A Big Miss on US Jobs

Missiles and a big miss on the data front are the main news at the end of the trading week on Friday 7th April. The good news is that stock indices on both sides of the Atlantic are none the worse for wear.

I will leave your weekend papers to discuss the ramifications of President Trump’s Tomahawk missile strike against an airfield in Syria. The strategic strike was in response to the Syria government’s use of chemical weapons on Tuesday of this week. The news was condemned as an act of aggression by Russia, which has supported the Syrian government militarily. While both Syria and Russia contend that there were no chemical weapons involved in the attack, the WSJ is reporting that autopsy results show that sarin gas was the cause of death of three victims.

The missile strike occurred 100 years to the day of US forces entering the fray of the First World War. Fairly predictably, the missile attack was good for the gold price and the yellow metal looks set to move upwards towards 1320$ in the weeks ahead. This level is a 78% retracement of the last major weekly range.

Some weeks ago, I suggested the gold miner Centamin Plc as a strong candidate for your attention. The share looks set to break much higher. The chart of Centamin is shown below with the share price advancing over 3% in Friday’s trading. The share is on a “Buy” recommendation on VectorVest with an earnings potential (RV) of 1.46 on a scale between 0 and 2. This is excellent. The safety and predictability of the earnings (RS) is a little over 1, which is good for a precious metal miner. However, this number indicates that a position in Centamin is only for aggressive traders who have proven experience in position sizing and risk management. A moment of weakness in a gold miner can be very dangerous to your financial health.

cent

Stock futures initially sold off on the news of the missile strike, but rebounded to around breakeven before the jobs number was released.

The US Bureau of Labor Statistics reported on Friday morning at 830 AM Eastern Time that the U.S. economy created just 98,000 new jobs during the month of March. This was about half the number that had been expected (consensus expectation had been for 180,000 new jobs). In addition, the new job totals for both January and February were reduced by a total of 38,000. If the March number holds, the economy will have created 533,000 new jobs in the first quarter of the new administration. The good news from the report is that the official Unemployment Rate fell by 0.2% to 4.5%. This was the lowest level seen since 2007, before the financial crisis. Inflation is rising, with CPI climbing steeply above the Fed’s 2% target. Core CPI, excluding energy and food, remains stable. Hourly wage rate growth has eased below 2.5%, suggesting that underlying inflationary pressures are contained. The Fed is unlikely to accelerate its normalization of interest rates unless we see a surge in core inflation and/or hourly earnings growth.

Market action after the number was positive in the UK with the Ft100 charting a strongly positive day. A poor number should dampen the hand of Miss Yellen in raising rates and that is positive for the stock market. The US market at the London close is essentially unchanged from Thursday.

On VectorVest UK the trends are strongly up on all timeframes from short term, the primary wave, to the longest term signal, the Confirmed Call. The Color Guard on VectorVest shows three green lights. This indicates that the VectorVest Composite, the momentum of the Composite and the breadth of the Composite are up day over day and week over week.

 

3i has pulled back and kissed the high of the 14th March prior to moving upwards again. At the close on Friday, the share is pushing on at the 52 week high and on a buy recommendation on VectorVest. The fundamentals on VectorVest are all excellent.

Sopheon gave a few traders a heart tremble during the past week. The share had a positive Friday, and if it can push above resistance at 460, then selloff would appear to be over. I am holding with my stop at the VectorVest stop (419) based on an EOD close.

The chart of Hastings is shown below and the share seems headed higher after a weak pullback. Of note is the last reaction low. This low is much higher than the last high and that’s the definition of a strong trend as postulated by Charles Dow over 100 years ago. The numbers on VectorVest for both earnings potential and safety are excellent and I will add to this counter soon as it charts a new high.

hastings

 

Hill and Smith pulled back to the last high recently and is now advancing towards the 52 week high charted on the 20th March. The share is on a buy recommendation on VectorVest with outstanding fundamentals.

Ab Dynamics has recently broken out of a 5 wave ascending triangle. After the perfectly normal kiss of the triangle, the share is advancing again.

JD Sports continues to perform and with a RV of 1.52, this performance looks set to continue.

The concepts here are simple and make strong intuitive sense to me. I employ VectorVest to do the heavy lifting of making sense of the fundamental data. The program gobbles up all the data, which is sourced from Reuters, and calculates numbers for Value, Safety and trend for each share on the LSE and AIM each and every day.

That done, I use Unisearch within the program to find undervalued shares that are growing their earnings strongly and safely, that are rising. I want to buy into those shares when the general market is rising. For many years, I was a purely technical momentum trader. Now I am still a momentum trader, but these days focus on two types and measures of the shares momentum, namely price momentum AND earnings growth momentum.

This fusion of the two main disciplines of analysis (technical and fundamental) has improved my hit rate and this makes the emotional side of trading much easier and simpler to complete. It also makes more money.

A simple Unisearch, such as detailed below, finds some great shares that fulfil the objectives of the above paragraph in seconds.

Value/Price >=1.2

GRT >=20

RS>=1

CI>=1.3

If these terms sound like Outer Mongolian to you, then please come along to my seminar on the 22nd April in Central London. The link to register is http://www.vectorvest.co.uk/uk-events/

For those well away from London, we have lots of live webcasts, and for those please call 0800 014 8974 for the details. It’s a free call. After either a webcast or a seminar, you will be picking shares like a veteran.

 

I am sitting in all of my positions and will continue to do so until the VectorVest Composite indicates to the contrary.

David Paul

April 7th 2017

2 thoughts on “A Big Miss on US Jobs

  1. Hi David.

    As usual good analysis thank you.

    I am still holding Centamin but notice that the V V system has reduced the valuation from £2.67 on 15th March 2017 to current £1.72 which is below current price of £1.84. Why and should I be concerned?

    My Unisearch is recommending South 32 again?

    Kind regards,

    Charlie.

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