November 8, 2015
Weekly Market Outlook
By Keith Schneider
US equities posted yet another up week, a six week run of 10% or so and still counting. The run up this week was muted and stocks barely budged on Friday even after the much awaited jobs report showed that unemployment dropped to 5% amid a surge of new hires. Stocks seem unfazed at the prospect of a first time rate rise in years. Welcome to the new normal.
The participation rate however dropped to levels not seen since the mid 1970’s or 62.4%.Before the financial crises in 2007 it stood at 66% so about a decrease of a roughly 3 million people.
The dollar soared as well. However, the further run up in the dollar should exacerbate a fall in corporate earnings at some point and impact stock market valuations as well. For the moment US stocks are holding rather well considering the specter of higher rates as soon as next month.
The gold market has run the inverse of the stock market and is just barely off the lows set late last year. Gold is most sensitive to higher interest rates and a positive economic outlook. Yellen’s talk about a hike next month has clearly hurt its feelings as gold sits at oversold levels but can certainly get worse.
What is most interesting is how many world class Hedge Funds and top flight newsletters still believe we are in a bear market. The chart below show we are in an accumulation phase which is certainly a downgrade from the classic bull phase that we had been in for almost a year, but hardly a bear market. The 200 day moving average is key support which is the 206 level.
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