SPY-UI Model Update For April 2017

by: Paul Novell

The unemployment report was released on Friday, April 9, 2017. Here is the update for the SPY-UI model. There is so much noise out there on this report that it's important to just ignore the noise and focus on the trend.

Note: You don't need fancy paid tools to track this model. You can use easy free tools like StockCharts.com, for example. I'll do that below.

Most ink on these reports is spilled over the headline total nonfarm payrolls number. This is a very noisy number with a margin for error of about 100K jobs. It's much better to focus on the unemployment rate (UER), which is less noisy and tends to trend. Which is what we want. The unemployment rate for March was reported at 4.5%, down from the previous month. Here is a chart of the UER versus its 12-month SMA.

That's all we need for the SPY-UI model this month. As long as the UER is below its 12-month SMA, there is no further analysis or action necessary.

But just for kicks, we'll look at the SPY versus its 200-day (or 10-month) SMA. The chart below is a monthly chart of the SPY and its 10-month SMA (weekly or monthly charts help hide much of the noise). The trend is still up. The 10-month SMA is about 5.4% below the closing price on Friday. I also drew a cross hairs on when the real breakout in stocks took place last year. It wasn't on the election as most people seem to think. It took place in July 2016.

That's it for this month. SPY-UI is still fully invested in SPY. The next jobs report is on the first Friday in May, which is May 2nd. No potential changes to the model until then.