Market Wrap - US Economy and Stock Market

By: Douglas_V_Gnazzo

The Labor Department reported an increase of 111,000 additional workers to the employment numbers. The unemployment rate climbed to 4.6%. Factory orders and consumer confidence increased. Initially the dollar was sold and interest rates rose. After second thoughts, investors bought the dollar and interest rates fell.

The Reuters/University of Michigan index of consumer sentiment rose to 96.9 in January, from 91.7 in December. The Commerce Department reported that factory orders increased 2.4% in December, twice the 1.2% gain in November. The Labor Department reported that worker's average hourly earnings rose 3 cents, or 0.2%, after increasing 0.4% the previous month.

Fourth quarter Gross Domestic Product increased to 5.0%, up from the third quarter's rate of 3.8%. Personal Consumption rose 4.40%. Average weekly hours worked by production workers fell to 33.8 from 33.9. Profitability at U.S. companies is shrinking as wages are rising at the fastest pace in six years. The Fed left overnight rates at 5.25%.

Stocks
The Dow was up 1.3% for the week. The S&P 500 gained 1.8%. The Transports were up a large 6.2%. The Utilities increased 2.3%. The transports have now confirmed the new Dow high. This doesn't necessarily mean that everything is perfect in paper fiat land, but a trend is in effect until it isn't.

Right now the averages are performing well. Valuations, however, are off the chart, which warrants a careful watch and approach to the markets. Also, charts look the MOST bullish just before they turn bearish. Expect the unexpected and be prepared.

My opinion (which could very well be wrong) is that the markets are floating on a sea of liquidity. I track the daily open market operations of the Federal Reserve and they are providing plenty of new money daily. Any change in the amounts of liquidity that are daily injected into the system would be immediately and strongly reflected in the averages - to the downside. Caveat Emptor.

The first chart up shows the relationship between the performance of the Dow Industrials compared to gold. Gold has out performed the Dow continuously and dominantly.

Next up is a chart of the performance of the Dow Industrials compared to that of the Nasdaq Composite. When the Nasdaq out performs the Dow it means investors are willing to take on more risk: i.e. the riskier stocks in the Nasdaq as compared to the Dow.

When the Dow is out performing the Nasdaq it means investors are leery of taking on more risk and want to own the conservative tried and true blue stocks in the Dow Industrials, as opposed to the new hot shot kids on the block in the Nasdaq.

Presently, as the chart shows - the Dow is out performing the Nasdaq.

Below is a comparison of the Transports to the Industrials. The blue lines indicate the transports are out performing the Dow - red lines indicate the Dow is out performing the Transports.

The Transports have finally confirmed the new Dow high by making a new high as well. This doesn't mean to throw caution to the wind. However, it is a confirmation of the trend, which is in effect until it isn't.

Next up is a chart of the Transports. Confirmation has occurred - but by the smallest of margins, and for the smallest of time. More upside action and a 2 day close or weekly close above such levels are needed for validation of the confirmation.

Douglas V. Gnazzo
Honest Money Gold & Silver Report

Douglas V. Gnazzo is the retired CEO of New England Renovation LLC, a historical restoration contractor that specialized in the restoration of older buildings and vintage historic landmarks. Mr. Gnazzo writes for numerous websites, and his work appears both here and abroad. Just recently, he was honored by being chosen as a Foundation Scholar for the Foundation of Monetary Education (FAME).

Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly, Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America.

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.