Kevin Kiefer: Job Growth is Key to Recovery and Market

Friday's job numbers were very disappointing with private sector hiring declining significantly. What people need to understand is that there are enormous deflationary pressures in this economy and job growth is the only way to overcome those headwinds. Without strong job growth, this recovery and this stock market are both toast. The consumer and the private sector are continuing to deleverage and pay down debt....which is very deflationary but is a needed process in a system that had too much leverage. Even with the public debt soaring, total US debt (includes private and public debt) is declining.

We think this process will need to go on for many years with higher saving rates than what we have seen the past decade. Given this, the economy and the market can still do well if we have job growth to replace the aggregate demand lost due to the increase in savings. Also, after a few years of credit card debt going down, more income will be used to spend instead of interest payments which is a boost to the economy. As we have mentioned before, companies have cut to the bone and we believe that productivity can't go much higher in the short run so any increase in demand will lead to higher job growth than what we saw in May. We must watch the ISM and durable goods data to determine if demand is still increasing and if so, we expect much better private sector hiring in the months of June and July.

We are also still watching the 200 and 50 day moving averages on the S&P 500. We are well below both of these key moving averages with the 200 day at 1006 and the 50 day at 1154. It is very possible that the market may get a relief rally soon and we'll need to get a close above the 200 day moving average in order for us to put on more positions. If the economic data still points to demand increasing, then we should see the market get back above the key 200 day moving average quickly. Having said all of this, I am not selling or buying right now... and so I have no stock picks tonight. We'll need to keep a close eye on the economic data this month and on the charts and we'll let you know when it is safe to buy again or if it is time to sell all of our remaining positions.

I'm still a believer in this recovery... but if the market keeps hanging around below the 200 day and we can't get a close above it on the next leg higher, then I'll have to rethink that. Also, if the economic data starts coming in weaker than expected, then I'll also have to rethink that. We need good data this month to get the one thing we need to keep this economy and market going, JOBS.

Analyst Kevin Keifer can be reached at Kevin@tickerhouse.com

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Market Ends Week on a Down Note, Now What?

From guest blogger Kevin Kiefer of Ticker House.Com.....

Well folks, this week was pretty easy to call what would happen. We told you on Monday that we were being careful the rest of the week and that you shouldn't buy after that huge rally. We wanted to fill in that gap on the SPY chart before we got less bearish. Today, we have mostly filled in that gap. While you don't have to be a hero and buy stocks at the lows today, we don't see much more downside from here. We have good support at 1125, 1110 and the 200 day currently at 1100. We still think the market will not trade straight up from here but we do see the following things happening next week.

1) The stock market will finish next week at least slightly higher.
2) Oil/copper will finish the week higher.
3) US Treasury bills and the VIX will finish the week lower.
4) Gold will finish the week lower.

I didn't want to make a call on what will happen Monday but I am confident enough to call those four things. Of course, things can change and we'll keep you updated next week. It's possible we drift lower and retest the 200 day which is about 2% lower from here. However, I think that we have more of a chance of bottoming out today. My trade for next week is CELG which currently is in the green today. Celgene could be setting up for a decent bounce next week. If you want to read about the fundamental case for CELG, read the article that I wrote a few weeks back below. Take a look at Tuesday's article below to see the gap on the SPY we were talking about. Compare it to the chart of the SPY as of 2:10 pm today below this article. To sum things up, we think we are bottoming today but let's wait to see what happens early next week. If you want to buy a stock, I'd recommend CELG. It's chart looks good and it's not connected to the overall economy so it's more defensive.




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The Charts Say we Aren't in a New Bear Market

From guest blogger Kevin Kiefer at Ticker House.Com

Everyone is bearish now... should you be selling after a nearly 10% correction now? I don't think so. Even if your a believer in a double dip recession and a market crash, the charts show that now is probably not the time for that. For predicting the future, we are using the S&P 500 monthly 10 year chart. Over the last 10 years, we have never entered a bear market while the MACD was positive. With this 10% correction, the RSI is now down back to 50 and the MACD is still positive.

That leads me to believe that the RSI will not break 50 and that we are exactly laying the foundation for a bottom here. Remember the 50 level on the RSI is pivot point because below 50 signals a bear market while above 50 signals a bull market. Not only are the charts saying this is not the start of a crash but the fundamentals in the US also do not support it. Last time we broke the 200 day moving average in late 2007, we were losing jobs, our banking system was reporting huge write downs and home prices were falling.

April's job report was very good with around 220,000 private sector jobs being created and March's numbers were revised upwards. Before we panic out of the market, let's wait to see what happens this week. We'll be watching the 200 day on the SPY daily chart and the RSI on the 10 year monthly SPY chart. The RSI needs to hold 50 on that chart for us to remain bullish. Below is the chart of the SPY 10 year monthly. I have circled the areas of importance.



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