The US manufacturing sector picked up in June according to the Institute for Supply Management report. In fact, it is the fastest growth in manufacturing in 3 years.
The ISM said its purchasing managers index climbed to 57.8 in June from 54.9 in May, with a reading above 50 indicating growth in the manufacturing sector. Economists had forecast a 55.2 print.
The positive surprise in US manufacturing came as the production index jumped to 62.4 in June from 57.1 in May and the new orders index surged up to 63.5 from 59.5.
The positive surprise in manufacturing shifts sentiment towards the Bulls. Remember, much of the bearish commentary over the last few months was supported by the fact that US manufacturing was contracting for all of 2017. June’s surprise number breaks that bearish trend.
Making use of labor market information is always a challenge for traders and this month’s May jobs report is no exception. Colin Twiggs says traders shouldn’t read too much into the weaker 138,000 print for May 2017 (link above).
Making Use of Labor Market Information
Colin Twiggs is an expert at making use of labor market information to forecast future market direction. Colin Twiggs is author of the weekly Trading Diary newsletter, with more than 140,000 subscribers. His specialty is blending fundamental analysis of the economy with technical analysis of stocks, markets, commodities and currencies. Colin Twiggs is also know for his Twiggs Money Flow indicator.
Colin thinks that the drop in job gains is more indicative of a tight labor market than it is in a slowing US economy and notes that respondents in the ISM report from the sectors machinery, fabricated metal products, food and beverage, and tobacco products all made statements about how business is booming but that it’s hard to find employees.
Whether we are talking about individual stocks, the stock market, or the economy, when you’re wrong just admit it and then move on. The goal is to make money, not to be right 100% of the time so you can stroke your ego.
AM TV and Peter Schiff predicted that the Federal Reserve could not stop their monthly QE injections into the economy. Even though the Fed kept cutting the monthly injection all the way down to zero, alternative media outlets AM TV and Peter Schiff kept saying the Fed wouldn’t stop the monthly infusions because they couldn’t as the patient (the economy) would die. Peter Schiff then went on to say that the Fed was not going to hike rates in December 2015 but instead actually cut rates. The Fed increased rates a quarter point right on schedule. For all of 2016, Peter Schiff has been saying that the Fed isn’t going to hike rates again but instead reverse course and lower rates. In December of 2016, the Fed will likely increase rates another quarter point.
Most alternative media outfits think they have to be crazed perma-bears to get viewers. Maybe they do. Rather than AM TV and Peter Schiff admitting they were wrong about the Federal Reserve, they double down on their wrong predictions and do another “interview” together, check it out.
There are some really good points in this interview, don’t get me wrong. However, to be a successful traders and investor, you can never be a perma-bear. You can never be a perma-bull. You have to adapt and respond to market conditions. That adaptation means you have to be willing to admit when you’re wrong and then to just move on.
Folks, watch out for fear mongering. Fear drives viewership and video view counts on YouTube but being forever fearful is a great way to lose all your money at trading. Some parts of the economy will no doubt suffer under a Trump Administration and higher interest rates; however, higher rates will be good for other parts of the economy like Banking. A Trump Administration will be bad for multinationals and the Dow and parts of the S&P 500; however, Trump will be great for domestic businesses and the Russell 2000.