Stocks started the day sharply lower after the strong jobs report on Friday. The concern being that a strong report could impact the Fed's decision to cut interest rates so freely over the next year, as the market has been anticipated. The Trading volume was very light again, and the only reason it was higher than Wednesday's volume was because of the reaction to the jobs report. We did see stocks trend higher into the close and the indices turned a near 1% loss into just minor declines, and in the case of small caps, slight gains.
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The June Jobs Report came in at +224,000 jobs, better than the 160,000 that had been estimated. The unemployment rate ticked up to 3.7% from 3.6%, and wages grew at a rate of 0.2%, slightly lower than estimates.
In May the market rallied on a weaker than expected jobs report (+72,000) and then on Friday stocks sold off initially on a stronger than expected June report (+224,000) reminding us that this market is not being controlled by the economy in the way you might expect, but rather by the Fed and their prospective interest rate cuts, so right now good news is bad for stocks, and bad news is good.
The indices did recover much of those early Friday losses by the close and the question is whether that was a factor of folks actually wanting to buy weakness, or if it was just the typical very light volume, bullish biased holiday-type trading, because the reversal looks good on the charts. But we will find out on Monday when volume picks up and we're facing a possible "post" holiday reversal.
Over the weekend the Germany's Deutsche Bank announced some restructuring after a prolonged 90% decline in their stock price, and reported that they expect to lose €2.8 billion in the 2nd quarter. The slow decaying of Deutsche Bank over the last few years has weighed on financial stocks around the world, so it will be interesting to see how this will impact U.S. financial stocks today. The futures opened Sunday evening without much regard.
The S&P 500 (C-fund) spent the first week in July above the prior highs and the bears were not able to make much headway, even after the strong jobs report sent stock tumbling early on Friday. The day ended strongly and the charts start this week with some positive reversals above resistance. The test may be whether any post-holiday reversal tendency will be in affect.
The DWCPF (S-fund) was able to close in positive territory on Friday. It is stilling in the middle of a rising trading channel, just below the May highs, which could be a test. Other than a possible double top pullback, the chart looks pretty good. Again it could be the early July positive seasonality, which changes in the second half of the month.
Getting a jobs report in May of +72,000 and June of +224,000 cloudies the economic temperature so I am keeping an eye on the price of oil and copper as a backdoor gauge of economic strength. While that jobs report was good, and the near historically low 3.7% unemployment rate should throw a wrench in the prospect of 4 interest rate cuts from the Fed in the next year, the price of these commodities, and the poor chart formations, may actually give them some ammunition to cut rates.
Except for a brief breakdown in June, the dollar has been strong all year and that is also a reason for falling commodity prices.
That has led to the I-fund lagging the S&P 500 by more than 5% this year, and now that the dollar's breakdown appears to be "fixed", that may continue.
The Dow Transportation Index is also quite economically sensitive and it has been lagging badly this year, but recently it has made some positive bullish strides by closing back above the 50 and 200-day EMAs. How much of that was the bullish holiday seasonality may be determined this week.
AGG (Bonds / F-fund) broke down from a short-term support line after the stronger than expected jobs report. The bond market saw yields rise on the strong economic data and may be rethinking the Fed's extreme dovish stance on rates, but it's just one day after a breakdown so let's see how this unfolds.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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.
In May the market rallied on a weaker than expected jobs report (+72,000) and then on Friday stocks sold off initially on a stronger than expected June report (+224,000) reminding us that this market is not being controlled by the economy in the way you might expect, but rather by the Fed and their prospective interest rate cuts, so right now good news is bad for stocks, and bad news is good.
The indices did recover much of those early Friday losses by the close and the question is whether that was a factor of folks actually wanting to buy weakness, or if it was just the typical very light volume, bullish biased holiday-type trading, because the reversal looks good on the charts. But we will find out on Monday when volume picks up and we're facing a possible "post" holiday reversal.
Over the weekend the Germany's Deutsche Bank announced some restructuring after a prolonged 90% decline in their stock price, and reported that they expect to lose €2.8 billion in the 2nd quarter. The slow decaying of Deutsche Bank over the last few years has weighed on financial stocks around the world, so it will be interesting to see how this will impact U.S. financial stocks today. The futures opened Sunday evening without much regard.
The S&P 500 (C-fund) spent the first week in July above the prior highs and the bears were not able to make much headway, even after the strong jobs report sent stock tumbling early on Friday. The day ended strongly and the charts start this week with some positive reversals above resistance. The test may be whether any post-holiday reversal tendency will be in affect.
The DWCPF (S-fund) was able to close in positive territory on Friday. It is stilling in the middle of a rising trading channel, just below the May highs, which could be a test. Other than a possible double top pullback, the chart looks pretty good. Again it could be the early July positive seasonality, which changes in the second half of the month.
Getting a jobs report in May of +72,000 and June of +224,000 cloudies the economic temperature so I am keeping an eye on the price of oil and copper as a backdoor gauge of economic strength. While that jobs report was good, and the near historically low 3.7% unemployment rate should throw a wrench in the prospect of 4 interest rate cuts from the Fed in the next year, the price of these commodities, and the poor chart formations, may actually give them some ammunition to cut rates.
Except for a brief breakdown in June, the dollar has been strong all year and that is also a reason for falling commodity prices.
That has led to the I-fund lagging the S&P 500 by more than 5% this year, and now that the dollar's breakdown appears to be "fixed", that may continue.
The Dow Transportation Index is also quite economically sensitive and it has been lagging badly this year, but recently it has made some positive bullish strides by closing back above the 50 and 200-day EMAs. How much of that was the bullish holiday seasonality may be determined this week.
AGG (Bonds / F-fund) broke down from a short-term support line after the stronger than expected jobs report. The bond market saw yields rise on the strong economic data and may be rethinking the Fed's extreme dovish stance on rates, but it's just one day after a breakdown so let's see how this unfolds.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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.
