The Fascist Component of the Unemployment Claims Data

As you have probably heard, unemployment-claims are the lowest they have been in 42 years. However, I believe there is now a substantial political component to the data.

First, Republicans have about 10 more governorships now than they did in 2009. So, in general, it is probably harder to get unemployment benefits today. For example, one study found that Florida’s unemployment benefits are “virtually inaccessible.” Stricter eligibility rules might not effect initial claims, but they certainly would lower continuing claims.

Second, corporate lawyers may have found a loophole when doing layoffs. In a story about a massive IBM layoff, Bob Cringely reports:

“Some companies in some states have been known to report terminations in a way that disqualifies workers, thus saving the company money on unemployment insurance premiums.”

Third, corporations have been assiduously scrubbing their payrolls clean of citizens in favor of foreign employees working on visas such as the H-1B. The size of this scab army is probably large enough now to put a dent in the unemployment-claims data. To qualify for benefits, a worker must be ready and able to go to work immediately at any suitable job. An H-1B worker is only allowed to work for his sponsor, so his only options are to get rehired, find a new sponsor, or go home. I found conflicting opinions on this, but in general, foreign workers have fewer rights, which of course, is the whole reason why corporations favor them over citizens.

Essentially, as the USA moves to a more fascistic system, it is reasonable to expect an impact on the unemployment data. I don’t know how big the fascist component is now, and would love to see some research done by a professional economist.

Because of this, the withholding-tax data might be giving us an even clearer picture of the jobs situation than the claims data.

FICA Flops

Below is a chart that I sent out to my DailyJobsUpdate.com subscribers a couple of weeks ago. So, this is a sample of the kind of analysis you get when you subscribe (click chart to enlarge):

Compare

On the left side is the annual growth-rate of withholding-tax collections plotted daily for 2008. On the right side is the same metric plotted since November 1, 2015. As you can see, things have weakened badly over the last eight weeks.

This plot is similar to a very long moving-average, and it has only turned down twice since 1998: before the 2002 recession, and then before the 2008 recession. It takes a lot of deterioration to bend it over, so this is a significant development. The growth-rate will almost certainly continue to weaken going forward since shorter-term measures are in the 2% area as we speak.

Note: FICA/Payroll/Withholding taxes are reported every business day by the Treasury Department, so the annual growth-rate can be calculated each day for the trailing year.

Rising Wedge Pattern on NASDAQ

The rally since February on the NASDAQ-100 index (NDX, QQQ, NQ) has taken the shape of a bearish rising-wedge pattern. See the green lines on the chart below (click to enlarge):

Rising Wedge Pattern

Rising Wedge Pattern

The NDX may be back-testing the neckline of its 4Q15 top at 4486 (see the blue line and arrows). This sets up a convergence point at the red X where the wedge reaches its apex just as it reaches the blue line. This may be an excellent area to for a short trade.

Widening out the view, we see that the wedge may be forming the right-shoulder of a giant head-and-shoulders top pattern:

Head-and-Shoulders Top

Head-and-Shoulders Top

The left shoulder isn’t well-formed, and the neckline (pink) is raggedy, so it isn’t the best H&S, but it has the look and should be taken seriously. So, if it completes, where would the target be? Answer: way down there. To find a likely target, we have to widen out to a weekly chart and scroll way back. The height of this pattern portends a plunge down to the 2014 lows at 3414 (green line and arrows):

Head-and-Shoulders Targe

Head-and-Shoulders Target

It’s also possible that the NDX will rally up further and print its right-shoulder at 4694, but that wouldn’t change the target of the H&S.

How could such a cataclysm befall the market? There are a few headwinds blowing right now. First, the Fed Heads have started talking hawkishly again. Second, FICA tax-revenue is rolling over in the same pattern that it did in 2008; I will post a chart of that soon. And finally, Bernie Sanders crushed Hills in all three primaries on Saturday, and a recent poll showed him crushing Trump by 20 points in the general. So, we just might be looking at a market-hostile socialist president (to go along with a hostile Fed) in November. It would be a miracle if the market didn’t throw a major tantrum at such a scenario.

To learn how to play the rising-wedge pattern, see Chapter 16 in my book: The General Theory of Day-Trading.

New App: Random Stock Grapher

I just released a new app called Random Stock Grapher. It’s a simple, free app that uses a random number generator to make charts that resemble stock charts. So, if you are trying to decide whether or not stock-price movement is random, you might want to play with this app.

There are RSG versions for Windows, Mac, and Raspberry Pi. I would make an iOS version if I had a lot of time on my hands to jump through all of Apple’s flaming hoops to get it in the App Store. One does not simply distribute an iOS app after all. Maybe someday…

In any case: the RSG home page.

Monetary Policy has no Effect on Wages in a Slave Society

Imagine that you are Fed chairman in 1830, and at an FOMC meeting you ask the committee: “how can we adjust our policy levers here at the central bank to get a wage boost for the slaves down south?” What would happen? Your fellow fed-heads would probably look at you like you were insane. Then they would offer suggestions, trying not to giggle in the process.

In the future, a big milestone in the march toward a fascist slave-state will go into the history books when Congress formally relieves the Fed of its mandate to strive for full employment. Perhaps this will be done in the aftermath of a global financial catastrophe caused by the Fed pumping absurd amounts of liquidity into the global financial system.

This is inevitable because with the ever-expanding policies of free-trade and mass-immigration, what is left of the USA’s economic boarders are rapidly melting away. And that’s why the wage data is still punk after trillions of stimulus from the Fed: wages in the formerly-sovereign USA cannot rise until after wages rise in the “Mexico” and “China” and “India” regions of the neoliberal global empire.

It’s pretty obvious that the Fed, and the ECB, have succeeded only in creating massive distortions in global financial markets (such as negative rates on German bunds). Perhaps this is why Janet Yellen is so hesitant to make even a teensy quarter-point rate hike: she knows that she will have to engineer the mother of all soft-landings. The path of least resistance for her would be to keep rates at zero until a rise in inflation forces her hand. Once the CYA is in place, she can blow up the world.

If David Rockefeller and his neoliberal oligarchy were competent, they would have removed the Fed’s full-employment mandate long before they reached their goal of commoditizing global labor at a wage-rate of $2 per hour. But they are anything but competent, and the 2008 financial crisis was only a small taste of the havoc they will wreak upon this nation.

Godspeed Janet Yellen, Godspeed.

Oh My God, The Wages!

There was consternation on CNBC yesterday after the Employment Situation report showed a drop in wages. I find this hilarious because CNBC is the media flagship of neoliberalism, America’s national ideology, and the beating heart of neoliberalism is low wages.

The primary goal of our economic policy is to beat down wages via the mass off-shoring of jobs, and the mass immigration of cheap labor. Not to mention flat-out criminal corporate wage-theft (keep reading). Yes, this is an evil policy, but it is a successful one. Very successful, as evidenced by the massive increase in corporate profits. Devouring the middle class might be the most-profitable economic policy ever.

The talking heads on CNBC should have been celebrating. Instead, they are baffled that their ideology isn’t producing a land of rainbows, lollipops, and puppy dogs. What a bunch of brainwashed buffoons.

To illustrate, imagine a planter growing cotton on a thousand acres. Then he bribes the government to run-off the Native Americans living next door, buys the land, and doubles the size of his plantation. Now he needs more workers, so he goes to the market and purchases a hundred more slaves. That night, he drinks a toast to himself: “I am a great jobs creator!” But wages have not improved; they were $0.00 per hour before, and are still $0.00 now.

What is happening in the USA isn’t too much different. Recently, one of our fabulous jobs-creators in Silicon Valley did something similar. They flew in eight workers from India, made them work 120 hours per week, and paid them only $1.21 per hour. Now, let me point out something that might not have occurred to you: $1.21 per hour is lot closer to $0.00 per hour (slavery) than it is to the California minimum wage of $9 per hour.

That is a microcosm of what is happening in the USA. America’s once mighty middle-class workforce has, to a great extent, been either eliminated by off-shoring, or replaced by a massive foreign scab workforce tens-of-millions strong.

And what can Janet Yellen do about that? Absolutely nothing. The best she can do is keep rates low, and pray, but low rates cannot even put a dent in neoliberalism. Ultimately, it’s not her job, and she has no power to stop the forces driving wages lower.

If you are a neoliberal baffled by the lack of wage growth, may I suggest a psychiatrist skilled in cult deprogramming?

Further reading: Here is the story that I mentioned above: “Bay Area Tech Company Caught Paying Imported Workers $1.21 per Hour.” Management’s excuse was they thought that they could pay India’s minimum wage; that somehow U.S. and California laws do not apply to immigrant workers. Do they also think that they could go to Sudan and purchase slaves, and keep them slaves in California? Maybe they do. Maybe management’s homes should be searched. Interesting fact: back in the 1990’s, I worked for a software company in Silicon Valley that had offices in the same building as the company in the story, Electronics for Imaging. What if Janet Yellen parachuted into EFI’s offices? What could she do? Not a damn thing.

Funny: Mohamed El-Erian calls it the “wage puzzle.” Story here.

Surprised by the Strong Jobs Report?

Friday’s jobs report caught investors by surprise, and sparked a buying panic in the stock market. With 248,000 jobs created over the expected 215,000 the Dow rallied 208 points.

But my subscribers at DailyJobsUpdate.com were not surprised at all. Three days prior I sent them this chart showing an acceleration in withholding-tax collections (click to enlarge):

Trailing-Quarter

The chart plots the quarterly growth-rate of federal withholding-tax collections over the trailing quarter. So, each bar is the growth-rate of the past 90 days over the corresponding period from last year.

The data is noisy, so a 21-day moving average (red line) is used to highlight the trend. The green arrow points to where the moving average was last month at this time – about 5.25%. The black arrow points to where it is now – about 5.75%. So, that’s solid acceleration during September.

Not bad, huh?

If the Fed stops cycling interest rates, does the business cycle go away? Maybe it does; maybe that explains the freakishly steady, if lackluster, creation of jobs. In any case, the moral of the story is that you should go to the Daily Jobs Update and subscribe right now.

Family Dumpster

On Thursday, Family Dollar Stores, Inc. (FDO) reported a sharp drop in profits, and said they would close 370 stores. When people can’t afford to shop at Sears anymore, they go to Walmart. When they can’t afford Walmart, the go to Family Dollar. But what is the next step down? Family Dumpster.

Now that the multinationals have off-shored the American middle class, the big question is: can they devise a way to monetize dumpster diving. Perhaps they can. I notice that dumpsters are no longer left unattended out back. Now they are enclosed in brick buildings. Maybe during the small hours of the morning, a sales rep from Family Dumpster could open the buildings and charge homeless people a fee to spelunk the dumpsters. I can hear the greeters now: “Welcome to Family Dumpster!”

But seriously, people who have been expelled from the capitalist economy against their will have another option: sharing. For example, if you have no job, but own a house, you can now generate income with the help of Airbnb.com. There are now such companies for sharing every conceivable thing from baby clothes to cars. And they are growing. Fast. And taking market share from capitalist incumbents.

An Airbnb IPO would probably see the company with a market-cap larger than Hyatt Hotels (H). And it would be poetic justice. As I reported in my book, companies like Hyatt are notorious for breaking unions, firing American workers, and replacing them with desperate immigrants at minimum wage – and then working those immigrants like Alaskan sled dogs. Now, former hotel workers are striking back and taking market share via Airbnb.

Ladies and Gentlemen. What we are seeing is nothing less than the suicide of capitalism. And let the record show that the American people did not turn their back on capitalism. It was international capitalists who turned their back on the American people. Turns out, allowing a fat, drunken, incompetent (David Rockefeller) to design the global economic system wasn’t such a good idea after all. Who knew?

Note: Here are some more sharing companies: Couchsurfing, RelayRides, Getaround, Liquid, Lending Club, Fon, SideCar, Poshmark, Neighborgoods.

Down Goes Kudlow!

Larry Kudlow’s CNBC show is no more. The official story is that he is retiring, however that sounds like BS to me. On Monday (or was it Tuesday?) Kudlow said: “But I still have a pen” which is an expression of defiance, and puts the lie to the retirement story.

I reckon that the demand for Koch Brothers talking-points, neoliberalism, and non-stop warmongering isn’t what it used to be.

Nobody, other than myself, watched Kudlow’s show, but it is not a small thing that this beacon of globalism has been extinguished. First, the people struck down the attempted war on Syria. Then they struck down Larry Summers as Fed Chairman. And now they have given Kudlow the cold shoulder, voting with their eyeballs against neoliberalism.

We will have to see what CNBC puts in Kudlow’s slot, but this looks like another stinging defeat for the Oligarchy.

To see Kudlow at his most-evil, see my post: “Larry Kudlow is Pure Evil – Part 2.”

Here my other posts about Kudlow (from newest to oldest):

CNBC Rebellion
Larry Kudlow Lies About Immigration
Larry Kudlow, Gas Bag
Bizarro Kudlow Cheers Workers
Larry Kudlow is a Declinist
Where Are Those Jobs Mr. Kudlow?
Larry Kudlow, Patriotic Globican
Kudlow Goes Berserk
Larry Kudlow, Chinese Patriot
Larry Kudlow is Pure Evil
Larry “Global Job Creation” Kudlow
Kudlow, Idiot – IBM, Evil
Larry Kudlow is an Idiot #2
Larry Kudlow is an Idiot
Kudlow Congratulates Citi After Catastrophe
Kudlow: “Hurrah for Recession!”

NASDAQ-100 Megaphone Pattern

Below is a daily chart of the NDX showing a megaphone pattern (click to enlarge):

NDX-Megaphone-Feb-2014

This pattern is sometimes called a “reverse symmetrical triangle” or a “broadening top” and is usually bearish. Here is a megaphone chart that I posted back in 2009:

ES Broadening Pattern

Two days later, the S&P 500 rolled over and dropped 63 points. But the correction only lasted six days, and the bull market resumed. So in that case, the megaphone was a signal to go to cash and get ready to buy the dip.

No pattern is perfectly reliable, and it’s not impossible for the market to shake off a megaphone. Perhaps Janet Yellen’s melodic voice has soothed the market beast. We will know very soon.

Long Line at the Car Wash

After the recession began in 2008, I no longer had to wait in line at the car wash. That was odd because I live in an upscale neighborhood, and the most-expensive service at my car wash is $10. I couldn’t believe that my neighbors couldn’t afford to wash their cars anymore. Maybe they could afford it, but could not afford to come down to their condos here in Miami Beach. Maybe the “snow bird” population had been thinned. Maybe they had to stay up north with their noses to the grindstone year-round.

Whatever the reason, the car wash is busy again. On Thursday, I had to wait in line for over an hour. Maybe the economy is reaching escape velocity – at least among the population that can afford cars.

Dow Rectangle Pattern Targets 12735

During the past few weeks, the Dow has been trading in a rectangular range about 300 points high. On the hourly chart below, I have outlined the range with red lines. (Click chart to enlarge):

The futures have already broken out of that range, and stocks will certainly follow on Monday. To find the downside target, we subtract the height of the rectangle from the lower bound of the range. And that brings us to the March 6th low of 12735.

The last time that the market plunged after “not creating enough jobs” was on September 2, 2011. The next day, I criticized the panicky selling in “Companies Add Jobs for 18th Straight Month – Investors Jump Out Windows“. And while I was right that the expansion/bull market wasn’t over, the market did languish for a few weeks. On this chart, the red arrows point to that seemingly “bad” jobs report:

Of course, there’s no guarantee that the bulls will get off easy again this time, with only one month of chastisement. However, another important event occurred last September: Mitt Romney said that, if elected, he would not re-appoint Ben Bernanke. And so, while Doug Kass says “the liquidity rally is over”, a certain Mr. Bernanke may have other ideas on the subject.

AAPL Down = IWM Up?

On Wednesday, I joked that AAPL was sucking the life out of the small caps. Well, maybe it’s not a joke after all. On Friday, the Russell 2000 staged a dramatic come-back rally, and broke out of the downtrend channel that I drew in the previous post.

While the R2K was up 1.05% on Friday, AAPL was down 0.58%. Did money rotate out of AAPL into IWM? If it did, and AAPL continues to pull back, then maybe the small caps are the sweet spot in the market now.

That’s the bullish perspective. Now let’s look at the bearish side.

The IWM has been range-bound since February 3rd. Friday’s rally brought it up to the top of the range, and the IWM is now overbought on some indicators.

Thursday, the IWM fell on strong volume, and it rallied on Friday on lighter volume.

The false breakout from March 19th still stands with four consecutive closes below the breakout level.

So, the IWM still has work to do.

Momentum traders have made huge profits during this year’s rally. Maybe it’s time they hand those profits back to the mean-reversion traders, if not the perma-bears.

In any case, the small caps need to scrub that false breakout off the chart.

IWM Downtrend Channel

The IWM came within an eyelash of my downside target #1 from Tuesday’s chart. Take a look at the green box (click chart to enlarge):

Here is what the chart looks like now. Notice how IWM dropped into my green box:

Not bad, huh?

The fact that IWM bounced without filling the gap completely is a sign of eager dip-buyers, so maybe you bulls will survive after all. However, the bears scored some points too. On Tuesday, I said that the bears “would want to see this pattern evolve into a downtrend channel.” And that’s exactly what has happened. Look at the red downtrend line that I drew on the chart on Wednesday:

To see if we have a downtrend channel, we duplicate the red line to get a parallel, and drag it down to see if it connects the dots. And so it does:

IWM made a nice double bottom around 81.65 Thursday afternoon, and rallied sharply into the bell. In order to stay alive, it must keep that momentum going long enough to at least run up and tag the upper line of the downtrend channel. If it falls short, the next swing down might pierce the lower trendline.

If you are bearish, your dream entry for a short trade is at the upper channel line. If you are looking to buy a dip, your dream entry is at the lower channel line – but only if prices can tag the upper line first.

If the market is weak on Friday, then I draw what I call a “turbo line”. If the market drops at the open, it would look like this pink line:

If IWM rallies up a bit, but fails to tag the upper channel line, then I draw the pink line through its high for the day. The turbo line is a signal that the slope of the downtrend may intensify. So, just like the head-and-shoulders pattern has morphed into a downtrend channel, the red downtrend channel may morph into a more intense pink downtrend channel.

Film at 4pm.

IWM H&S Still in Play

When I drew the red line on the second chart in the previous post, I thought “too steep”. I was also thinking that the right shoulder wasn’t wide enough to balance the left shoulder. So, what the small caps did on Wednesday, moving sideways, made sense. On the chart below, I have re-drawn the red line, and it now has a more reasonable slope for a downtrend if the market drops. The blue boxes show how the shoulders looked after the close on Tuesday, and as you can see, the shoulders look more balanced now (click chart to enlarge):

Bulls can be glad that the right shoulder is now wider than the left shoulder since that’s a sign that the IWM may be able to shake off this bearish pattern. Bulls can also point to the pink line which has held an uptrend for over a week.

In addition to the head-and-shoulders pattern, bears can cite the fact that the IWM has closed below its breakout level for two days in a row now.

So, Thursday is an important day. A third close under the breakout level is one of the criteria of identifying a false breakout. So, its “swim or die” time for the small caps.

Why is the Russell 2000 struggling here? Suppose that a consumer has $2000 in spending money for the rest of the year. First, she buys yet another iPad for $600. Then she buys a share of AAPL for another $600. Then she has to set aside the remaining $800 for $4 per-gallon gasoline so that she can get to work.

Now she’s tapped out and all the rest of the retailers will go bankrupt.

And the Zero Hedge Times will be upon us.

May god have mercy on your soul.

IWM False Breakout?

Has the Russell 2000 small-cap index made a false breakout? Take a look at this 15-minute IWM chart covering that past few days (click chart to enlarge):

Not only has the IWM dropped back under its breakout level of 83.31 (blue line), but it has etched out a nicely formed head-and-shoulders reversal pattern in the process. I have my neckline drawn at 82.65 (red). The upper pink line goes from that level to the top of the pattern. The lower pink line is the same length and gives us our potential target just below 81.05 (black “x”). That’s near a former swing-low (purple arrow), and is a likely level where dip-buyers may come in.

Also, the green box marks a gap left over from March 13th. So, this head-and-shoulders pattern may be the market’s way of telling us that it intends to fill that gap.

Of course, since we are still in a bull market (probably), bearish patterns such as this will have a higher failure rate. If you insist on bucking the primary trend of the market, putting your short trades on at the red line of this chart might not be suicidal:

Right? So, you would want to see this pattern evolve into a downtrend channel. And in order to have a downtrend-channel, prices will need to tag the blue line I have drawn in. Anything short of that would indicate that dip-buyers are eager to come in.

If prices charge right up to the red line on strong volume, that’s a sign that they might break through. If prices hit the red line by going sideways, or drift up on light volume, then you can entertain the idea of a short trade – with a stop of course. If prices gap over the red line in Wednesday morning, then odds of pattern-failure increase.

IWM Leads, but Can’t Break Out – Sort of…

Yesterday, I mentioned that the market breakout was suspect until the small caps joined the party. Today, the IWM out-performed SPY and QQQ, but fell short of its rally peak of $83.31. That intra-day peak came on February 17th, marked by the red arrow on the chart below.

However, the second panel on the chart is of closing prices. IWM’s high close was $82.95 on February 3rd, marked by the black arrow. And as you can see, IWM closed above that level by an eyelash today, and also on Tuesday.

So, what’s more significant? The intra-day high, or the closing high? Answer: the closing high, because fund managers look at daily charts of closing prices and don’t care about intra-day extremes.

Right now, fund managers are seeing a breakout on the IWM chart, and are thinking about coming in. If IWM can follow through in the next day or two, bears should probably throw in the towel.

Also, this morning, the IWM was lagging until the “oil to be released from SPR” rumor hit the news. Oil whooshed down initially, and the IWM rallied along with the transports. If small caps are sensitive to gasoline prices, it’s news to me, but that’s what it looks like. Has the Russell 2000 been sulking, along with the transports, because of gasoline prices?

The Dow Jones Transportation Average finished up 3.27% today. So, even though the White House denied the SPR rumor, the markets suspect that Obama sent a message to oil speculators. And that might mean that he is serous about not letting gasoline prices cost him the election.

In other words, there is a potential catalyst there that might cause the small caps and transports to join the breakout. The IYT came up short of its rally peak, so it’s in the same boat as the IWM: it also needs to deliver some follow-through on today’s action.

March 15th is a Major Bradley Turn Date

March 15th is the first major Bradley Turn Date of the year. And since the market has been shooting straight up, the only possible “turns” would be down or sideways.

And there are indeed flies in the ointment. The small caps have been lagging badly. The Russell 2000 is not validating the SPX and NDX breakouts. Not only has the R2K failed to take out its 2011 peak, but it hasn’t been able to break out of its recent trading range.

In a rip-roaring rally like this, you would think that the McClellan Oscillator would be crazy overbought. But it stands at -36.74! And that shows that there is no breadth to this breakout.

Where have the small-cap gamblers gone? I don’t know, but until they come back, this breakout should be viewed with skepticism.

Typically, what would happen in a bull market is that money would now rotate into the small caps. And you would have a day where the IWM is up 2% and SPY and QQQ are up only 0.5%.

The moral of the story is: all eyes on the small caps as they will likely call the tune from here one way or the other.

Note: The last major Bradley Turn Date was on December 28th. And that turned out quite well as the market turned from flat to up rather decisively.

The Cramer Missile Crisis – Day 8

Since Jim Cramer declared a “missile crisis” and did his damnedest to turn you bearish a week ago, SPY has rallied 3.5%. The only missile in sight is SPY rocketing higher (click chart to enlarge):

By having Cramer on practically all day now, CNBC is making itself into one giant clown show.

And the crime is that CNBC has real talent on the roster. Look at the amazing call that Simon Hobbs made back in 2010.

Note to CNBC: WTF?