This morning’s unemployment claims of 333K, +5K from last week, puts the four-week moving average at 335K, the lowest since November 2007. This report signals the August employment report will be solid and is supportive of the Fed tapering.
Stocks above their 10-day moving average had fallen to 37% yesterday of the group of more than 3,600 stocks on the NYSE, NASDAQ and AMEX we follow. By comparison, last week, August 1, this number was 63% and on July 15, it was 83%. Also, as of yesterday’s close, the average stock was only 2.7% above its 21-day moving average vs. 4.7% on August 1 and 6.2% on July 15. On a short term basis, stocks look more attractive as the big gains from the end of June to mid-July have consolidated and they are not as overbought.
Of the sectors we monitor, consumer staples, telecom and technology are the strongest and basic materials, utilities and financials are the weakest. Basic materials and utilities together make up only 8% of the market while financials are 18%. For this market to take the next leg up, the financial sector needs to get stronger.