This page has been archived and commenting is disabled.

Unemployment Report Shocks Markets

David Fry's picture





 

 

The big driver of market declines Friday was led by the Non-Farm Payrolls report. The jobs data was a dreadful miss (88K vs 198K & prior 236K) and the unemployment rate declining from 7.6% from 7.7%. The unemployment rate is misleading since 663K people dropped from the labor force and now total 90 million. The labor force participation rate fell to 63.3% the lowest level since 1979.

This leads to the major “disconnect” we’ve been seeing between stock prices and overall economic data which we posted just last week. This is the nagging and confounding reality of the QE and ZIRP grand experiment for many investors.

Even the Bank of England announced per Bloomberg: Gains by equities since mid-2012 “in part reflected exceptionally accommodative monetary policies by many central banks, per the BOE’s Financial Policy Committee”

The chart below (courtesy of Zero Hedge) reflects European data and stock indices but could be easily applied to conditions in the U.S. and other countries engaged in QE.

Now we have the same distortion and disconnect with the Bank of Japan’s QE policy that closely mimics U.S. Fed policies. It is designed and intended to double the Japanese monetary base. There is no assurance the impact will improve economic conditions overall vs increasing stock prices. It’s all artificial but that’s what some investors, especially old timers, sense.

Earnings shouldn’t be great but due to ZIRP, many companies are finding it easy to sell debt and buy back shares. This reduces share float allowing for even weaker earnings to look better. With recent data poor, I’d expect most earnings reports to struggle some.

Stocks opened the day sharply lower with just about every sector taking heat. As the day wore on markets slowly recovered and then ramped higher by the 2:15 PM Buy Program Express that made the decline look more respectable. Who would be buying on this dreadful news? (Thinking….thinking….hmmm) Higher prices at day’s end were in previously underperforming transports (IYT), utilities (XLU) and banks(KBE). Losers included a wide assortment of issues including technology (XLK),small caps (IWM), healthcare (XLV), consumer durables (XLP) and materials (XLB). Overseas markets were weak in Europe (IEV), China (FXI) and Australia (EWA).

The dollar (UUP) was weaker even as there’s little to like in other fiat currencies. Gold (GLD) reversed course and rallied on weaker data, dollar and some fear. Commodity prices (DBC) were weak led lower by oil (USO) and copper (JJC). With stocks weak, bond (TIP) prices rallied. Late in the day Friday Consumer Credit for February was released with revolving credit up $532 million and Student and Auto Loans up $17.6 Billion—both the latter are in a bubble. This pushed stock
prices off the lows.

With hindsight “the tell” was the weekly DeMark 9 showing the potential top in the leading major U.S. sector, small caps as represented by IWM (iShares Russell 2000 Small Cap ETF).


In other news a Reuter’s employee, turned whistle blower, sues the company for wrongful dismissal after he alleges the company was leaking economic data early to High Frequency Traders (HFTs). Recently hired HFT lobbyist consultant Mary Schapiro now will have to use her influence which makes her recent hire beyond despicable. Also, government auto loan recipient, Fisker, declared bankruptcy. The government had funded $529 million to the company. Based on these and other recent stories, I’d say corruption is omnipresent in Washington these days.

Volume on this volatile Friday was higher again with selling while breadth per the WSJ was negative overall.


You can follow our pithy comments on twitter and become a fan of ETF Digest on facebook.

SPY 

SPY

.SPX WEEKLY

.SPX WEEKLY

INDU WEEKLY

INDU WEEKLY

RUT WEEKLY

RUT WEEKLY

QQQ WEEKLY

QQQ WEEKLY

XLF WEEKLY

XLF WEEKLY

KBE WEEKLY

KBE WEEKLY

IYR WEEKLY

IYR WEEKLY

ITB WEEKLY

ITB WEEKLY

IYT WEEKLY

IYT WEEKLY

XLB WEEKLY

XLB WEEKLY

XLV WEEKLY

XLV WEEKLY

XLP WEEKLY

XLP WEEKLY

XLY WEEKLY

XLY WEEKLY

BWX WEEKLY

BWX WEEKLY

TIP WEEKLY

TIP WEEKLY

UUP WEEKLY

UUP WEEKLY

FXE WEEKLY

FXE WEEKLY

FXY WEEKLY

FXY WEEKLY

GLD WEEKLY

GLD WEEKLY

GDX WEEKLY

GDX WEEKLY

SLV WEEKLY

SLV WEEKLY

JJC WEEKLY

JJC WEEKLY

DBC WEEKLY

DBC WEEKLY

USO WEEKLY

USO WEEKLY

XLE WEEKLY

XLE WEEKLY

DBA WEEKLY

DBA WEEKLY

IEV WEEKLY

IEV WEEKLY

EEM WEEKLY

EEM WEEKLY

EWW WEEKLY

EWW WEEKLY

EWA WEEKLY

EWA WEEKLY

EWJ WEEKLY

EWJ WEEKLY

EWH WEEKLY

EWH WEEKLY

EWM WEEKLY

EWM WEEKLY

EWG WEEKLY

EWG WEEKLY

EWC WEEKLY

EWC WEEKLY

EWZ WEEKLY

EWZ WEEKLY

EPI WEEKLY

EPI WEEKLY

GXC WEEKLY

GXC WEEKLY

 

 The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.


The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

 

Is it any mystery who the buyers were as the day wore on Friday? It was either those with positions to protect, dip buyers or the Fed. As to the latter, nothing should surprise as the beard is engaged in the great experiment.

An interesting item is today marked the 12th consecutive day of opposite market moves which has never happened previously I’m told.

Earnings season starts again beginning next week with Alcoa (AA) as usual the first of the majors to report. The economic calendar features Fed Minutes Wednesday, followed by Jobless Claims, Retail Sales and Consumer Sentiment.

Let’s see what happens.

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 04/06/2013 - 11:28 | Link to Comment max2205
max2205's picture

Thanks for the charts!

Sat, 04/06/2013 - 08:51 | Link to Comment Go Tribe
Go Tribe's picture

These guys are always long the markets. Will be interesting to see if they ever turn long on metals.

Sat, 04/06/2013 - 08:19 | Link to Comment StarTedStackin'
StarTedStackin''s picture

Charts (stock) are pretty much worthless these days..

Sat, 04/06/2013 - 08:07 | Link to Comment NuYawkFrankie
NuYawkFrankie's picture

Complain all you want...

 

  - but dispensing with the graphics, would only leave us in uncharted territory...

Sat, 04/06/2013 - 05:25 | Link to Comment One of We
One of We's picture

Take your charts and shove them up your algo. Charts are last millisecond's news...

Sat, 04/06/2013 - 04:07 | Link to Comment ebworthen
ebworthen's picture

So what's up with REIT's? 

Isn't there a ton of empty office and retail space?

Are REIT's just the soup du jour for hedgies and algos with varying sector rotation timetables?

I don't know, Jic Cramer said he likes them, so someone must be behind them or about to sell them.

Sat, 04/06/2013 - 02:24 | Link to Comment dunce
dunce's picture

I looked at every site reporting this but could not find one that gave the split between private sector and public sector jobs. This makes me suspect that most of the hiring was govt. jobs which makes the report even worse.

Fri, 04/05/2013 - 23:24 | Link to Comment Hulk
Hulk's picture

I hope page 2 of the comments never comes cause I be afraid of scrolling through all dem charts again...

Sat, 04/06/2013 - 04:04 | Link to Comment ebworthen
ebworthen's picture

So I shouldn't add something here? ;-)  Really comprehensive charts though, lot's of fiber.

Fri, 04/05/2013 - 22:48 | Link to Comment vulcanraven
vulcanraven's picture

Dem Charts

Fri, 04/05/2013 - 22:45 | Link to Comment disabledvet
disabledvet's picture

I have NEVER ONCE compared the rise to equity prices to what the Fed is doing. Indeed i am on the record for many years saying that the Fed QE policy is in fact BAD for the economy, bad for growth and in this sense SHOULD BE bad for equities (though i was bullish right up until this January where i shifted my focus to Treasuries and the "thank God yields are finally over 2%" crowd.) The reason i was bullish in equities...and certainly remain so on individual names...has to do with the TREASURY policies of 2008 and the massive countercyclical policies "on steroids" that the Federal Government engaged in after Alan Greenspan "blew everybody and everything up." (that includes a war effort i might add.) trust me when i tell you "these folks could give a rats ass about the Banks." this is about saving Federal largesse from a direct threat "caused by a friggin' nobody." to Chairman Bernanke's credit he has held the institutional integrity of the Fed together through this calamity...but mark my words the days of the Fed are numbered if employment doesn't turn around and turn around MASSIVELY. by no means have i become a bear...but i do believe we are well beyond the point of a healthy correction..."flushing out the weak hands" as they say...i see nothing empirically wrong in the economics of what has been done oh these many years...but simply put "we're losing all our customers" save for China, Mexico and Canada. (great customers all of course.) if this wacko in North Korea really does launch a bunch a nukes (and who knows who's helping him in this regard...i imagine it's a who's who of global scum and villainy though) I think you'll see "the numbers" change dramatically. i still don't believe in shorting...there will be a point where i do (i did in 1998 and when Greenspan inverted the yield for like...was i ten years it took him to finally succeed?) with a Fed this accommodative it's really hard to see a scenario where growth in the USA suddenly turns lower. Could hit stall speed of course...it's the future and these things are always hard to tell. The only thing we DO know is that this is the worst post World War II recovery in history...and that makes shorting Treasuries "for crazy people." happy trading...

Fri, 04/05/2013 - 22:25 | Link to Comment the grateful un...
the grateful unemployed's picture

what a load of crap. in the first place the only paper that matters is the stuff bernanke prints, not the little squiggles from this and that. fuck unemployment (wall street talking bad news is good news easy money from the fed) but who wants to be long the weekend with kim jong ding dong playing games. they can buy it back up monday after he agrees to stop making noise and we send them a bunch of stale hostess twinkies (they're gold, they're locked in fort knox) sorry that april fools day came so late,

Fri, 04/05/2013 - 21:53 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

The behavior of the equities market should be a source of embarrassment to Ben and the Boys. Too much, too fast, too high, too soon. But when your motivation is pure greed, that still isn't enough.

This is going off the rails before too much longer.

Fri, 04/05/2013 - 22:28 | Link to Comment the grateful un...
the grateful unemployed's picture

bernanke hitched his wagon to employment because he knew it was never going to surpirse on the upside, and he could keep his ZIRP forever policy pour the wine they celebrate tonight

Sat, 04/06/2013 - 02:11 | Link to Comment Boris Alatovkrap
Boris Alatovkrap's picture

But to understanding Bernanke ZIRP, must first study of Duration Mismatch. No happy ending except ZIRP eternal. Raise Fed Discount Rate is raise Treasury Rate is destroy Bank Capital. Bernanke is work for bank, not people, not Treasury. Wake up Amerika sheeple now, or one day is wake up in Self-Inflicted Soviet Serfdom. Even now, Amerika is Potyomkin village.

Fri, 04/05/2013 - 21:44 | Link to Comment ebworthen
ebworthen's picture

The markets won't truly react and data won't really mean anything until the FED quits dicking around in them and gets their big semi-flaccid wrinkly mole and sore ridden penis out of them.

(p.s. - love the charts, most importantly, what to avoid like the plague, thanks)

Fri, 04/05/2013 - 21:17 | Link to Comment ramacers
ramacers's picture

no real diconnect. preps and victims see bigger picture. are the preps gonna get away with it? serve up the baskets w/heads!

Fri, 04/05/2013 - 21:16 | Link to Comment Peter Pan
Peter Pan's picture

How soon can they get enough people on disability pensions?

O rhow soon before they change the definition of employed to include anyone who has worked at any time during the last 12 months or anyone who is just looking for work?

Sat, 04/06/2013 - 00:37 | Link to Comment ebworthen
ebworthen's picture

Under 30 hours a week and the corporate rats don't have to pay health care.

Meanwhile, those with full time jobs get bled, and corporate "health" care rakes it in - along with the lawyers and big pharma.

Bleed the middle class dry, push more onto the government dole which is a reach around for said sick-care corporatocracy as well as WalMart and any pizza joint and strip club across the fruited plains.

Sat, 04/06/2013 - 07:55 | Link to Comment Chuck Walla
Chuck Walla's picture

Under 30 hours a week and the corporate rats don't have to pay health care.

Gee, I wonder who induced them to do that?

FORWARD SOVIET!

Fri, 04/05/2013 - 22:46 | Link to Comment JeffB
JeffB's picture

You know, I guess one could say that the government is paying people to cash those unemployment checks they send out and feeding their families with it.

That's kind of a self-employed government contractor.

Send 'em 1099s.

 

Sat, 04/06/2013 - 01:00 | Link to Comment FreeMktFisherMN
FreeMktFisherMN's picture

I believe it was the Kenyan socialist's (former) labor secretary Solis who said something like 'unemployment benefits being extended has saved so many jobs.' I.E., paying people not to work has saved jobs. Truly Orwellian.

Sat, 04/06/2013 - 09:44 | Link to Comment DaveyJones
DaveyJones's picture

spreading war to grow democracy

imposing fines and monopolies to lower medical costs

hiring Monsanto to protect food

holding prisoners because their innocent

buying your own debt  

Fri, 04/05/2013 - 21:14 | Link to Comment maskone909
maskone909's picture

i just overdosed on charts dog

Sat, 04/06/2013 - 08:23 | Link to Comment Handful of Dust
Handful of Dust's picture

I like a man of few words....

Sat, 04/06/2013 - 04:45 | Link to Comment archon
archon's picture

Help!  I'm crushed under a wall of charts!

Sat, 04/06/2013 - 02:45 | Link to Comment The Second Rule
The Second Rule's picture

I haven't checked the charts in weeks cause frankly I just don't give a fuck anymore, but OMG the VIX is below 15 and dipped down to 12! That is beyond insane. That is full on Lost In Space "Danger Will Robinson!" insane. Anybody with an ounce of trading common sense has to know how fucking dangerous this is.

Sat, 04/06/2013 - 03:20 | Link to Comment OldPhart
OldPhart's picture

Not being a trader and, according to my wife, possessing little common sense; could you please enlighten me?

Sat, 04/06/2013 - 06:10 | Link to Comment The Second Rule
The Second Rule's picture

VIX is a measure of volatility, or you could also think of it as a measure of market anxiety or market awareness in times of danger--the twitchiness of a gunfighter at high noon would be an example of high VIX. 12 is utterly insane because it means... Imagine you are on a cruise ship and you go up to the bridge and find that the Captain and the entire crew are drunk. Not just misty but six sheets to the wind stumble down drunk. It doesn't mean the ship is in imminent danger of sinking but were a hazard to appear, e.g. an iceberg, your life would be put at risk. That's basically what a VIX below 15 means. The people running the market are starting out with 3 fingers of Jack in their coffee in the morning and continue to get their load on throughout the day. Hopefully that wasn't too condescending. I just wanted to put it in terms that were understandable and would stick.

P.S. I could comment on the channels and trendlines in some of the other charts but I think it would bore people, however, I would draw your attention to the "Stork Pattern" on the SPX. It's called a Stork cause it looks like a stork standing on one leg, and they NEVER work, i.e., they always break down,

Sat, 04/06/2013 - 09:27 | Link to Comment PolishErick
PolishErick's picture

Nice explanation. Thanks... 

 

go long volatility, worst thing that could happen- it goes to zero... Hey wouldnt that mean were all happy with what we got? like... no one is bidding or offering, everyone is just- "meh... I'll keep this and I dont need anything else... ever" :D what a disaster that would be!!

Sat, 04/06/2013 - 10:02 | Link to Comment slightlyskeptical
slightlyskeptical's picture

While the Vix may not go to zero, just about every way you can invest in the Vix will go to zero.

Sat, 04/06/2013 - 00:50 | Link to Comment MisterMousePotato
MisterMousePotato's picture

That's more charts, by a considerable margin, than I've ever seen here before this. At least that guy (what was his name?) a few years back would post some lingerie babe at the end of his.

Sat, 04/06/2013 - 02:03 | Link to Comment Boris Alatovkrap
Boris Alatovkrap's picture

Porno-graph-ic addiction. There is 12 step for that!

Do NOT follow this link or you will be banned from the site!