Forward looking economic indicators continue to suggest the US economy will perform better over
Half 2 '16. Since I prefer the household survey of jobs obtained over the payroll report, I regard
the large - 287K - increase in employment reported today to be of less significance than the fact
that the household survey shows only nominal progress in employment since this spring, with this
latter measure more accurately reflective of the slow progress of the economy this year. Better
sales and production data are needed to firm up the case that the economy is again moving forward
at a better pace. Moreover, with the unemployment rate already under 5%, what is needed now is
better productivity growth rather than strong jobs growth and this requires more nearly full staffs
to expeditiously handle a larger order flow both in manufacturing and commercially.
A post Brexit rally has brought the SPX to a slight new closing high. The move to a new high
confirms a continuation of the rally began in Feb., albeit one which is now on a considerably more
restrained trajectory. Note especially the bounce in the MACD off its following 'red line' in the
chart just ahead. SPX Weekly In short, the SPX dodged a bullet (Brexit).
The SPX and the indicators on the chart show a positive reversal around Feb. of this year and
continuation of an intermediate term uptrend. The market is nearly 5% above the 40wk. m/a
but is not seriously overbought on the weekly indicator readings. My suspicion is that should
this advance continue, it will prove volatile as the market is trading well above the trend line
set by the Feb. / Jun. lows. This baby is building in some roller coaster potential.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!