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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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  • Shrinking By WSS Research Team

    By Dominique Paul, Research Analyst

    The Dow Jones Industrial Average has made quite the reversal from premarket lows. Half an hour before the market open, The Dow indicated that it was down over 130 points. The Dow rose over 180 points above the breakeven line though it has retreated to now be up approximately 140 points, sporting a gain of +0.80%. The S&P 500 and the NASDQAQ, indicated higher this morning and are struggling to hold onto their gains. We had some rather positive economic reports released this morning.

    First of all, during July, the US trade deficit shrank to its second smallest level since the start of 2015. The amount of US exports rose by $0.8 billion to $188.5 billion, while US imports increased by $2.5 billion to $230.4 billion. This resulted in a trade deficit of $41.9 billion; that's down 7.39% from June. According to the Bureau of Economic Analysis (BEA), the deficit between the US and the European Union fell to $12.4 billion in July, while the deficit with Mexico fell to $3.8 billion.

    The Institute for Supply Management (ISM) released its non-manufacturing (services) purchasing managers' index (PMI) report for the month of August. While the economy is still expanding, August saw a deceleration in growth. The headline fell to 59.0 from a reading of 60.3 in July, still, it's higher than the neutral 50-level. Strength in the report came from inventory sentiment component rising by 5.5 points to 69.0 and the backlog orders component rising by 2.5 points to 56.5. Similar to July, imports also demonstrated strength in August, rising by 1.0 point to 51.5. However, new export orders was the source of the greatest weakness in the report as the component decreased by 4.5 points to 52 (still expanding). Despite yesterday's ADP report pointing to high job growth within the services sector, ISM's employment component decreased by 3.6 points to a reading of 56.0. Also, prices paid decreased, falling to 50.8 from 53.7.

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    Sep 03 1:01 PM | Link | Comment!
  • What's The Canary Saying? By Charles Payne

    That last second rally that almost got the Dow above a 300-point gain for the session is a reminder that the market can stave off sell programs from time to time. It also will stave off buyers, while cowering on the sidelines and ready to jump on the train if it's leaving the station. Of course, this market has been more of a roller coaster than a roaring locomotive that had been powering the market rally since it bottomed in March 2009.

    However, another juggernaut might be sending a clear message without the crazy volatility of the stock market. The bond market should have seen yields significantly under 2.0% at some point in the last two weeks, but that didn't happen.

    Bond yields have been in a virtual freefall since 1981, confounding the experts while making debt investors rich in the process. The big trade coming into each year was the biggest against bonds; it's been a loser, going back to 1940, and it's been impossible to get yields to go and to stay under 2.0% for an extended period. Maybe the non-action in yields is speaking louder than stock market gyrations.

    For all the talk of the Fed driving the market higher, the fact of the matter is that the good old-fashioned corporate profits are the primary driver of stocks. It's a reason why markets have been shaky of late, because while earnings per share have been higher -in part to massive corporate buybacks- revenue and profits have been disappointing. However, keep this chart (below) in mind and understand that in the long run, it's about profits.

    That said, all eyes are squarely on the Fed going into Friday's jobs report; we will be waiting on how they'll react and how the market will react to what the Fed says.

    I think the market can handle the Fed hiking rates by 25 basis points if there's overwhelming evidence the economy is going to make it without the punch bowl. With that being said, we'd need a huge jobs report and significantly higher wages on Friday morning. In the meantime, the myth over irrational exuberance has never materialized with this market, which has been marked largely by individual indifferences.

    In April, neutral levels were at its highest since April 1989. Now, investors are picking sides and most are bearish. If this is still a great contrarian indicator, then this market is ready to soar.

    Investor Sentiment
    August 26, 2015

    Change

    Current Level

    Bullish

    +5.7%

    32.5%

    Neutral

    -10.6%

    29.2%

    Bearish

    +4.9%

    38.3%

    Today's Session

    Initial jobless claims were higher, again, although still in longer term down trend. That news didn't move the needle, but it's interesting to know ahead of tomorrow's jobs report. In fact, coupled with this morning's report from Challenger, Gray & Christmas (Pending:CGC) on announced layoffs it's worrisome.

    CGC counted 41,186 job layoff announcements, down 60% from August, but up year over year. In fact, seven of the nine months this year have seen higher job cuts announced and we are on pace for the worst year since 2009. It's not the stuff of recoveries.

    Speaking of which, Mario Draghi spoke this morning and moved markets. Sadly and predictably, his comments portrayed an abysmal economic picture and outlook for Europe. Some traders were happy to hear a more aggressive implementation of their QE resulting in knee jerk reactions:

    I'm not chasing the early move higher, but spying a lot of bargains- price isn't an issue these days, but the backdrop that is more about emotions. Also, there are legitimate concerns as government intervention continues to come up short - around the world.

    Sep 03 9:44 AM | Link | Comment!
  • Sweet Change Of Pace By WSS Research Team

    By Dominique Paul, Research Analyst

    Commodities are down. The price of crude oil has faded below $44 per barrel following the Energy Information Administration's (NYSEMKT:EIA) weekly petroleum status report release this morning. The US saw a build of 4.7 million barrels to 455.5 million barrels in the week ended August 28th. This loosely translates to higher supply, lower prices. Gold futures are also down, moving to $1,135 per ounce. In fact, most hedges are down during today's session, and one look at the markets will tell you why. The major equity indices began the session gapping up, and have continued to demonstrate strength for most of the session. Albeit, it did pullback briefly moments after the release of the Factor Orders report from the Census Bureau. The Dow Jones Industrial average has recovered nearly 180 points while the NASDAQ sports a gain of 1.45% and the S&P 500 sports a gain of 1.15%.

    ADP released a disappointing figure for the month of August as it reported that 190,000 jobs were added to payroll. A bulk of the jobs (91%) came from the services sector. Small businesses added 85,000 of the jobs to the economy during the month. Manufacturing added 7,000 jobs which is significantly higher than the 1,000 gain observed in July. Construction jobs also improved, with 17,000 additions during the month following a 15,000 gain in July. Professional/business service industry added the most jobs, +29,000, followed by the trade/transportation/utilities industry adding 28,000 jobs.

    The Bureau of Labor Statistics released a revised productivity and labor cost report for Q2-2015. During the quarter, productivity actually increased by 3.3% sequentially compared to an initial estimate of +1.3%. Within the manufacturing sector, labor productivity rose by 2.3% and output rose by 1.3%. With the amount of hours worked decreasing by 0.9%, this shows that businesses have been finding ways to make their production processes more efficient. Unit labor cost fell by 1.4% during the quarter; initially, it was estimated that unit labor cost had increased by 0.5%. Within the manufacturing sector, unit labor cost had fallen by 2.2%. Looking to the future, with low GDP estimates, we may see a deceleration of growth in productivity during Q3-2015.

    The Census Bureau released its monthly Factory Orders report for July. Month-over-month, new orders of factory goods rose by 0.4%. This is significanly lower than the upwardly revised 2.2% gain (from 1.8%) observed during the month of June. When excluding transportation, new orders actually fell by 0.6% in July, negating the 0.6% gain from june. Shipments fell for the third time in the past four months, down 0.2%. Unfilled orders also increased slightly and inventories decreased.

    Sep 02 1:41 PM | Link | Comment!
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