Average hourly wage rates are rising, with Production & Non-Supervisory Employees growing at an annual rate of 3.20% and All Employees at 3.14%.
This is a clear warning to the Fed that underlying inflationary pressures are rising. There is Buckley’s chance* that they will ease off on rate hikes.
The Fed adopts a restrictive stance whenever hourly wage rate growth exceeds 3%, illustrated below by a high or rising Fed Funds Rate.
The market is adopting a wait-and-see attitude ahead of Tuesday’s mid-term elections. Stocks like Apple (AAPL) have been sold down on strong volume despite good earnings results: earnings per share of $2.91 and revenue of $62.9 billion for Q4-18, compared to consensus estimates of $2.79 and $61.5 billion.
Optimism over a possible trade deal with China may not last the week.
A harami-like candle on the S&P 500 reflects indecision, while bearish divergence on Twiggs Money Flow warns of long-term selling pressure. Breach of 2550 is still unlikely but would warn of a primary down-trend.
The Nasdaq 100 tells a similar story, with primary support at 6300.
* William Buckley was an English convict transported to Australia. He escaped when the ships laid anchor in Port Phillip Bay in 1803. The nearest permanent settlement, Sydney, was more than 1000 km away and, considered to have no chance of survival, he was given up for dead. Thirty-two years later, having lived among the Wathaurung Aboriginal people, he emerged from the bush when a settlement was established at Port Phillip in 1835. “Buckley’s chance” is an Australian colloquialism meaning having no chance at all.
A quick recap of the quarterly chart overview from December 2012:
The S&P 500 is headed for a test of its 2000/2007 high at 1550. Declining 63-day Twiggs Momentum and a lackluster economy suggest that resistance is unlikely to be broken. Breach of the rising trendline would indicate a test of support at 1100.
Canada’s TSX Composite Index is gaining momentum. Follow-through above 13000 would indicate another test of 15000.
Germany’s DAX threatens a breakout above 8000. Follow-through above 8200 would confirm a strong primary advance.
The FTSE 100 broke resistance at 6000, suggesting an advance to 7000.
India’s Sensex is testing resistance at 21000. Rising momentum indicates breakout is likely, heralding a fresh primary advance.
Singapore’s Straits Times Index lags behind, but breakout above 3300 is likely and would indicate an advance to 3900.
The Shanghai Composite is headed for a re-test of long-term support at 1800/1750. Rising momentum suggests that a bottom will form at this level. Recovery above 2500 and/or the declining trendline would strengthen the signal.
The ASX 200 is headed for a test of resistance at 5000, supported by rising 63-day Twiggs Momentum. Breakout would signal an advance to 6000, but weakness in China or the US may delay this for some time.
Quarterly charts for the last two decades give a good idea of where stocks will be headed in 2013.
The S&P 500 is headed for a test of its 2000/2007 high at 1550. Declining 63-day Twiggs Momentum indicates that resistance is unlikely to be broken. While this does not mean another fall to 750, it does suggest a strong correction.
Apple Inc. [AAPL] is no longer leading the advance but testing primary support at 500. Failure of support would confirm the primary down-trend indicated by a 63-day Twiggs Momentum peak below zero.
Germany’s DAX is also headed for a test of its 2000/2007 high, at 8200, but rising momentum indicates that breakout above resistance is likely.
The FTSE 100 is also advancing but is some way off its earlier high of 7000 and breakout appears unlikely.
India’s Sensex is more bullish and likely to break resistance at 21000.
The Shanghai Composite is headed in the opposite direction and likely to re-test long-term support at 1800/1750. Rising 63-day Twiggs Momentum (below zero) suggests that a bottom will form at this level.
The ASX 200 is headed for a test of resistance at 5000, supported by rising 63-day Twiggs Momentum. Breakout would signal an advance to 6000, but weakness in China and the US may delay this for some time.
Apple with its massive market capitalization holds significant sway over the Nasdaq 100. Its monthly chart reflects a strong bull trend, with 63-day Twiggs Momentum holding above zero since early 2009, before a massive 50%+ gain over the last 3 months. Bearish divergence on 13-week Twiggs Money Flow warned of strong resistance and the stock is now signaling a correction.
Are we going to see a short correction followed by another surge, or is this a full-blown correction back to the long-term rising trendline? The daily chart already shows a bullish hammer candlestick, hinting at reversal.
When we break the day down into 30 minute candles, however, we can see retracement encountered a new resistance level at $575. Breakout would indicate a rally to $600, but not necessarily the end of the correction, while reversal below support at $568/$570 would signal another decline and test the lower trend channel around $550.