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 Targe

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.