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Friday, March 15, 2013

Interesting tidbits

There was a lot of celebration of the employment data when it came out.  However, when you look at the first two months this year vs the first two months last year the number of jobs created were much lower.  I think this chart gives a pretty good long term view of employment.


The employment data has rolled over a little bit.  However, this does not mean we are in a recession yet.  A look at the past data shows a few times where employment picked back after turning down for a while without a recession.  It does show the labor market has weakened a bit.  Is it lasting or just temporary?

This next chart shows prior instances of long winning streaks by the Dow like we currently have.  Pretty interesting.


There were only four out of 24 nine day streaks with a smaller percent gain then the current streak.  The size of the gain during the streak does not seem to be a very good indicator of what happens down the road. The next month after the streak was only positive 52% of the time.  There was a 5% and a 7% pullback over the next month as well as 5% and 6% gains.  This is not a highly predictive indicator long term either.  There was a streak in 1987 which did not save the market from a crash.  There was also a streak in the middle of the 73-74 bear market which saw the market much lower later in 73.  It is interesting data, but not of much use for future trading though.

Here is a look at the retail sales data.


This data series does not go back all that far.  The 12 month average is getting close to a critical level.  Will it turn back up or keep heading down?  It is not really showing a strong uptick in the economy at this time.

In the contrarian sell signal department, I thought this was an interesting story Morning MarketBeat: Another Bear Bites the Dust.

This rally has converted yet another skeptic.
Richard Russell, a newsletter writer who has been penning the “Dow Theory Letters” since 1958, is now advising his clients to buy stocks, an about face for someone who had been pretty bearish for much of the four-year-old bull market.

This is strikingly familiar.  During the last bull market in the 2000s he was very bullish of gold, but always found reasons for being bearish on stocks.  In 2007, right near the top, he suddenly got very bullish just like the above story seems to indicate he is again.  Maybe this time it will be different.  However, advising clients to buy in an extended market is probably not the smartest thing in the world to do.

The global data and for the most part the U.S. data is headed down not up.  We also have had two quarters of negative earnings growth.  There is a considerable disconnect between stocks and the fundamentals.  This condition will not persist indefinitely.  Either the economy must pick up or stocks will reprice lower.  Which will it be?


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.