Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
The big discussion in relation to a lot of the economic data in the U.S. of late has been the effect of seasonality. A very warm winter has many wondering if some activity has been ‘pulled in’ and hence there will be a payback down the road. Further, within the methodology of almost all these reports are assumptions about what typically happens – so when typical does NOT happen, it creates dislocations in the data. For example, in January a lot of construction workers in the north should not be employed. Unless the average temperature in city XYZ is 54 rather than 29 degrees. Then they don’t lose their jobs. But the report assumes they do, since they do almost every year. That is but one simplistic example but this sort of things is paralleled in many reports.
April is one of those transition months as we get back to pure data and weather has less of an effect. Thus far the results have not been fantastic in the economic data, and worries are mounting that seasonality may have had more of an effect than many have thought. But we’ll see over the next 4-6 weeks. This morning we had the second week in a row of weaker than expected jobless claims – last week it was blamed on adjustments around Easter…this week there is no such convenient excuse. Last week was actually revised up to 388,000 and this week we have a print of 386,000 versus expectations of something closer to 360,000. I think 400,000 will be a psychological line in the sand, so this figure is inching towards that area – the next few weeks should be interesting to watch for this data point.
As for the market, despite the rally Tuesday we still remain in a potential bear flag. Need to see a move over S&P 1400 and above (which sticks) to make that idea go away.
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