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Mid-Week Update 03-10-10

Jobs continue to be front and center of economists’ and Americans’ minds alike as the Labor Department released a highly anticipated February employment report last week. The report was mixed. On the positive side, the 36,000 job losses during the month were less than the expected 68,000, helping the unemployment rate stay steady at 9.7 percent, rather than rise to an expected 9.8 percent. A 48,000 increase in temp jobs (including 15,000 for the 2010 Census) was a major reason for the better-than-expected reading; some of the luster was taken off January’s numbers as job losses were revised from 20,000 to 26,000.
 
While the headline numbers seem to be better than expected, delving deeper into the underlying situation, things are so “rosy.” Today, the Labor Department released some underlying data showing the unevenness of the recovery. In January, only nine states saw unemployment decrease, including Michigan, whose 14.3 percent rate (down from 14.5 percent in December) is still the worst in the country. New York and New Jersey were among the other eight states, all of which saw unemployment fall by a tenth of a percentage point.
 
And while unemployment held steady, the number of underemployed workers unfortunately rose during the month of February.
Read more...

Market Update 03-09-10

The major stock market averages have been climbing back toward their 52-week highs. For the S&P 500, for instance, we’re only about 1 percent below the January highs around the 1050 area. Depending on how the S&P (and Dow Industrials) act in the near term it should set the tone of the market for the next several months.

For instance, we’re coming up on the S&P’s 200-week exponential moving average. If the powerful rally we’ve experienced in the last year is nothing more than bull trap in the context of an on-going secular bear market, and there’s still a strong argument to be made that it is, then that level is a logical place for the market to stall again.

Failure to close above the 1050 market for several days running will likely shake investors’ confidence and lead to at least a modest pullback in share prices, probably resulting in another retreat back to around 1050.

If, on the other hand, the S&P does hold above 1050 for several days, the technical breakout will bring in more buyers who are likely to drive share prices even higher. Looking at the index’s long-term chart, the next leg up would probably carry us to around 1220, last seen back in September 2008. That area represents formidable overhead resistance that stretches all the way back to 1999.Read more...

Market Update 03-08-10

Market Update
March 8, 2010
 
Short-Term Key: Negative
Long-Term Key: -86 (Neutral to Negative)
 
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Inside this week's update...
 
***** Don't listen, watch.
***** Heavyweights lining up for Nova.
***** Oil stocks: opportunities and a pitfall.
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With so much spin these days, it's important to pay closer attention to what people do rather than what they say. Case in point: George Soros' recent behavior regarding gold.
 
A couple of weeks back, the hedge fund manager made headlines by suggesting gold was in a bubble – implying that investors should lighten up on their gold holdings.
Read more...

Market Update 02-22-10

Short-Term Key: Negative Long-Term Key: -93 (Neutral to Negative)

The two most important developments that came to light this past weekend both occurred within the energy sector, a sector which is also a key indicator of economic health.

On the global level, we had a report that oil consumption in the U.S. fell in January to its lowest level since 1998. We can interpret this drop in several ways.

Most of the recent decline came in the demand for distillates, including diesel fuel. Diesel fuel, which is used in trucking, railways, and other forms of mass transit, is particularly sensitive to economic activity. The more goods we produce, the more transportation fuel gets consumed and vice versa. In fact, UCLA has recently created a Pulse of Commerce Index based on real-time diesel consumption by the American trucking industry.

Diesel consumption has a very good record as an indicator of industrial production. Unfortunately, this means the drop in January's consumption figures suggests that industrial output is slowing as well.

To be fair, the 3-month moving average for this index is considered more reliable than the monthly data, and the 3-month MA is up. December saw a big increase in consumption, so perhaps January's dip is really just a brief correction. Nonetheless, another drop in February would call the U.S. economic recovery into question.Read more...

Market Update 01-26-10

Last week stocks put in one their worst showing in a year, with blue chips dropping nearly 4 percent. Market breadth was lousy and volume remains on the light side. This week share prices are staging a half-hearted rally, but we suspect stocks will continue to have a downward bias in the near-term. Read more...

Market Update 01-19-10

Heightened concerns about the economy caused both stocks and commodities to retreat somewhat last week. Investors are looking at fourth-quarter earnings reports and even good news is being shrugged off. There have been plenty of disappointments in the quarterly reports coming in which haven’t helped either. But so far the setbacks have had a limited adverse influence on the major averages lasting just a day or two, before buyers come back into the market.

The economic data, meanwhile, also continues to offer conflicting indications of where we’re headed. Manufacturing is recovering, although the recession wasn’t brought on by excessive capacity in industrial production, so we’re not inclined to read too much into this. Consumers, on the other hand, still have their hands full with a weak housing sector, high unemployment and relatively few job openings. As long as consumer confidence remains soft, it’s hard to see any rebound occurring in this important segment of the economy.

We’ve been concerned with the strong impact rising commodity prices could have on the economy. So the recent retreat in oil prices from $83 a barrel to around $78 might seem comforting, but there’s a chance the damage is already down. Traders are pushing crude prices lower in anticipation of a weaker economy to come. Keep in mind that even after this modest pullback, crude oil prices are still more than double what they were a year ago. Such increases have historically been bad for both the economy and the stock market.Read more...

Mid-Week Update 01-13-09

It’s obviously still very early, but earnings season has not gotten off to a good start. Aluminum giant Alcoa kicked off the fourth quarter reporting period on Monday after the market close and got it off on the wrong foot. Revenues were up together with higher metals prices, but profits failed to meet expectations. The Street had expected a profit of six cents per share, but Alcoa earned just one cent per share, excluding one-time charges, thanks to higher energy costs that cut into margins. Including the charges, Alcoa lost twenty-seven cents per share. Alcoa shares dropped sharply on the news, but we’re more concerned for what the report will mean for other companies.
 
As we noted on Monday, energy costs have climbed rapidly and have put our long-term key in the negative-to-neutral range, and edging closer to a sell signal. Copper and other major materials are well off their lows too, and as we’ve written extensively rising energy and commodity costs act as a brake on any economy, let alone one that just may be starting to recover.
Read more...

Market Update 01-05-10

People are by nature optimistic. This point is underlined with each reset of the calendar. The can-do spirit, best exemplified in personal resolutions, mostly of the diet and exercise variety, is fresh in everyone’s mind. Likewise, the feeling that better times are on the way is reflexive. This psychology is at least partially behind stocks’ tendency to rise in the early part of the year. Strong stock market returns in year just ended certainly don’t hurt either.

So it’s not surprising that we started the trading year off with a bang yesterday. Further signs of strong economic growth in emerging economies, namely China, plus an improvement here in the U.S. in the Institute of Supply Management’s Manufacturing Index and with factory orders have helped to bolster investor confidence.

Less than bullish readings yesterday on construction spending and today’s surprisingly large decline in November pending home sales, which dropped 16 percent in contrast to expectations for only a 0.2 percent decline, have largely been ignored.

Stocks should continue to have an upward bias for the near term, although positive returns are by no means a slam dunk. There’s plenty more economic data due out this week, but the real bellwether for the U.S. economy will be the employment numbers to be released on Friday. A surprise reading either way could set the tone for the market for weeks to come.Read more...

Market Update 01-04-10

Short-Term Key: Positive
Long-Term Key: - 95 (Negative-to-Neutral)
 
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Inside this New Year's update...
 
***** America loses control of its fate.
***** A rundown of key commodities for this year.
***** Currencies that will outperform the dollar.
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Typically at this time of year, investors try to step back a little and look at the big picture. Of course, as one of our readers, the big picture should be familiar ground to you. Nonetheless, some pretty important stuff is emerging from over the horizon that warrants another look.
The big story of 2009 and indeed the entire 2000s has been the rise of the developing world over the United States. A number of trends evidence this shift. You can see this has occurred by looking at changing figures on the supply, demand, and price of oil.
Today, U.S. oil consumption remains close to what it was ten years ago. Yet oil prices are four times higher.
Read more...

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