U.S. stock futures are set to move higher after the employment report showed job growth slowed less than expected. Nonfarm payrolls increased by 128,000 jobs in October. Also, the ISM employment measure for the manufacturing industry will be released later today. The report may show manufacturers may be planning workforce reductions. Investors are now looking for indicators that the economy is not slowing as much as predicted.
The S&P 500 closed lower at 3037.56 on Thursday, but the index remained in the 3025.96-3050.10 trading range. Volume was above average, and the RSI index trended down on the day to close at 61.54. We believe the selling was possibly month-end window dressing along with some needed profit-taking. With the start of the traditional, not always, strong last two months, we feel markets are still set to move higher.
We are currently long term bullish and short term bullish.
John N. Lilly III
Accredited Portfolio Management Advisor℠
Accredited Asset Management Specialist℠
Portfolio Manager, RJ
Partner, Windsor Wealth
The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that measures the speed and changes of price movements.
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The most closely watched of all economic indicators, the employment situation is a set of monthly labor market indicators based on two separate reports: the establishment survey which tracks 650,000 worksites and offers the nonfarm payroll and average hourly earnings headlines and the household survey which interviews 60,000 households and generates the unemployment rate.
Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report’s private payroll measure excludes government workers.
The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.
The manufacturing composite index from the Institute For Supply Management is a diffusion index calculated from five of the eleven sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms nationwide. The survey queries purchasing managers about the general direction of production, new orders, order backlogs, their own inventories, customer inventories, employment, supplier deliveries, exports, imports, and prices. The five components of the composite index are new orders, production, employment, supplier deliveries, and inventories (their own, not customer inventories). The five components are equally weighted. The questions are qualitative rather than quantitative; that is, they ask about the general direction rather than the specific level of activity. Each question is adjusted into a diffusion index which is calculated by adding the percentage of positive responses to one-half of the unchanged responses