The good news is, the jobs numbers came in much stronger than expected on Friday morning. The bad news is, stocks could not hold onto their early gains. After a morning rally, the Dow ended the day down 46-points while the other indices were mixed. Small caps led the way, and for the fourth straight day, the S-fund outperformed the C-fund.
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The jobs report came in with 288,000 jobs being add, well above the +210,000 that were expected. The unemployment rate dropped to 6.3% when 6.6% was expected. What wasn't expected was the 806,000 dropping from the work force which moved the participation rate down to 62.8%, meaning over 37% of Americans are not working. I don't know if that was the reason why stocks fell on Friday. It could have just been a "sell the news" reaction to the weekly strength as all of the TSP stock funds ended the week with gains at or above 1%.
The SPY (S&P 500 / C-fund) is comfortably above the 20 and 50-day EMAs, and both are rising, but it is having a tough time staying above the 188 level. The chart doesn't look terrible, but a big failed breakout in early April, that led to a stiff sell-off a few days later, could mean trouble for the market during the summer of a mid-term election. A jump to new highs that holds for a couple of days is what the bulls need right now.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The weekly chart shows a few things. One is the that the trend is still clearly up. Every pullback for the last few years has been a buying opportunity, and nothing in the chart says otherwise right now - unless it doesn't get a new high soon. Technically, the index has closed at a new weekly high, but we need to see the buying continue up here.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
That new high came with what looks like a positive outside weekly bar. In general, that is a bullish formation and if it works like the textbooks say it should, we should see the dips being bought this week. If not, maybe it is different this time.
The small caps of the Wilshire 4500 created a negative kangaroo tail after closing well of its daily high on Friday. It did close with a modest gain, but failed to stay above the 50-day EMA and the descending resistance line after some positive economic news, and that's concerning. Any kind of negative reversal day is concerning for the short-term.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq 100 has been slightly outperforming the Nasdaq Composite lately, and the difference is important because one, the Composite, is still trading under key resistance, while the Naz 100 (QQQ) has broken above it. A close above the mid-April high (about 88.30) on the QQQ could indicate a new ascending trend and confirm the recent low as a higher low.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Like the other indices, the Transportation Index closed weakly on Friday and we need to see the upside continue or we'll risk creating a lower high on this market leader. On the other hand, a new high would create a new support line (dashed) but that's not official until we get a new high.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds are surprising many by continuing to move higher. Both the TLT and the IEF made new recent highs and broke above key resistance. Why? I have no idea, but it is a possible indication that there could be some trouble in the economy. Or perhaps it is just a reaction to the situation with Russia, which could also have an impact on the economy.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Yields are dropping as if there is a recession coming, but there really is no other data confirming it. Let's just hope this isn't a leading indicator.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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