain as interest rates climb. Some rotation is healthy for the market, though as noted Thursday, financials typically do not provide great trading opportunities.
Jobs Report tops expectations, credited with the reason stocks have rallied.
You would think 175K jobs created in February was 350,000 jobs given the gush that ensued the data release. Is this where we have come, i.e. a 175K job month, 12K above a lowly 163K expected, is the stuff great economic expansions are made of? If so, we have succeeded in remaking our economy to that of an EU member.
On CNBC I heard the comment 'this is why stocks have been rallying.' New highs in the indices based on a measly 175K jobs? This is some evidence that the recovery, now on five years, is 'awesome?' Looking at the 110+M unemployed and out of the workforce, 46M on food stamps, the complete obliteration of the middle class, and we conclude thisis a great report? As Belushi said in 'Animal House,'
'What the **** happened to the Delta I used to know?' Except in this case, it is what happened to the American economy I used to know? This is more like a Japanese style prolonged depression with the high end reaping the reward, the low end reaping the handouts, the middle section footing the bill and watching their standard of living decline.
Is it now time for that wholly futile and stupid gesture be done on somebody's part as Otter suggested?
And we're just the guys to do it. Let's DO IT!!!
Perhaps, just this week we heard the Administration's budget and stimulus proposal. Sounds pretty much like a wholly futile and stupid gesture, i.e. doing the same thing again and hoping for a different result.
The details of the report, in addition to pathetic headline numbers, show just how weak the jobs picture is for the vast majority of Americans.
Older workers again getting all the jobs.
In an economy with over 110M eligible and able workers not working either because they cannot find a job or have given up looking, you would surmise that what jobs that are out there don't pay a whole hell of a lot. That is true. In that environment the employer has the choice of picking those with the most experience, those that bring the most impact to the table and pay them the same amount as they would someone younger with less experience.
Despite Seinfeld episodes about older workers petering out in the afternoon (Elaine held late afternoon meetings to drive off Jerry's father from the company she worked at), older workers have the experience and the know how to make things happen with minimal training costs. Thus they are the choice of the employers and it shows up in the division of who gets the few jobs that are available.
The result? The 55+ demographic is +4.9M jobs from 12/07 to February 2014. All other demographics are -3.1M jobs from 12/2007 levels.
Wages are not what the jobs report tries to suggest.
Average hourly earnings jumped 0.37% month/month in February and 2.18% year/year according to Friday's report. Heralded as a very good sign for the American worker, you have to ask how could wages be rising when there are so darn few jobs out there and so many unemployed? Damn good question.
Hours worked were lower (33.3 versus 33.5 in January and 33.8 year/year), surely weather related. That may have had something to do with fewer hours worked and earnings still paid to some who could not work through no fault of their own. That makes the 0.4% increase somewhat suspect, but even if you take that at face value, US wages are horribly lagging.
In addition to the average hourly earnings, the BLS reports average weekly earnings. They rose .078% month/month, 1.29% year/year, a far cry from hourly earnings. Definite difference: weekly earnings are not dependent upon the hours worked versus what is paid as in the average hourly earnings. This is your take home pay regardless of hours worked, not worked and paid, etc.
What that means becomes clear when you see it graphically:
Despite a 1.29% gain year/year, weekly earnings show that regardless of the number of hours worked, US citizens are earning less and less as the 'recovery' continues. Indeed, we just hit a 4+ year low, the lowest since the 'recovery' in 2009.
As the recovery continues, we earn less and less. This is CLASSIC depression data: an early spike when the liquidity is forced into the system, lifting the overall economy, then a slow, steady, inexorable decline as the economy fails to recover in the historical manner for the US. A chronic lack of investment due to overregulation, uncertainty as to the future, and a general hostility to free enterprise. In short, we are not dancing with who brung us as legendary coach Daryl Royal would say.
I believe there can be no doubt that regulation such as the ACA is impacting the economic activity and the reported numbers. Weekly earnings are declining year/year as we deleverage from full time jobs into part-time jobs. That creates some new jobs but it also reduces the take home pay, hence lower and lower weekly earnings growth.
In short, there IS NO widespread economic growth, just pockets of stronger areas such as oil and gas. Most jobs created are in the service industry because our economy simply does not have the investment to create the next new technologies that drive the new breadwinner jobs that raise our standard of living. Technology may replace some jobs but it creates new ones. Just look at the PC revolution. Just look at all of the Ebay companies that employ thousands in their own businesses.
Thus even as the longer term data shows lower and lower lows, those in the media and the experts that should know better focus only on the month to month changes. Thus they call 175K jobs 'really good' and the 'reason stocks have been rallying,' using rather pathetic data to proclaim the 'recovery is awesome.' Perhaps if you are a southern European country, but not the US. Again, what the **** happened to the US economy I used to know?
Euro/Dollar: Weaker again versus the euro.
1.3872 versus 1.3857 versus 1.3735 versus 1.3737 versus 1.3730 versus 1.3805 versus 1.3709 versus 1.3687 versus 1.3743 versus 1.3733 versus 1.3746 versus 1.3720 versus 1.3738 versus 1.3758 versus 1.3698 versus 1.3681 versus 1.3591 versus 1.3625 versus 1.3645 versus 1.3633 versus 1.3588 versus 1.3537 versus 1.3514 versus 1.3529
Dollar/Yen: Dollar moves higher still though well off intraday high. After flirting with that 101 level twice in February, the dollar bounced off a double bottom.
103.33 versus 103.07 versus 102.31 versus 102.19 versus 101.38 versus 101.82 versus 102.10 versus 102.38 versus 102.16 versus 102.47 versus 102.51 versus 102.35 versus 102.25 versus 102.43 versus 101.86 versus 102.14 versus 102.41 versus 102.41 versus 102.21 versus 102.33 versus 102.10 versus 101.37 versus 101.62 versus 101.37 versus 101.40 versus 102.30 versus 102.72 versus 102.11 versus 102.89 versus 102.64.
Bonds: Diving still, gapping through the 50 day EMA.
10 year: 2.79% versus 2.74% versus 2.69% versus 2.67% versus 2.60% versus 2.66% versus 2.69% versus 2.67% versus 2.70% versus 2.74% versus 2.73% versus 2.75% versus 2.73% versus 2.71% versus 2.75% versus 2.73% versus 2.76% versus 2.72% versus 2.67% versus 2.68% versus 2.70% versus 2.67% versus 2.62% versus 2.60% versus 2.67% versus 2.70% versus 2.68% versus 2.75% versus 2.76% versus 2.73% versus 2.77% versus 2.86%
Oil: 102.54, +1.00. Bouncing again off the Thursday 200 day SMA test, holding support where it had to, right on top of the late December 'hump' in the double bottom.
Gold: 1337.80, -13.90. Back and forth all week, up one day big, down the next. Strong move higher, stalling out some this week, but still trending up the 10 day EMA.
Stats: -15.9 points (+0.37%) to close at 4336.22
Volume: 2.15B (+1.75%)
Up Volume: 985.05M (+32.88M)
Down Volume: 1.15B (-20M)
A/D and Hi/Lo: Decliners led 1.04 to 1
Previous Session: Advancers led 1.07 to 1
New Highs: 171 (-59)
New Lows: 9 (-1)
Stats: +1.01 points (+0.05%) to close at 1878.04
NYSE Volume: 632M (+8.4%)
A/D and Hi/Lo: Decliners led 1.36 to 1
Previous Session: Advancers led 1.32 to 1
New Highs: 210 (-51)
New Lows: 65 (+3)
Stats: +30.83 points (+0.19%) to close at 16452.72
Good run for five weeks, still trending higher with some key upside breaks on the week. Nice moves, the uptrend continues. On the counter, still close to recent resistance and could slip. Long moves leaves the indices vulnerable to selling if the European situation worsens. Those are, however, the problems of a good upside run. The indices could come back and test and be on their way again.
There is some rotation ongoing and there is also a lot of very bullish sentiment. It could be a bit bumpy with rotation and the Ukraine issue worsening, but unless that really gets ugly the market likely doesn't suffer a really sharp decline as a result.
NASDAQ: Faded to the 10 day EMA after a big upside gap Tuesday on the Russian relief rebound. Still trending higher, still holding the new post-bear market highs with ease. The only issue for it is length of time to the upside. They all eventually end.
SOX: Great week with a gap to a new post-bear market high and a continued run into Thursday, pushing the break above the November trendline. Friday SOX gapped higher but then gave up the move. A bit tired but looking very good.
RUTX: Big break higher Tuesday to a new high took RUTX to the mid-2013 trendline and over the long, long term trendline from 1997 to the early 2000's. Nice 1-2-3 test into Friday.
SP400: Broke over the November 2012 upper channel line Tuesday, tested in a tight lateral move Wednesday to Friday. Big run but looks very solid in this test of the break through the upper channel.
DJ30: Broke higher and continued upside into Friday. Now just 130 points off the December peak. Following along and that is okay for now, but concerned when the Dow hits the prior peak.
Telecom: CAMP, IDCC remain solid. Some interesting and surprising improvement from the likes of BBRY (yes Blackberry) and other such as PNTR.
Financial: Steady (and slow) rise continues, e.g. JPM, WFC
Electronics: Overall very good as KLAC, ALTI, IMOS, OVT remain in solid shape, but some are cracking, e.g. AEIS, possibly SCTY.
Drugs: Continue showing some outward rotation: GILD, BIIB. May just be a test as stocks such as VRX test the 50 day EMA and bounce. Others are testing the 50 day and not bouncing as much, e.g. KERX. INO is heavy but holding. Other smaller issues are doing decently, e.g. RMTI, TKMR, the same ones performing all week while the bigger brothers struggled.
Big Names: AAPL, GOOG, PCLN still trending higher but very sluggish on the week.
Bulls are rapidly approaching the recent highs where the market suffered the January selloff. In addition, there is a disproportionate amount (a.k.a. a bu**load) of bulls and bullish commentary on the financial stations. Today CNBC was a veritable cornucopia of bulls from the early comments on the jobs report, the gushing about how companies are so wonderful, and later how the bulls are throwing in the towel, capitulating to the upside. Perhaps they are, and that is what keeps a bull run running: as more give in the money is dragged into the market, pushing it higher.
At some point, however, the money is all in. That is why the bulls/bears read remains quite relevant and important to watch as the market moves. It is not the determinative indicator, but it is a flag, a signal, to watch for possible deterioration and breakdowns in the market. There are some breaks in the drug stocks as bulls approach the December levels. Could be just rotation to other areas or it could be a sign of leaders starting to crack. Definitely deserves our attention.
VIX: 14.11; -0.1
VXN: 15.23; +0.29
VXO: 12.97; -0.01
Put/Call Ratio (CBOE): 0.82; -0.01
Bulls and Bears:
Bulls continue upside though at a slower pace: 54.6 versus 53.5 from 46.5 and 41.8 before that.
Bears dropped sharply: 15.1 from 17.2 for two weeks and 17.4 for three weeks prior to that.
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.
Note the extreme bullishness: it was this high in 2007 at the crash, in early 2005 as well.
Bulls: 54.6% versus 53.5% versus 46.5% versus 41.8% versus 45.9% versus 53.1% versus 57.6 versus 56.1 versus 60.6% versus 61.6% versus 60.0 versus 58.2 versus 57.1 versus 55.7 versus 53.6 versus 52.6 versus 55.2% versus 52.6 versus 49.5 versus 42.3% versus 45.4 versus 46.4% versus 44.3% versus 42.3% versus 37.1% versus 37.1% versus 38.1% versus 43.3%. Getting even more extreme . . .
Background: Last undercut 35%, the threshold for bullishness, in early June 2012.
Bears: 15.1% versus 17.2% versus 17.2% versus 17.4% versus 17.4% versus 15.3% versus 15.1 versus 15.3% versus 15.2% versus 15.2% versus 14.0 versus 14.3 versus 14.3 versus 14.4 versus 15.5 versus 15.5% versus 15.6% versus 16.5% versus 18.5 versus 21.6% versus 20.6% versus 18.6% versus 20.6% versus 21.6% versus 22.7% versus 23.7% versus 23.8% versus 21.6%.
Background: Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.
First order of business is getting through the weekend. Unlike last weekend when it seems our leaders were caught flatfooted by the Russian incursion into Ukraine (though you were not; heck you were taking some nice gain in anticipation of the invasion), this weekend there is anxious worry about what further problems may develop given all the rhetoric hurled Thursday and Friday.
Growth lagged to end the week after leading the run to the new highs. Possible rotation starting to favor S&P stocks, e.g. financials as they perked up on the week. Definitely don't want to see growth drop off the lead, however, because it is the best indicator of continued upside: if growth stocks are moving up, it is in anticipation of economic activity moving higher as well.
Difficult to factor in geopolitical issues into your buys and sells, but it works into the market through the patterns stocks show. After a five week move higher and the last upside spurt many of the leading areas are extended near term, particularly the 'names' that you and most everyone knows. There are, however, stocks showing up in good patterns or showing pullbacks to support that set them for a new move higher. With stocks continuing to work into position to rally and support the move upside, that bodes well for the move. The breaks in some leaders, e.g. big biotechs, demand our attention and we will see if others come in to take their place.
We found some stocks in position to move, but they are not major themes of new stocks ready to take off. Many of those have already made the moves, e.g. internets as discussed. They are going to need a test and the key is if new groups move up. Again, this weekend we see some nice plays, but not groups setting up moves. That makes it a bit more difficult and just means we need to be patient after banking a lot of gain on internet and other plays of late, letting the plays set up and come to us.
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4336.22
4289 is the July 2000 recovery high
4277 is the March lower gap point
4246.55 is the January 2014 peak
4237 is the upper channel line for the November 2012 to present uptrend.
The 50 day EMA at 4190
4131 is the November 2012 trendline
4104 is the lower gap point from 12/20/13
4070 is the series of highs from late November/early December
3991 is the prior November 2013 high and the post-bear market high.
3967 is the October 2013 post-bear market high.
3855 is the November low
The 200 day SMA at 3838
3819 is the early October high
3801 is the September 2013 high.
The October low at 3750
3697 is the August high and a prior post-bear market high in the recovery.
S&P 500: Closed at 1878.04
1849.44 is the recent all-time high.
The 50 day EMA at 1825
1815 is the December 2012 up trendline
1808 is the November and December 2013 twin peaks
1775.22 is the October prior all-time high
1768 is the December 3013 low
The 200 day SMA at 1732
1730 is the September 2013 peak
1710 is the August 2013 peak.
1698 to 1700 are the July and August interim highs
1687 is the May high and post-bear market high
1685 is the mid-August 2013 upper gap point
1657 is the late August upper gap point
1654 is the June 2013 peak
1646 is the October 2013 low just before the surge into early 2014
1627 is the August 2013 low
Dow: Closed at 16,452.72
16,589 is the December 2013 all-time high
16,257 is the January 2014 low
16,242 is a lower trendline off the 11/2012 low
16,179 is the November 2013 peak.
The 50 day EMA at 16,100
15,739 is the December 2013 low
15,696 is the September 2013 peak
15,659 is the August 2013 peak
The 200 day SMA at 15,596
15,542 is the May 2013 intraday high
15,318 is the June closing high
15,050 from the August 2013 interim recovery high
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,762 is the August 2013 low
14,551 is the June 2013 intraday low on the selloff (14,659 closing)
14,198 from the October 2007 high
14,149 is the February 2013 high
14,022 from 7-07 peak
14,010 from the early February 2013 consolidation
March 7 - Friday
- Nonfarm Payrolls, February (8:30): 163K expected, 113K prior
- Nonfarm Private Payrolls, February (8:30): 170K expected, 142K prior
- Unemployment Rate, February (8:30): 6.6% expected, 6.6% prior
- Hourly Earnings, February (8:30): 0.2% expected, 0.2% prior
- Average Workweek, February (8:30): 34.4 expected, 34.4 prior
- Trade Balance, January (8:30): -$37.3B expected, -$38.7B prior
- Consumer Credit, January (15:00): $11.8B expected, $18.8B prior
March 11 - Tuesday
- Wholesale Inventories, January (10:00): 0.4% expected, 0.3% prior
- JOLTS - Job Openings, January (10:00): 3.990M prior
March 12 - Wednesday
- MBA Mortgage Index, 03/08 (7:00): 9.4% prior
- Crude Inventories, 03/08 (10:30): 1.429M prior
- Treasury Budget, February (14:00): -$203.5B prior
March 13 - Thursday
- Initial Claims, 03/08 (8:30): 329K expected, 323K prior
- Continuing Claims, 03/01 (8:30): 2925K expected, 2907K prior
- Retail Sales, February (8:30): 0.2% expected, -0.4% prior
- Retail Sales ex-auto, February (8:30): 0.2% expected, 0.0% prior
- Export Prices ex-ag., February (8:30): 0.2% prior
- Import Prices ex-oil, February (8:30): 0.3% prior
- Business Inventories, January (10:00): 0.3% expected, 0.5% prior
- Natural Gas Inventor, 03/08 (10:30): -152 bcf prior
March 14 - Friday
- PPI, February (8:30): 0.2% expected, 0.2% prior
- Core PPI, February (8:30): 0.1% expected, 0.2% prior
- Michigan Sentiment, Preliminary March (9:55): 82.0 expected, 81.6 prior
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