Thursday, January 8, 2015

Keystone's Evening Nightcap 1/8/15; Monthly Jobs Report Eve [The 1/9/15 Jobs Report is 252K Jobs and 5.6% Rate; Wages are Weak]

The Monthly Jobs Report is in the morning. Strike up the calliope the circus is back in town. The consensus for the jobs report is 245K jobs and a 5.7% unemployment rate. Last month was an unexpected upside surprise at 321K jobs with a 5.8% unemployment rate. There are whispers of concern over a potential large revision to the robust 321K jobs last month.

In these erratic markets it is anyone's guess how stocks will react to the numbers. The consensus is expecting a +0.2% increase in average hourly earnings building on the encouraging +0.4% rise in earnings last month that has boosted enthusiasm and created stock market optimism in December. Inflation cannot exist without rising wages and the wage component is perhaps more important than the headline jobs number and unemployment rate. The success or failure of the six-year Bernanke-Yellen Keynesian money-printing experiment is dependent on the wage data. The average workweek is expected to remain steady at 34.6 hours.

Thus, the headline jobs number and rate are key, and especially hourly earnings (wages) and also monitor the revision to the 321K jobs from last month.

Keybot the Quant algorithm turned bullish today as the NYA moved above its 40-week MA at 10790. This level remains key and is extremely important since it tells you if the markets will remain bullish or bearish for weeks and months ahead. The NYA is at 10801 eleven points above the critical 10790 so stocks are in a cyclical bull pattern. The bears need NYA under 10790 pronto or they got nothing.

SPX S/R is 2094, 2091, 2088, 2082, 2079, 2075-2076, 2067, 2061, 2057, 2054, 2040, 2038, 2032, 2024, 2018, 2011, 2002-2003, 1998 and 1985-1986. The 20-day MA is 2045.08. The 50-day MA is 2043.80. The 200 EMA on the 60-minute is 2046.79. Price begins the day at 2062 but the S&P futures after the jobs report will point the way forward. The 2067 and 2075-2076 levels offer overhead resistance. The moving average confluence at 2043-2047 may act as a magnet for price on the down side.

Here comes the clowns, freaks and carney barkers setting up the BLS tent; the circus is officially back in town. The ringmaster will read the jobs report at 8:30 AM EST. Average hourly earnings (wages) are key and will greatly impact trading.

Note Added Friday Evening 1/9/15: The Monthly Jobs Report is 252K jobs with the unemployment rate at 5.6% the lowest rate since June 2008. Last month’s 321K jobs are revised 32K higher to 353K and the month before that is revised 18K higher. So any worry over a decrease of the robust 321K jobs number was unwarranted.

The critical average hourly wages are down -0.2% which sends a hush over the crowd. Even worse (if you are the Fed wanting to begin tightening) is last month’s robust +0.4% average hourly wage increase is revised lower to +0.2%. The decrease in wages is surprising considering that minimum wage increases are occurring in one-half of the States and generally many employees receive raises to begin the New Year. This boost may show up in next month’s wage data. Concern increases that the jobs added to the economy are low-paying jobs. Inflation cannot exist without wages increasing. The whole idea behind the Fed’s grand six-year Keynesian money-printing experiment is to raise inflation to +2%. Thus, the Fed will remain fearful of deflation, as they should, and will likely delay rate hikes.

Average hours worked remains steady at 34.6 hours. The labor participation rate drops to 62.7% so less people in the US are working. The U-6 unemployment rate is 11.2% the lowest since September 2008. Many unemployed are simply no longer counted. The headline jobs number at 252K, unemployment rate at 5.6% and last month’s revision increase to 353K jobs creates a happy employment report. Under the surface, however, wages are stagnant which harpoons inflation and the Fed’s policies. In addition, the jobs created are low-paying jobs and the labor participation rate remains challenged.

In the stock market, note that the SPX ends at 2045 exactly at the moving average confluence at 2043-2047 described above; it acted as a magnet. The NYA is back under the 40-week MA at 10790 signaling a cyclical bear market ahead for weeks and months.

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