The NYA prints a new 52-week record high at 13612 but this remains a hair below the all-time record high at 13637 from 1/26/18. The NYSE Composite came within 25 points of an all-time record high. This is fascinating because the NYA is an index that is not yet able to overcome the 2018 market highs but other major indexes such as the S&P 500 (SPX), Dow Jones Industrials (INDU; DJIA; DJI), Nasdaq Comp (COMPQ), Nazzy 100 (NDX) and Semiconductor Index (SOX) have all printed all-time record highs recently. The Russell 2000 small caps (RUT) has also not yet been able to come up and overtake the 2018 record highs.
Interestingly, the SPX, INDU, COMPQ, NDX and SOX did not print new all-time record highs today although they are a hair away but the index that did overtake the November record highs, the NYSE Composite, has not printed an all-time high in almost 2 years. One wonders if the robots are simply cycling into the lagging indexes and stocks in a constant circle jerk that uses central banker liquidity to keep riding the overall stock market wave higher (algo's rotate from sector to sector and index to index as long as the central banker music keeps playing). The Russell 2000 has also recovered to its November high today, like the NYA, so the robots are buying-up the lagging indexes in today's action.
The rising wedge is worrisome since the collapses from this pattern can be dramatic and fast. The NYA failed 4 and 5 days ago, on bad trade war news, but Soybean Donny ran to a microphone and proclaimed that the US-China trade deal is going swimmingly. Prices have gapped-up ever since and are pumped higher this morning after the US Monthly Jobs Report.
President Trump is touting the 266K jobs report, and he should, it is on his watch, and it is a robust headline number, but as usual, poking around beneath the hood provides an education. The consensus for the headline jobs number was 180K, some said 187K, and others lowered their estimates after the ADP payroll numbers came in lighter than expected. The 266K jobs surprised everyone and is about 80K or 90K above the expectation. The prior months were revised higher which is an important positive.
Off the top, and as reflected by the manufacturing sector, 50K jobs are due to GM employees returning to work after the strike. This is not a recurring number. The jubilation in the 266K number is people thinking 'wow, it will be like this here on out'. No, it probably will not. That 50K jobs will not repeat next month. Market participants are extrapolating today's job numbers into the future painting a beautiful mosaic but they are mistaken since many of the gains appear one-offs or seasonal and holiday employment. The return of the GM workers also opens the door to calling back employees at the local support businesses such as the doughnut shops, restaurants, copy centers, caterers, cleaning people, etc.., which has to be a few thousand adds and helps create the broad-based gains in the report.
The largest gains are in education and health services. Let's see. What is occurring now? Yes, the yearly Medicare and other health insurance sign-up and policy adjustment period. Many of these workers, perhaps thousands, are probably employed to help with this busy health insurance enrollment period. They can be kicked to the curb in a couple weeks. Merry Christmas.
Leisure and hospitality are another big winner. Again, seasonal and temporary employment. Many companies and businesses take their employees to luncheons and/or holiday parties to try and keep them happy. Holiday shoppers need to refuel at restaurants so they can go buy more worthless crap. Thus, many thousands of jobs are added in this category that are mainly seasonal and again, they will be sh*t-canned come January.
Warehousing is another big winner with jobs while retail jobs are weak. Consumers are buying from AMZN and other online retailers so the warehouse jobs grow while the retail jobs shrink. Again, many of those warehouse jobs are for the busy season and they will not be needed come 2020. Ditto the shippers such as UPS and FDX hiring workers to help with deliveries but their foreheads will be stamped with "No Return" come January. Adding up these seasonal boosts put you in the ballpark of the 70K to 90K beat. However, nothing can be taken away from the surprise boost in jobs. It is the best jobs growth that central banker money can buy.
The unemployment rate fell from 3.6% to 3.5% but was expected to remain steady. The rate is at a 50-year low and you would think that was good news, which it is, kind of, but if the US economy was in a strong robust recovery, the rate would actually be climbing. A great indication of an economy coming out of the doldrums and ramping higher for a sustained long-term joyous path is the unemployment rate initially moving higher for a few months and then rolling back over lower. If the millions of Americans that are out of work, having given-up on the chance of finding jobs, believe that the economy is truly recovering, they will flock into the job market in mass numbers; this behavior creates a temporary higher unemployment rate.
Everyone wants a job and a piece of the pie once the economy takes off like gangbusters. This sends the unemployment rate higher since for a few weeks and months more people are looking for jobs than acquire jobs (which skews the data creating a higher rate) but over time they find a job they like, and the rate comes back down. So it would have been better to see the unemployment rate climb over the last few months, say from 3.6% to 3.7%, then 3.8% and maybe 3.9% or even 4.0%, and then move lower again. This is not happening; the rate remains subdued with companies holding on to workers praying that the backlog increases.
The unemployment rate is remaining at record lows. People are not flocking into the work force since it is status quo with the economy, same-o, same-o. Companies are holding on to the workers they have, a bare-bones staff, but this cannot go on forever. The Unemployment Claims numbers remain subdued because business cannot afford to layoff anyone else; they are hoping for more work to come through the door. In addition, the labor participation rate is actually down a tick this month to 63.2%. So the headline numbers are great for the newspaper headline writer's but create questions for pondering minds.
Keystone has harped on the wage data in the jobs report for several years. The earnings data is more important than the headline jobs number. The mainstream has finally joined this club over the last year or so and focused strongly on the wage data. Today's bright 266K jobs is a shiny object that no one can resist so it is receiving the bulk of the media attention. The monthly wage data misses by a tick up +0.2% but the year-on-year beat by a tick at +3.1%.
Keystone has explained the wage conundrum many times. The Federal Reserve's grand one-decade-plus Keynesian financial experiment, started under Chairman Bernanke in March 2009, remains a complete failure unable to generate inflation. Of course, the obscene global central banker collusion and non-stop intervention in markets is actually a success for the wealthy elite class since they own large stock portfolios and are now filthy rich from the one-decade-plus dovish monetary policies. This was always the intended outcome in America's rigged, crony capitalism system; the wealthy privileged class control the game.
Inflation cannot exist without wage inflation. These concepts are very simple. Do not complicate your life with television hype and misdirection. Wages must be growing for there to be sustainable overall inflation. This is Economics 101 and the problem over the last decade. Wages remain stagnant; ergo, no inflation. You are told it is a tight labor market but when you go in to ask the boss for a raise, he/she tells you to go pound salt. Inflation cannot occur without wage inflation occurring.
Wages are currently rising +3.1% per year. That's pitiful. Just think, you eat all the boss's crap all year long and all you get is a lousy 3% bump in pay. And some people receive a little more, maybe 5% or 6%, which means others receive no increase in pay at all. A 3-handle does not cut the mustard. The dirty little secret the Fed will not tell you is that you need around +4.5% annual wage growth to feed sustainable, guaranteed, steady inflation, above the +2% Fed target, for months and years forward. In this goofy day and age with the sick central banker control of global markets, let's be generous and say a 4-handle is good enough to provide the energy for sustainable inflation. We are a percent away from that, hence, you do not see inflation. It's not rocket science folks.
The narrative for today's price action provided by the business news outlets is that the jobs report created a big rally. Keystone's wet blanket on the data above provides you a more sobering perspective of today's market activity and several of you are placing the Fed wine down for a minute to try and clear your head. Stocks rally on central banker liquidity and nothing has changed. The Fed and its partners in crime such as the BOJ, ECB, PBOC and 20 other central banks, are printing money like madmen providing more liquidity than even after the Great Recession. Things are out of control.
Since the wage data remains subdued, there is no inflation anywhere in sight. Since there is no inflation in sight, the Federal Reserve will not hike rates and the dovish central banker fun will continue indefinitely. In other words, the headline jobs and rate numbers are great but the real focus by professional traders is that the Fed and other central banks plan to remain accomodative forever in a low inflation and disinflation environment so it is party-time; buy stocks.
Copper jumps +3.2% today the red metal exploding higher with investors believing in a trade deal. This huge move tells you that a lot of the rally today was due to a happy vibe about the trade deal rather than jobs number joy. The bulls know just how to nudge markets enough to limp them along at elevated levels especially to end the year. The FOMC rate decision is Wednesday and stocks are typically higher 80% of the time going into a Fed meeting. Chairman Powell will be greasing the market skids with fancy talk on Wednesday afternoon. The full moon peaks at midnight, going into Thursday morning, and stocks are usually bullish through the full moon.
Thus, the bulls have the wind at their backs next week say from Monday afternoon into Thursday. The ECB policy meeting is on Thursday and this may actually be a more important central bank meeting than the Fed. If the bears are going to growl, they probably need to do that out of the gate on Monday morning and try to override the Fed positivity into mid-week.
Perhaps the bulls will run next week until the new ECB President, Madame Lagarde, swims into power (she was an Olympian for France in synchronized swimming in her younger days and she obviously maintains a healthy form). President is a unisex title so she will likely be addressed as President Lagarde. This is a big meeting for Lagarde but she is a seasoned pro at handling the political pressure. Yes, her meeting on Thursday may be far more important than Powell's on hump day. Retail Sales data hit next Friday and we shall see if the American consumer continues to support the economy, or not.
So the bulls win a big victory in the stock market today but after dissecting the drama, we are once again left with a mixed bag of confusion. The charts may need a day or two more to absorb the upside momentum (tiny green lines) but the daily chart above remains in neggie d and bearish. Let a day or two play out and confirm that the indicators remain neggie d which will signal that the top is in.
The top standard deviation band is violated so the middle band at 13462 and lower band at 13321 are on the table. The bands are squeezing in the tightest since late July which resulted in a huge squeeze lower. Tight bands predict a big move is coming but they do not predict direction. Price is extended above the moving averages requiring a mean reversion lower. The Aroon green line is at the 100 max with nowhere to go but down and the red line is at the min zero with nowhere to go but up both are bearish going forward.
The positive sound bites on the US-China trade talks and the belief that the Fed and other central banks will always support markets with easy money keep the stock market elevated. Like other indexes over the last couple weeks, the charts say down but Soybean Donny, Dictator Xi, Pope Powell and other characters continue pumping stocks higher with happy talk. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
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