Friday, November 7, 2014

Keystone's Midday Market Action 11/7/14; Monthly Jobs Report

The consensus for the Monthly Jobs Report is 240K jobs and a 5.9% unemployment rate. Last month was 248K jobs and a 5.9% unemployment rate. The consensus range is from 200K to 282K jobs. The ADP Jobs Report on Wednesday was 230K jobs. The average hourly earnings are expected to rise from the flat line to up +0.2%. Wages are key since the inflation that the Fed and other central bankers are trying to create cannot exist without wages inflating. The average workweek is expected to remain steady at 34.6 hours.

Minutes before the important jobs report, the S&P futures are flat. Dow +3. Nasdaq +8. DAX -0.4%. CAC -0.6%. FTSE +0.5%. Gold 1146. Silver 15.41. Copper 3.02. Dollar/yen 115.30. Euro 1.2391. Pound 1.5815. 10-year yield 2.39%.

At 8:30 AM EST (1:30 PM GMT London time), the S&P futures bump higher seconds before the Monthly Jobs Report that announces 214K jobs and a 5.8% unemployment rate. The jobs miss expectations at 240K but the unemployment rate beats the 5.9% expectation. There is a 31K increase in the prior month's revisions with last month increasing from 248K to 256K and the weak August number that originally reported the paltry 142K jobs is now revised up to 203K. Interestingly, the very low August jobs number was fudged above 200K so the streak of 200K plus job numbers could extend to nine consecutive months. If the August number was not manipulated higher this winning streak could not be claimed.

There is an average of 224K jobs added per month over the last several months. This is nothing to write home about but at least it is progress. In a normal recovery the job gains should be from 300K to 700K per month. The job gains continue for 49 consecutive months the longest streak since the 1930's.

The average hourly earnings bump higher by a tick +0.1% missing the expected +0.2% increase but at least wages are not flat. The 5.8% rate is the lowest since July 2008 before the major trouble occurred in the markets during the financial crisis. The rate drops as those unemployed long-term are no longer counted. The U-6 unemployment rate drops to 11.5%. The labor participation rate is up one tiny tick from 62.7% to 62.8%. The job gains are across the board, however, Information Services lost jobs.

Stocks jump on the news. S&P +4. Dow +32. Nasdaq +15. The DIS earnings from last evening create a drag on the Dow. The 10-year yield is 2.37%. The US dollar index is 87.97 hanging around the 88 level. Euro unchanged at 1.2398. Dollar/yen 115.06. So as the smoke clears, the US futures are slightly elevated after the jobs report. European indexes recover off intraday lows.

At the opening bell, stocks are weaker and Europe trades lower. The dollar/yen collapses to 114.75. The euro is climbing to 1.243 as Draghi's dovishness wears off.

The negative divergence on the SPX 2-hour chart is creating some negativity to begin the day. Keybot the Quant algorithm remains long and is tracking VIX 14.10 and JJC 37.07. The VIX is 13.70 under the 14.10 creating bullishness in the stock market and the JJC is 36.75 under the 37.07 creating bearishness. Since the algo identifies these two parameters as the most important currently impacting market direction, the stock market staggers sideways. Bulls win big with JJC above 37.07. Bears win big with VIX above 14.10.

The SPX, Dow and TRAN print new all-time highs at the opening bell. The new all-time intraday record high for the SPX is 2032.36.

Note Added 10:56 AM: Here comes the SPX teasing new all-time highs again, printing up on the day above 2032. VIX is 13.61 dropping like a stone creating bull fuel. JJC 36.71. Wow. The TRIN is 0.67 with an uber low 0.59 print a short time ago. No wonder stocks recover off the lows. Low prints like this representing off-the-charts bullish euphoria will need remedied by selling pressure in equities in the day or two ahead, say early next week.

Note Added 11:00 AM: The SPX prints a new all-time intraday high at 2032.44. They keep coming in waves. If VIX stays under 14.10 and JJC stays under 37.07, equities will stumble sideways into the weekend.

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