All charts edged in blue with the word "FRED" in the upper left-hand corner are from the St. Louis Federal Reserve's FRED economic database
All stock charts with the word "stockcharts.com" in the upper right-hand corner are from the Stockcharts.com website.
The author has written permission to use PMI©’s and Institute for Supply Management ©
The following is from the author's personal notes:
Above is my shorthand way of tracking the key sector ETFs (top "panel") and major index-tracking ETFs (bottom "panel"). The sectors represent the entire "XL" series from State Street Global Investors with the exception of real estate, which is represented by "Q" for VNQ. Combined, they comprise the entire US economy. I only use the last letter of each ETF (for example, "B" is the XLB, "C" is XLC, etc.). The bottom panel uses the last letter of the following ETFs: IWC, IWM, IJH, SPY, QQQ, DIA, and OEF. Together, these represent the entire spectrum of US indexes from small to mega-cap). A horizontal line in a column indicates that all ETFs below that level are negative.
The following trends are apparent in the data:
- There's an interesting split between basic materials and industrials. Basic materials were the top-performing sector last week, probably because traders believe rising commodity prices combined with strong demand will lead to higher prices. However, industrials were down modestly, probably because they have to absorb increased commodity prices.
- The two key technology ETFs -- the XLK and XLC -- were off modestly.
- Real estate is still performing modestly well. Its yield is likely attracting income investors who are frustrated at low bond yields.
- Once again, energy did well.
- Two other defensive sectors -- utilities and consumer staples -- are edging up the list.
- Smaller caps regained the lead relative to larger caps (see bottom panel).
Here are the key economic numbers released this week.
- We get new PMI©’s from the Institute for Supply Management©
- Friday is the big day, with the BLS released the latest employment report. Here are some key data points to keep in mind after we see the new data.
The US economy has regained about 70% of job pandemic-caused job losses (left chart). The pace of monthly job increases (right) is increasing modestly.
However, the labor force participation rate (LFPR) (left) -- which measures the percentage of people eligible to participate in the labor force -- has only regained about half its losses. This means that something is keeping people on the sidelines. It's likely a combination of stay-at-home issues (mostly women taking care of children who aren't in school), virus concerns, and potentially enhanced unemployment benefits (so far, the data here is mixed). As a result, the employment/population ratio (right) is still lower than its pre-pandemic levels.
What's happening in China? This article from Bloomberg gives you a good explanation of the changes instituted by the central government. There's way too much the summarize.
Let's take a look at today's performance tables from stockcharts.com:
The spike in the morning helped to mitigate the losses that followed in the afternoon. Only one equity index was higher, and it was only up fractionally. Larger caps were off marginally while smaller-caps are at the bottom.
Defensive sectors are scattered throughout the table, which means there wasn't a rush to the door's movement. Instead, it was just a standard, profit-taking session.
Here are today's charts from the author's Quotetracker:
All prices gapped higher at the open. But the markets used the ISM release (which was only off marginally) as an excuse to start a wave of selling. There were two legs lower. Most important is the high-volume sell-off at the close.
From the 30-day perspective, not much has changed.
DIA 30-day
The DIA is still fluctuating around the upper 350 level. However, prices closed below the 200-minute EMA at the close on high volume. Tomorrow's open is pretty important for this ETF.
SPY 30-day
The SPY is still using the 438 level for support.
QQQ 30-day
The QQQ is using the mid-365 area as a center of gravity.
IWM 30-day
The IWM couldn't hold above the 222 area.
Sell-offs at the close are always concerning. Let's hope it's not the harbinger of a nasty move lower.
