The State of the Markets:
The headlines blared that the July's Jobs Report was a "miss." This was due to the fact that, according to the Labor Department, the economy created 157,000 new jobs last month, which was below the consensus estimate of 190,000. As such, the bears gasped loudly and proclaimed that the economy must be rolling over.
However, after digging into the report, my response to the nattering nabobs of negativism is, "Uh, not exactly."
First off, we need to recognize that the monthly job totals are almost always revised the following month (you know, when the actual numbers are in). For example, June's new job creation total was revised upward to 248K from 218K while May's total moved up by 24K. This means that the economy actually created 59,000 more jobs than were originally reported in the prior two months alone. So, the optimist in me says that if you add 59K to 157K you get 216K new jobs, which would have been a "beat."
Oh, and the average job creation total over the last 3 months currently stands at 224K. Not bad for an economy that is supposed to be running out of workers.
The Unemployment Rate fell to 3.9%, although why the Labor Department doesn't break that number out a few more decimal places in this day and age is beyond me.
The Most Interesting Part Of The Report
For me, the most interesting aspect of the Nonfarm Payroll report was the all-important wages component. To review, this is now a closely watched area due to the impact wages have on inflation. And with everyone on the planet calling for higher inflation, well...
For the month, average hourly earnings rose by 7 cents, or 0.3%. On a year-over-year comparison basis, wages rose by 2.7%. Insert second gasp here, because this is above the critical 2% level that everyone is watching. So, inflation has GOT to rise soon, right?
Counterpoint number one, courtesy of J.P. Morgan's David Kelly, is that from a macro point of view, wages are not keeping up with the current pace of inflation. JPM's Chief Global Strategist told us Friday that although wages are up 2.7% over the past 12 months, inflation itself is up 2.8%. So, Kelly contends, there is no need to panic about runaway inflation just yet.
Kelly also pointed out that corporate profits are up 27% over the past year. This argues that wages are not impacting Corporate America's profits as companies have been able to effectively keep a lid wage increases. So, again, there really aren't any big inflation issues here.
The Bottom Line: Goldilocks Lives
From my seat, it appears this was yet another economic report that can be placed in the Goldilocks category. And in turn, this "splains" why the stock market rallied on Friday - despite the "miss" on the Jobs report.
However, with some weakness still present in my favorite market models (see the Primary Cycle Indicators board below) and overhead resistance looming on the S&P 500, it will be interesting to see if the bulls have the muscle to break on through to the other side in the near-term.
Now let's move on to the weekly review of my favorite indicators and market models...
I like to start each week with a review of the state of my favorite big-picture market models, which are designed to help me determine which team is in control of the prevailing major trend.
The Bottom Line:
Once I've reviewed the big picture, I then turn to the "state of the trend." These indicators are designed to give us a feel for the overall health of the current short- and intermediate-term trend models.
The Bottom Line:
Next up are the momentum indicators, which are designed to tell us whether there is any "oomph" behind the current trend.
The Bottom Line:
We also focus each week on the "early warning" board, which is designed to indicate when traders might start to "go the other way" -- for a trade.
The Bottom Line:
Now let's move on to the market's "external factors" - the indicators designed to tell us the state of the big-picture market drivers including monetary conditions, the economy, inflation, and valuations.
The Bottom Line:
Each year, NAAIM (National Association of Active Investment Managers) hosts a competition to identify the best actively managed investment strategies. In April, HCR's Dave Moenning took home first place for his flagship risk management strategy.
Want to Learn More? Contact Dave
The tragedy of life doesn't lie in not reaching your goal. The tragedy lies in having no goals to reach. - Benjamin Mays
Publishing Note: My next report will be published on Wednesday morning.
Wishing you green screens and all the best for a great day,
David D. Moenning
Founder, Chief Investment Officer
Heritage Capital Research
HCR Focuses on a Risk-Managed Approach to Investing
Must Read: What Risk Management Can and Cannot Do
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At the time of publication, Mr. Moenning held long positions in the following securities mentioned: none - Note that positions may change at any time.
We are excited to announce that the latest upgrade to the Daily Decision service was implemented on Monday, July 9.
The new, state-of-the-art portfolio is comprised of three parts.
The Risk-Managed Growth portion is made up of three trading strategies and accounts for 50% of the portfolio. The Market Leadership portion makes up 20% of the portfolio. And the Top Guns Stocks portion (10 of our favorite stocks) will make up the final 30% of the portfolio.
All three of our strategies will be run in a single Marketfy model - the model is currently labeled as the LEADERS model. The goal is to make the service simpler to follow by putting everything in one place.
Today's Portfolio Review:
2018 YTD Performance Update:
Daily Decision Portfolio: +7.4%
S&P 500: +6.2%
Current Rating Explained
This is our rating for the day. The Current Rating tells you what action we would take if we did not currently hold the position. A "Buy" rating means we would be willing to purchase the position at current prices. A "Strong Buy" suggests this would be our first choice to buy. A "Hold" rating indicates we would not make new purchases at current levels. And a "Sell" rating indicates we will likely exit the position in the near-term.
Positions Can Change
Positions often change during the trading session. Remember that we will send a Trade Alert via SMS Text Message and/or Email BEFORE we ever make a move in the models.
At the time of publication, the editors hold long positions in the following securities mentioned: SPY, IJR, QQQ, XLK, XLY, XLV, XLE, AAPL, MSFT, GOOGL, FB, AMZN, NFLX, CNC, ICUI, TRU, VFC - Note that positions may change at any time.
Wishing You All The Best in Your Investing Endeavors!
The Front Range Trading Team
NOT INVESTMENT ADVICE. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Investors should always consult an investment professional before making any investment.