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Dallas, TX
December 3, 2009, 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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Pre-Employment Data Indicators Suggest Little Change In Jobs Picture Ahead
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What's Hot Today: |
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U.S. stock index futures were pointing to a higher opening
on Thursday morning. It's a busy day for economic statistics and the employment
report is due out tomorrow.
Today's Economic Calendar:
- Chain Store Sales
- Monster Employment Index
- Jobless Claims 8:30 AM ET
- Productivity and Costs 8:30 AM ET
- 30-Yr Bond Announcement 9:00 AM ET
- ISM Non-Mfg Index 10:00 AM ET
- EIA Natural Gas Report 10:30 AM ET
- 3-Month Bill Announcement 11:00 AM ET
- 6-Month Bill Announcement 11:00 AM ET
- 3-Yr Note Announcement 11:00 AM ET
- 10-Yr Note Announcement 11:00 AM ET
- Fed Balance Sheet 4:30 PM ET
- Money Supply 4:30 PM ET
News For Thought
Health care bill hits "gridlock" in Senate. Markets love gridlock, which
is why biotech stocks gained on 12-2-09 and other health related stocks had been
moving higher in the previous sessions. According to Reuters: "The U.S. Senate
debate on a sweeping healthcare overhaul stumbled toward gridlock on Wednesday,
with frustrated Democrats considering new procedural moves after Republicans
blocked votes on the first amendments. On the third day of a divisive debate,
Democrats threatened to keep the Senate in session through the Christmas holiday
if necessary to pass a healthcare reform bill that President Barack Obama has
made his top domestic priority." Republicans, in response "refused to agree to
the timing of votes on either of the first two amendments -- a Democratic plan
to ease access to preventive health screenings for women and a Republican effort
to restore more than $400 billion in cuts in Medicare, the government health
program for the elderly and disabled." And so it's likely to go for a good while
it seems.
Yet another Russian Flip-Flop on Iran. While Iran's president Ahmadinejad
told the world that Iran is not going to talk to anyone about its nuclear program,
Russia again suggested it may change its mind on Iran. According to Reuters: "Russia
will join any consensus on more sanctions against Iran, a senior Russian diplomatic
source said on Tuesday after Tehran declared it would expand nuclear activity
in defiance of a U.N. rebuke. It was a thinly veiled Russian warning to Iran
of waning patience with its failure to allay fears it aims to develop atom bombs
in secret, and hinted that Iran could no longer rely on Russia to stop tougher
world action against it." The world has seen Russia change its mind on key issues
too often, especially when it comes to Iran. So we'll see which way this flows
next.
Different take on Obama's Afghan Speech. The mainstream media has been
fairly negative on Mr. Obama's speech on Afghanistan. Yet, the New York Times,
which has been mostly partisan in its coverage of Mr. Obama makes an interesting
point. According to The Times: "For Afghans, the change in tone from the United
States was unmistakable and may have already succeeded in President Obama’s goal
of focusing Afghans’ attention." This refers to one of the most criticized portions
of Mr. Obama's plan, the 18 month time limit of his "surge" before beginning
withdrawals. Yet, even as the Times gives the speech some positive spin, it's
important to note that Defense Secretary Gates was out on Wednesday adding nuance
and clarifications to the speech.
No matter what anyone says, Mr. Obama has lost significant support for his war
policy as several polls have registered lately.
Notice to subscribers. Starting December 2, we are introducing a rating system
for individual stocks and ETFs. Visit our health and biotech as well as our energy
and S & P 500 sections for more information and ratings. |
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Pre-Employment Data Indicators Suggest Little Change In Jobs Picture Ahead
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A Slowly Developing Bottom May Have Started For Jobs Market
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If the private market reports about the employment situation
and our trio of bellwether stocks are any indication, this Friday's employment
report is likely to show some improvement when compared to recent numbers but
could actually be slightly worse than last month's report.
The ISM report's employment component, which cobbles together data from the National
Purchasing Managers group was above 50. That's the good news, as numbers above
50 show growth. Yet, the November number was 50.8, falling from last month's
53.1. The message here is that numbers in the low 50s for this series are not
a good indicator of growth in payrolls on the government survey.
The Challenger layoff report also had somewhat positive news. The number of planned
layoffs fell to just above 50,000. This is a huge improvement from last year's
planned layoffs of 181,000. But again, this survey showed that there are no real
signs of planned hirings. The number of planned hirings was in the 10,000 range,
a huge fall from October's planned hirings of 57,520. Investors should also consider
the fact that this survey has some shortcomings. As the The Wall Street Journal
points out it "doesn't distinguish between layoffs scheduled for the short-term
or the long term, or whether job cuts are handled through attrition or actual
layoffs. Also, the job-cut report does not include jobs eliminated in small batches
over a longer time period. Unlike most economic data, this series is not adjusted
for seasonal variation."
The ADP report, which estimates the status of private payrolls is predicting
a drop in the category of 169,000 jobs. This data is also not 100% accurate,
but it does serve a purpose of at least giving us a potential range of where
things may go. Last month's data was revised to 195,000. The actual payroll number
from the Labor Department was 190,000 jobs lost.
This morning's Monster Employment Index fell by one point from October's number
to 119, but may be starting to show some stabilization in the job market. As
the company's press release points out: "online demand for workers remained muted
across the United States. On a year-over-year basis, the Index is now down 17
percent, the mildest rate of annual decline since September last year."
Monster's Index has been flat for most of the year, though, with a range of 114
to 122. The bottom came in July.
Chart Courtesy of StockCharts.com
Our employment stocks are not giving us much indication of any kind of surge
in payrolls either. Manpower Inc. (NYSE: MAN), which gauges traders' expectations
of the high end of the employment market is trying to move above its 50-day moving
average as the employment information that's available is being handicapped by
traders. Manpower gets a 2.5-star rating at this point. If it can move above
52.50 it would climb to a 3-star. That means that the stock is a low relative
strength stock at the moment and that its prospects, barring a big positive surprise
in the Friday data, is not likely to break out of its trading range in the near
future.
Administaff (NYSE: ASF) our small business expectations bellwether is in even
worse shape, suggesting that traders are not expecting much of a rebound in the
important jobs generating engine in the U.S. Administaff is a 1-star stock at
this point. It's trading below its 20 and 50-day moving average and is barely
showing signs of life. It has lots of major overhead resistance and that means
lots of potential selling pressure.
Chart Courtesy of StockCharts.com
Our third employment stock, Monster Worldwide (NYSE: MWW) isn't very different.
MWW is another 2-star. Again it's trying to bottom out but has lots of overhead
resistance to deal with. It's interesting to note that although the Monster Employment
Index bottomed out in July, the stock was able to rally along with the market
for a while, but of late has fallen off.
Chart Courtesy of StockCharts.com
Conclusion
The pre-employment report data and market indicators suggest that we could see
payroll losses below 200,000 for the second consecutive month. That's certainly
what could be called "less bad" but not really great news. It means that companies
have probably cut as many large chunks of workers as they can for now, but it
doesn't mean that they can't continue to cut small numbers and keep the overall
job market losses trickling down for a long time.
The stock market may like these kinds of numbers, though, as they don't really
allow global central banks to start raising interest rates.
In other words, we don't see anything here that is likely to surprise to the
upside too meaningfully. Still, it doesn't pay to be too sure of yourself when
it comes to these numbers, as anything is still possible whenthey are released.
Know when to sell and how to make money when the market falls. Get a detailed
trading plan in your pocket. Read Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for
All Seasons. Also Available As Kindle Books. |
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Market Moves - Stock Of The Day
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Oil Service HOLDRS Trust (NYSE: OIH) Shows No Winter Joy
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Energy stocks
tend to rally as the weather turns cold. But so far the
Oil Service HOLDRS Trust (NYSE: OIH) is not showing too
many signs of life.
Chart Courtesy of StockCharts.com
OIH is an excellent bellwether for the trend in the price
of oil, and the general trend of the energy stocks. Its
current posture is flat, giving the ETF a 3-star rating,
barely. It has been fluctuating in a tight trding range
for a few days and is oscillating above and below its 20
and 50-day moving averages.
The recent spate of energy supply data in the U.S. didn't really move the price
very much, although it was fairly bearish, showing decreasing demand for gasoline
and rising supplies of both crude oil and gas.
In the winter season, heating oil is the key to the energy markets, though. And
any kind of big winter storm could jar that market into some kind of short term
rally.
Probably the most important piece of data at the moment is that U.S. refineries
are now operating at below 80% of capacity. That means that any kind of sudden
burst in demand would likely be magnified as the refineries would have to play
catch up.
OIH would likely be an excellent way to play any kind of surge in the energy
markets. The ETF would climb to a 4-star rating on a move above 125.
Always consult your financial advisor before making any investment decision.
This column is educational in nature and is not meant as investment advice. |
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Technical
Look at the Market |
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Back Above 1100 - SPY ETF Coverage Started at 4-stars
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Still
Above 1100 - SPY ETF Coverage Started at 4-stars
The S & P 500 moved back above 1100 on Tuesday and
marked time on Wednesday. Still, it didn't give back
much of what it gained on Monday. And that's a positive.
Traders are noticing that once again the 20-day moving average has provided support
for the S & P 500 and that means that this may be another opportunity to
buy on the dips.
So the real question is whether this market is worth trading at all. And the
answer lies in how well you may have done for the year. If you've done well,
you can consider taking the rest of the year off, barring some really aggressive
up side action starting in the next few days.
This is still a good time to reassess any positions that aren't working, especially
as the market's advance has become narrower over the last few weeks.
Raising cash, along with sector and individual stock selection are still the
most important aspect of trading this market. With an employment report due out
on Friday, anything is possible.
We are adapting our star based rating system to the S & P SPDR ETF (NYSE:
SPY). In this section a 5-star rating for SPY is a signal that down side risk
is very low and that the chances of a further rise in prices are greater than
those of a fall. A 4-star rating Means that the risk is less attractive but that
the odds of a rise in SPY still outweigh the risks of a fall.
A 3-stars rating on SPY suggests that the odds of a rise and a fall are even.
2-stars and 1-stars suggest that down side risk is on the rise.
In no way is this star rating system intended as a series of buy and sell recommendations.
The system is intended as a guide to the general trend of the market and the
S & P SPDR ETF.
Star ratings can change rapidly based on the market's action. Followers of the
ratings should review them on a daily basis.
Star Ratings for S & P SPDR ETF (NYSE: SPY) - updated 12-2-09
S & P SPDR ETF (NYSE: SPY), 4 stars on 12-1-09 - closing price 111.30. Closing
price on 12-2-09 111.25. Short term support is at 109.57. Resistance is at 111.74.
A move above 111.74 would raise the rating to 5-stars.
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
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