Consumer Spending Forms V Pattern

The consumer spending (nominal) component of the Personal Income & Outlays report released today shows a classic ‘V’ continuation pattern.

March consumer spending rebounded 0.4 percent (and was up 3.0 percent from a year ago) from a revised increase of 0.2 percent in February. Yeah, the perma-Bears like Peter Schiff got smoked on the upward revision in February to 0.2 percent. That was a big upward revision from 0.1 percent. That means consumer spending rose double in February from what was originally reported at the end of March.

Check out the textbook ‘V’ continuation pattern in consumer spending:

Consumer Spending

The big resistance level to watch now is at 0.4 percent. My money is on the Federal Reserve being right about the U.S. economy picking up in Q2 and Q3 and so we should get a break above the 0.4 percent resistance level over the coming months. Who knows, if the revised March number is anything like what happened with February being revised up to 0.2 percent, we could have already broken through this level.

Consumer spending generates more than two thirds of GDP and is a key driver of growth.

Jobless Claims Break Support Hit 15 Year Low!

I usually do not write an article about the volatile weekly jobless claims report but folks, a major chart support was broke with today’s report.

New claims for state unemployment benefits fell 34,000 to a seasonally adjusted 262,000 for the week ended April 25, 2015, the lowest reading since April 2000! The number of Americans filing new claims for jobless benefits tumbled to a 15-year low.

Jobless claims has been in a sideways trading channel for all of 2015. Today’s plunge broke below support and continues the strong downtrend that began in January 2014.

I created the interactive infographic below that shows jobless claims in 2015. Hover your mouse over the line to see the specific data.

The major 267K support that has held for all of 2015 has been broke. More conservative traders may want to wait a couple more weeks to get confirmation of the break.

FOMC Announcement Keeps “Transitory” Language

The FOMC Announcement released today shows that the Federal Reserve continues to view the currently slowdown in the U.S. economy as nothing more than a “transitory” phase.

Overall I think it is a dovish statement. It acknowledges weakness in Q1 and it didn’t offset that with positives, other than to say weakness is transitory. It gives no clues about the timing of a first rate hike.Source:

We need to watch the GDPNow forecast for the Q2 2015 GDP estimate. If we see a massive turn around in Q2 2015 GDP estimates, I think we get a rate hike by September 2015 at the latest. Bar some spectacular turnaround, I think we can say rate hikes for June are off the table after the FOMC Announcement today.

FOMC Announcement Shows Small Downgrade Of US Economy

The Fed’s language changed to be slightly more bearish on the economy than they were at the March meeting. Household spending was changed from “rising moderately” to “declining”. Business investment was changed from “advancing” to “softening”. Exports changed from “weakening” to “declining”. Labor conditions were changed from “improving” to “moderating”.

Below is a word cloud of today’s FOMC Announcement (click on the image below to enlarge):

fomc announcement word cloud

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