Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Some interesting econ data this morning – the ADP employment came in light but a bit of a jaw dropping news in quarterly (Q1) labor costs which showed a massive drop. That said, Q4 2012 was back loaded with compensation to avoid the tax rates of 2013 so there is a lot of noise in the data right now. But longer term, labor costs have really stagnated in the country as the era of outsourcing and automation continues to crush labor and benefit those who own capital.
As for the S&P 500 we are in the fourth mini correction of this trend from mid November, and perhaps the most serious. Short term things seem oversold on some secondary indicators but rallies (such as yesterday’s) have been stymied which is a change of character. As you can see below we are a descending channel from which similar moves to the upside led to good sized rallies during the previous 3 “mini corrections”. Yesterday’s rally and then failure pushed the index to the bottom third of the current pattern, and also back to the bottom of the channel (orange line) we’ve been riding since mid November; with the exception of a head fake in mid April when the pattern broke.
We have ISM Non Manufacturing at 10 AM today and the employment data Friday; at this point it is difficult to even know what the market wants. On Monday it seemed to “like” the bad economic data since it means more QE. But the view seems to be changing day to day – one thing for sure, the market is not buying every economic data point (i.e. good is good and bad is good) as it has much of the year.
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