The cause was a worse-than-expected jobs report, but there are a few points that should be made pretty quickly. First, the Yanks are heading into their Fourth of July long weekend and so the volume of the sell off was light. It’s not like last year, when shareholders headed for the exit doors like they did when the Titanic hit an iceberg.
Secondly, jobs numbers are like looking at an economy in a rear vision window. It tells you what businesses were like six months ago when sales were falling and the managers were wondering if they can keep staff or not. Economic life is starting to get better if you believe the more ‘now’ indicators such as manufacturing and services sector surveys, as well as leading indicators, which look forward.
In fact, we need to see these ups and downs to turn around the important trend lines called — the moving averages. A series of these where the market ups are slightly bigger than the down days and this eventually turns the 50-day and 200-day average movements of the market to the upside.
For the record, US stocks have been down for three weeks and two indicators I watch are pretty interesting right now.
The S&P 500 is down to 896 and it has had trouble getting through the 950-level. Mid-July will be the start of testing of the stock market when the US company profits come out.
Investors are a little spooked with Volatility Index, ending at 27.95 after going under 25 earlier in the week. But this is not a big nor worrying jump in the fear index.
The better news was that factory orders went up, yes, up 1.2 per cent in May and that’s the best increase in close to 12 months.
By the way, Alcoa beats the pack reporting next week — Thursday, our time — and while its profit figure will be looked at, the analysts will be more interested in their outlook comments.
We will see if they are right over the next few weeks.
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