8/06/12
The stock index futures were already up strongly on Friday morning before the jobs report was even released, but things went into overdrive after the report, and the gains held throughout the day and the Dow gained 217-points.
[TABLE="align: center"]
[TR]
[TD]
[/TD]
[TD="align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"] G-Fund:
[/TD]
[TD] +0.004%
[/TD]
[/TR]
[TR]
[TD="align: right"] F-fund:
[/TD]
[TD] - 0.34%
[/TD]
[/TR]
[TR]
[TD="align: right"] C-fund:
[/TD]
[TD] +1.92%
[/TD]
[/TR]
[TR]
[TD="align: right"] S-fund:
[/TD]
[TD] +2.16%
[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:
[/TD]
[TD] +2.84%
[/TD]
[/TR]
[TR]
[TD="colspan: 2, align: right"]
[/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
For more on the weekly, monthly, and annual returns, see the recent Weekly Wrap Up.
The jobs report results were interesting. The number of jobs created turned out to be 163,000, which was about 60,000 more than expected. That's good. But the unemployment rate ticked up to 8.3% while estimates were looking for 8.2%. That's bad. But if you recall, last Thursday I postulated the following:
"This brings up an interesting situation for Friday's jobs report. The report is obviously a market mover, but will stocks move counter to the obvious reaction of the jobs report this time because investors want QE3 and a weak report is more likely to get them closer to QE3 than a strong report?
"A QE3 would weaken the dollar and likely send stocks higher. No QE3 will keep the dollar afloat longer and be a drag on the stock market. So, will a strong jobs report do more harm than good for stocks?"
So, is it possible that the market was celebrating the higher unemployment rate rather than the higher than expected number of jobs created? You would think that the higher unemployment rate would be bearish for stocks - unless you thought it was moving the Fed closer to a QE3.
The S&P 500 raced right back to the top of its recent trading range and is now testing a tough resistance area just below 1400. The higher high on Friday allows us to draw a new rising trend line connecting the two recent lows. But if we don't see new highs above that resistance line, this could be another rising wedge pattern (red), which tend to break down.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The MACD continues to show a negative divergence as each time the S&P 500 makes a higher high, it is making a lower high. This could be a warnings sign.
Another indicator showing a negative divergence is the Advance / Decline line. With each new high in the S&P 500, fewer stocks are moving up. This could be a sign of internal weakness in the index.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The market leading Dow Transportation Index continues to lag. As the S&P 500 makes higher highs, this index is making a series of lower highs, and it is now facing resistance at its declining resistance line.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Same with the Russell 2000. Normally a leader, it has also made a series of lower highs and is now facing resistance. This chart, however, may have formed a bull flag, in which case a break above resistance would not be a surprise.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The dollar has basically filled both open gaps. The sell-off in the dollar on Friday saw it close below the 50-day EMA for the first time since early July. This is going to be a major catalyst for the market. If the dollar breaks down, I would expect stocks to do well. If it rebounds from here, the summer could get dicey for stocks.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The yield on the 10-year Treasury rallied up toward 1.6% on Friday, but it is again testing the 50-day EMA. In a bear market, which yields have been in, you'd expected the 50-day to act as resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow has closed down for 9 consecutive Mondays and the charts of most of the major stock indices are testing resistance. Of course that streak can't last forever, but on paper it doesn't look good for a positive day today, but a breakout above resistance would change all of that. The market has been consolidating for some time and I expect a breakout from the trading ranges some time this month. The question is, which way? The sentiment indicators might suggest a move higher, but the indicators I mentioned above showing negative divergences might have a bearish argument.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.html
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
The stock index futures were already up strongly on Friday morning before the jobs report was even released, but things went into overdrive after the report, and the gains held throughout the day and the Dow gained 217-points.
[TABLE="align: center"]
[TR]
[TD]
[TD="align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"] G-Fund:
[/TD]
[TD] +0.004%
[/TD]
[/TR]
[TR]
[TD="align: right"] F-fund:
[/TD]
[TD] - 0.34%
[/TD]
[/TR]
[TR]
[TD="align: right"] C-fund:
[/TD]
[TD] +1.92%
[/TD]
[/TR]
[TR]
[TD="align: right"] S-fund:
[/TD]
[TD] +2.16%
[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:
[/TD]
[TD] +2.84%
[/TD]
[/TR]
[TR]
[TD="colspan: 2, align: right"]
[/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
For more on the weekly, monthly, and annual returns, see the recent Weekly Wrap Up.
The jobs report results were interesting. The number of jobs created turned out to be 163,000, which was about 60,000 more than expected. That's good. But the unemployment rate ticked up to 8.3% while estimates were looking for 8.2%. That's bad. But if you recall, last Thursday I postulated the following:
"This brings up an interesting situation for Friday's jobs report. The report is obviously a market mover, but will stocks move counter to the obvious reaction of the jobs report this time because investors want QE3 and a weak report is more likely to get them closer to QE3 than a strong report?
"A QE3 would weaken the dollar and likely send stocks higher. No QE3 will keep the dollar afloat longer and be a drag on the stock market. So, will a strong jobs report do more harm than good for stocks?"
So, is it possible that the market was celebrating the higher unemployment rate rather than the higher than expected number of jobs created? You would think that the higher unemployment rate would be bearish for stocks - unless you thought it was moving the Fed closer to a QE3.
The S&P 500 raced right back to the top of its recent trading range and is now testing a tough resistance area just below 1400. The higher high on Friday allows us to draw a new rising trend line connecting the two recent lows. But if we don't see new highs above that resistance line, this could be another rising wedge pattern (red), which tend to break down.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The MACD continues to show a negative divergence as each time the S&P 500 makes a higher high, it is making a lower high. This could be a warnings sign.
Another indicator showing a negative divergence is the Advance / Decline line. With each new high in the S&P 500, fewer stocks are moving up. This could be a sign of internal weakness in the index.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The market leading Dow Transportation Index continues to lag. As the S&P 500 makes higher highs, this index is making a series of lower highs, and it is now facing resistance at its declining resistance line.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Same with the Russell 2000. Normally a leader, it has also made a series of lower highs and is now facing resistance. This chart, however, may have formed a bull flag, in which case a break above resistance would not be a surprise.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The dollar has basically filled both open gaps. The sell-off in the dollar on Friday saw it close below the 50-day EMA for the first time since early July. This is going to be a major catalyst for the market. If the dollar breaks down, I would expect stocks to do well. If it rebounds from here, the summer could get dicey for stocks.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The yield on the 10-year Treasury rallied up toward 1.6% on Friday, but it is again testing the 50-day EMA. In a bear market, which yields have been in, you'd expected the 50-day to act as resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow has closed down for 9 consecutive Mondays and the charts of most of the major stock indices are testing resistance. Of course that streak can't last forever, but on paper it doesn't look good for a positive day today, but a breakout above resistance would change all of that. The market has been consolidating for some time and I expect a breakout from the trading ranges some time this month. The question is, which way? The sentiment indicators might suggest a move higher, but the indicators I mentioned above showing negative divergences might have a bearish argument.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.html
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
