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Dallas, TX
May 1, 2008, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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Employment Bellwethers Send Unclear Message
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What's Hot Today: |
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Global stock markets were mixed overnight as the markets tried to figure out
what the Fed's latest set of moves means. Meanwhile the countdown to more data
for today and tomorrow continued.
Today's Economic Calendar:
- 8:30a.m. Initial Jobless Claims For Apr 26 Week. Expected: +18K. Previous: -33K.
- 8:30a.m. Mar Personal Income. Expected: +0.4%. Previous: +0.5%.
- 8:30a.m. Mar Personal Spending. Expected: +0.2%. Previous: +0.1%.
- 10:00a.m. Apr ISM Manufacturing Business Index. Expected: 47.5. Previous: 48.6.
- 10:00a.m. Mar Construction Spending. Expected: -0.6%. Previous: -0.3%.
- 10:00a.m. DJ-BTMU Business Barometer For Apr 12. Previous: +0.3%.
News For Thought
CALPERS takes hit on late entry into real estate market. The California employee pension fund could register big losses in a $970 million land deal located north of Los Angeles. The usually savvy pension fund bought the land near the top of the market in February 2007 and reportedly may have to return the land to creditors and forfeit its investment, reported The Wall Street Journal.
Farm bill proposal moves slightly toward cutting farm subsidies. The White House is blustering about a new Senate Farm bill that would cut government subsidy payments to farmers that make more than $950,000 per year.
According to The Wall Street Journal "Under the proposal, direct payments, which provide income support, would be phased out for farmers with incomes of more than $950,000. An initial 10% cut would be made on direct payments for farmers with incomes above that level, and payments would be further ratcheted down as an individual farmer's income rose. The limits would be on top of a planned across-the-board 2% cut in direct payments, which have totaled more than $5 billion a year since 2004."
Egypt to give 30% raise to government workers. The Egyptian government will double its proposed raises to goverment workers by 30% of current levels as Egypt battles public discontent due to rapidly growing inflation.
State sales tax revenues are starting to decrease as consumer spending slows.
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Employment Bellwethers Send Unclear Message
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Small Glimmer Of Hope At The Upper End Of Employment Scale
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The Federal Reserve lowered the Fed Funds rate and signaled that it will pause its rate lowering moves unless of course it sees need to lower rates again.
And it's the central bank's less than emphatic message to the markets that led to Wall Street's fade yesterday after a nice rally developed in expectations of something more positive and concrete from the Fed.
But who can blame Bernanke and Company for hedging their bets? After all the economic data is far from signaling that all is well enough in the economy. One example is the uncertainty about tomorrow's employment report where economists surveyed by The Wall Street Journal are expecting a loss of 75,000 jobs on top of last month's 80,000 decline in non-farm payrolls.
Our indicators were a bit off last month, as they suggested that a positive surprise might have been in the offering. So it is with some trepidation that we deliver our monthly installment of the employment report preview. As usual we'll try to divine, or at least try to surmise what the market is trying to factor in with regard to the all important number.
Chart Courtesy of StockCharts.com
Our first chart, Manpower Inc. (NYSE: MAN, above) is a pleasant surprise, as the stock has risen above its 200-day moving average. This suggests that Wall Street is betting on an improvement in the employment picture at the top of the food chain, the executive level.
This comes despite the firm issuing a weak forecast for the employment picture in the second quarter, where its quarterly survey showed only one industry sector as increasing its need for workers, the transportation and public utility sector.
Chart Courtesy of StockCharts.com
Our second chart, Monster Worldwide (Nasdaq: MNST, above) paints a different picture. This stock is a bellwether for the hiring action in the middle of the curve, at the technical and clerical level for corporate America. Monster remains in a down trend, despite a recent attempt to bottom out.
Chart Courtesy of StockCharts.com
Finally, we look at our small business barometer, Administaff (NYSE: ASF). This payroll and benefit administrator firm offers decent insight into the small business segment of the economy. As small business expands, so does Administaff's business. Here, there is a small, but almost non-existent glimmer of hope, as the stock has bottomed out and is trying to rise, although it remains well below its 200-day moving average.
Conclusion
Economists are betting on yet another weak employment report. And there is little reason to argue with their expectations, at least based on the expectations of traders and their bets on our three employment related stocks.
If there is going to be a surprise, it may be that job losses are smaller than the expectations. But that may or may not be seen as positive by Wall Street after the number is released tomorrow.
Our concern for the market at this time is that the S & P 500 has not been able to close above 1400, and that the Fed is being seen as less than assertive in its actions. That means that we can expect a volatile Friday if the employment report is anything but clear in its data and implications for the future of interest rates.
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Technical Summary: |
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Chart Courtesy of StockCharts.com
S & P Remains Below 1400 After Fed Cut
The S & P 500 and the Nasdaq Composite both ran into trouble below their 200 day moving averages,as the Federal Reserve left the door open for more rate cuts if needed.
Still, we're headed for a new month where the market tends to rally in the first five trading days. Also important will be the employment report on Friday.
Still as more time passes, if there is no major break in prices, the chances of an upward break out and an extension are likely to rise.
That could still change, though, especially in a jittery market such as this one. For now, though, we are looking to add positions to our growth stock list. We have added one new position. See below.
Our S & P timing model is still on the long side and we still have several open positions in our growth stock list.
Chart Courtesy of StockCharts.com
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Market Moves - Stock Of The Day
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Homebuilders ETF (AMEX: XHB) Loses Steam
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The Homebuiders ETF (AMeX: XHB) is starting to fade, signaling a loss of confidence by value investors and bottom fishers.
Chart Courtesy of StockCharts.com
A rally has to start somewhere. And rallies after long declines are usually spurred by buying from long term value investors who often have a multi-year time frame.
Thus, if such a rally fails after several months it signals that this important segment of Wall Street is losing confidence. And that's what may be happening to the housing segment.
To be sure, it's early since the sector bottomed in December 2007. Yet, XHB has risen some 47% from its bottom, a nice run for a four month stint in this market. And the housing market doesn't seem to be getting any better.
In other words, it's possible that the long term money may be reconsidering and is starting to take money off the table.
A more sobering thought is that this group of investors has decided that since the Fed may have stopped lowering interest rates, any potential recovering for housing may still be a long time away. |
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