Monday, August 12, 2013

Market/Economic Overview: US

Let's start by reviewing the data releases from last week.

The Good

The ISM Services index printed very strong in last week's reading:

"The NMI™ registered 56 percent in July, 3.8 percentage points higher than the 52.2 percent registered in June. This indicates continued growth at a faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased substantially to 60.4 percent, which is 8.7 percentage points higher than the 51.7 percent reported in June, reflecting growth for the 48th consecutive month. The New Orders Index increased significantly by 6.9 percentage points to 57.7 percent, and the Employment Index decreased 1.5 percentage points to 53.2 percent, indicating growth in employment for the 12th consecutive month. The Prices Index increased 7.6 percentage points to 60.1 percent, indicating prices increased at a significantly faster rate in July when compared to June. According to the NMI™, 16 non-manufacturing industries reported growth in July. Respondents' comments are mostly positive about business conditions and the overall economy." 

The US trade deficit came in at a fairly narrow $34.2 billion.  While the deficit has been fairly consistent over the last few years:

We should be concerned about the weak export performance over the last year and a half:


The JOLTs survey was released by the BLS, once again showing the labor market is weak.  Here's a key takeaways from the report:

The number of job openings in June (not seasonally adjusted) was little changed over the year for total nonfarm, total private, and government. Although the number of total job openings was little changed over the year, several industries experienced increases and several industries experienced decreases. In the Midwest region, the number of job openings rose over the year. (See table 7.)


Over the 12 months ending in June, the number of hires (not seasonally adjusted) was little changed for total nonfarm, total private, and government. The number of hires increased in information over the year but fell in durable goods manufacturing and in educational services. The hires level declined over the year in the Midwest. (See table 8.)

Let's turn to the markets

 The SPYs have been trading in a range between 167 and 171 for the last two and a half weeks.  The real issue with this chart is the declining momentum reading, as shown by the lower MACD peaks that printed over the last three months.  Combine that with a very weak summer trading environment, and you have a recipe for stalling.

The IEFs are also trading in a range, however theirs is occurring between 100.0 and 103.  It appears the market is accepting this overall level as the natural post-Fed announcement trading range/interest rate level.

 And the dollar continues to be range bound as well.

Look -- there's just not much happening in the market right now.  For the first August in a number of years, it seems as though everyone is actually taking a vacation.  There is little in the news to meaningfully sway the markets either way and barring a cataclysmic event, there probably won't be any major movement for the next few weeks.