Early Friday morning the overnight futures were trading decidedly negative until the jobs report was released an hour before the market opened, and everything turned around. The Dow ended the day with a gain of 187-points turning a negative week into a slightly positive one. All of the major indices closed with gains of 0.5% to 1.2%.
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The January Jobs Report came in better than expected (+227,000) and the market responded by pushing the indices near the all-time highs again. The market (S&P 500) has been consolidating for many weeks and perhaps this was the spark it needed to push it to the next level. The problem is, often a big, emotional rally after a jobs report can produce profit taking the next week, so whether this is the catalyst the bulls have been waiting for, or just another selling opportunity for the bears should be answered in the coming days.The SPY (S&P 500 / C-fund) popped above its wedge resistance line on Friday but there is one more layer of resistance it must get through to breakout, and that's the red dash line connecting recent highs. A small gap was opened on Friday and they don't tend to stay open very long, but as we've said before there were two gaps in 2016 that have still not been filled so...
The weekly chart of the S&P 500 shows another "inside week" where the highs and lows of last week's action were between the prior week's highs and lows. That's not overly significant but in general it is a continuation pattern meaning the trend it is in tends to continue. The problem is the S&P is trading so close to the top of its rising trading channel (blue), but I've mentioned this for several weeks and it so far has not been an issue. But as was the case late last summer, it does not always stay up there.
The DWCPF (S-fund) popped back above the 1800 level which was the failed breakout mark that had us concerned last week. Having broken back above it, the next obstacle is the top of the red "F" flag formation.
The Dow Transportation Index had a good day after 5 still losses in a row. The 50-day EMA and the short-term rising support line both held before the rally on Friday.
The EFA (I-fund) gained 0.4% and it continues to ride below the rising wedge's support line turned resistance.
This chart of the Japanese Nikkei does not show the reaction to the U.S. jobs report so I suspect we'll see some positive action on this chart today, but it had been struggling and may have been forming a large rounded top. The 50-day EMA had been broken, but as I said, this could get a pop up on the jobs report today. The Nikkei is a major part of our I-fund.
The AGG (bonds / F-fund) popped up after the jobs report but it spent much of the rest of Friday pulling back below the 50-day EMA again. Only a late push higher on Friday afternoon kept it from creating a negative reversal day as it closed off the lows. It is still at some important resistance, but if it can crack that resistance there may be some room for a rally to the 200-day EMA. Until it gets above the 50-day EMA, I'd avoid it.
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Thanks for reading. We'll see you back here tomorrow!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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