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Thursday, September 3, 2015

Daily update 9/3 Cheap Labor

A little buying and a little selling.

SPX got a bit above the 9/1 big gap down, but ran into trouble.  Sellers pushed it back down below the open before it stabilized.  Breadth was +63% which was pretty strong for the size of the up move.  Big caps lagging again.  This looks like money moving from high flyers to more beaten down stocks.  Typical defensive activity.  New highs came in at 8 while new lows dropped down to 32.  The stats aren't telling us much about where we are going.  That 1975-80 resistance zone may be firming up some. 

The futures confirmed an upside break of the 20 SMA overnight.  Early in the day the bulls had some energy.  However, the sellers took over after 11:00 and sent the futures back below the 20 SMA again.   There is a triangle pattern forming since the crash.  Most often that is a continuation pattern.  We are running out of room so tomorrow looks like resolution day.  A break of the lower line should cause a retest of the crash low.  A break of the upper line probably sends us up to the first red resistance line. 

Lets revisit the green/red bar chart.

Today's action increased both the red and green bar counts.  I looked back several years and I cannot find any other time when both numbers where this low together.  More confusion.

The employment report might be the deciding factor.  Too high and rate hike fears are likely to take over.  Too low and the no hike crowd is likely to show up.  What happens if we get a middle number?  It is really too soon to get a good retest of the low.  A successful test is much more likely with some buying strength and 2-3 weeks at least in between.  Longer is better.  We have not had enough strength to indicate we have high odds of making a solid low.  Since I believe we have entered a bear market I don't find that surprising at all.  I think there are a lot of highly leveraged hedge funds hoping and praying for higher prices so they can get out.  Who is going to push prices up there for them to do that?

Here is an article from the ECRI that clearly shows many of the jobs being created are of the low paying variety.  Cheap Labor  Here is a look at a chart unlike anything I have seen anywhere else.

Since 2011, when the E/P ratio for those with less than a high school diploma bottomed, that metric has regained almost two-thirds of its recessionary losses (orange line in chart). But the E/P ratio for high school or college graduates – i.e., eight out of nine American adults – has not recovered any of its recessionary losses, and stands about where it started, one, two and three years ago (purple line).

This data shows that the so-called jobs recovery has been spearheaded by cheap labor, with job gains going disproportionately to the least educated — and lowest-paid — workers. This is scarcely a good basis for resilient consumer spending driven by “solid” job growth that the consensus – including the Fed – is banking on.

I sometimes hear the pundits on TV wondering why Americans don't feel like the economy is recovering.  I suspect some of that is because most people know some college graduates that are really struggling to find decent jobs.


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