tsptalk
10-08-2004, 10:29 AM
I have been in quite a quandary over what to do this morning. Then I remembered something I read, and wrote about, back in March. It came from http://www.sentimentrader.com (http://www.sentimentrader.com). It put my mind at ease a little to stay invested...
"When the actual payroll number fell short of estimates by a large amount, not surprisingly the day closed higher only 36% of the time, although the average return was measly 0.1% loss. After 3 days, the S&P was higher only 3 out of 13 times, with an average loss of 1.2%. Within 10 days, however, the S&P was back to being higher a majority of the time, at 62%. For these purposes, I am using the consensus estimate of the payroll number as reported by Briefing.com, and I am considering anything more than 20,000 jobs away from the estimate as being a “large” difference.
When we saw positive surprises in the payroll number, meaning those times when the number exceeded estimates by 20,000 or more jobs, then the day closed higher 50% of the time with an average gain of 0.1%. This neutral performance continued for up to 10 days later.
An interesting observation is what happened after 20 days. When the payroll number surprised to the upside, the S&P was up 20 days later only 33% of the time, and with an average loss of 2.3%. However, when the number surprised to the downside, then the S&P was higher 20 days later 69% of the time, and with an average gain of 1.2%. These are opposite reactions to each other, and from what one would normally expect. Logically, one would think that if the payroll number surprises to the upside, then the market will rally. This gets down to the perverse and fickle nature of economic analysis – when is “good” considered “bad” and when is “bad” considered “good”? These perceptions change constantly, and it’s nearly impossible to compare one release to another. Depending on where we are in the economic cycle and how the market has performed leading up to a release, the same surprise in the payroll number could have completely different reactions."
So you can play the wiggles, but the outlook may not be too bleak for the next month.
"When the actual payroll number fell short of estimates by a large amount, not surprisingly the day closed higher only 36% of the time, although the average return was measly 0.1% loss. After 3 days, the S&P was higher only 3 out of 13 times, with an average loss of 1.2%. Within 10 days, however, the S&P was back to being higher a majority of the time, at 62%. For these purposes, I am using the consensus estimate of the payroll number as reported by Briefing.com, and I am considering anything more than 20,000 jobs away from the estimate as being a “large” difference.
When we saw positive surprises in the payroll number, meaning those times when the number exceeded estimates by 20,000 or more jobs, then the day closed higher 50% of the time with an average gain of 0.1%. This neutral performance continued for up to 10 days later.
An interesting observation is what happened after 20 days. When the payroll number surprised to the upside, the S&P was up 20 days later only 33% of the time, and with an average loss of 2.3%. However, when the number surprised to the downside, then the S&P was higher 20 days later 69% of the time, and with an average gain of 1.2%. These are opposite reactions to each other, and from what one would normally expect. Logically, one would think that if the payroll number surprises to the upside, then the market will rally. This gets down to the perverse and fickle nature of economic analysis – when is “good” considered “bad” and when is “bad” considered “good”? These perceptions change constantly, and it’s nearly impossible to compare one release to another. Depending on where we are in the economic cycle and how the market has performed leading up to a release, the same surprise in the payroll number could have completely different reactions."
So you can play the wiggles, but the outlook may not be too bleak for the next month.