It was another choppy flat to modestly lower day for stocks as the market prepares itself for the final jobs report before Election Day. We got a mix bag of economic data yesterday - a stronger than expected ISM Manufacturing report but a weaker than expected jobless claims report. Yields and the dollar were up on that strong ISM data, and that put a little extra pressure on the small caps, the I-fund, and the F-fund.
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The September Jobs Report is the highlight of the week and it will be released before today's opening bell. Estimates are looking for a gain of 120K to 135K jobs. The unemployment rate is expected to remain at 4.2%. As I have been mentioning, I don't expect any big surprises, especially negative surprises, this close to the election. I am going to guess that we see a slight beat, maybe +140,000, just to show a stable economy without threatening the Fed's next rate cut.
Update: Nonfarm payrolls surged by 254,000 for the month. The unemployment rate fell to 4.1%, down 0.1 percentage point.
Here are the numbers from yesterday's Initial Jobless Claims report. It was just slightly weaker than expected and also weaker then the prior month's data. Larger numbers are weaker than smaller in this report.
Initial Claims: Actual: 225K, B.com Cons: 223K, Prior: 219K
Continuing Claims: Actual: 1826K, Prior: 1827K
The September ISM Services PMI came in at 54.9% with estimates at 51.7%, which was a big beat. The prior month was 51.5% so it moved up again off the lows earlier this year. This is a decent sign for the economy but it did have the effect of raising yields and thus putting some pressure on stocks.
The 10-year Treasury Yield rallied right up into the top area of resistance that I have been watching, and a move over 3.9% could mean some trouble, or at least volatility, in the stock market. Again, I don't expect any significant weakness from this jobs report, but one that is too strong could push this yield back toward 4%, which could get the Fed to take another 0.50% rate cut off the table next month. In the last week the chances of a 0.50% rate cut fell from 49% to 37%, with 0.25% now being the consensus favorite.
The dollar is popping higher, gapping up again and ripping above more resistance. This tends to weigh of stocks prices, or prices in general.
Despite the strength in the dollar, the price of oil moved near $74 a barrel yesterday as the war in the Middle East ratchets up. It was as high as $84 as recently as July, but it had tumbled as low as 65.xx on lighter demand earlier this month. Oil has been in a downtrend for months and the question is whether the recent move higher is another headline driven fake out against the trend, or if this action in the Middle East is game and trend changer?
Higher oil prices can get a quick reaction from the Transportation Index where fuel prices are integral to the bottom line for airlines and trucking companies, including delivery services. The market leading Transports have come down hard for three straight days and it is nearing important support again.
On a positive note, the dockworkers strike has been postponed until January.
Admin Note: In the coming weeks we may be working on a server and software upgrade that could disrupt the website periodically. I've procrastinated long enough and it's time to get it done. The maintenance could take part or all of the website down at times, but it will not impact Premium Service email and text alerts. I'll keep you posted.
The S&P 500 (C-fund) has pulled back and so far it has comfortably landed on the old highs and the 20-day EMA. The PMO Indicator is kissing its moving average and this probably sets up a big move - in one direction or the other. I suppose you want to know which way that will be? If I had to guess, I'd say up, but that's not what I want to see. I'd love to see more downside to shake out more bulls, perhaps test the 50-day EMA where the rising support line is coming up, then stabilize. One thing I do know for certain - it will never do exactly what I want or expect to happen.
DWCPF (S-fund) continued to pull back but it is not far from its recent highs and the chart looks pretty good actually. There is room for a decline down to the 2075 area where support is thick, but the bull flag and the large inverted head and shoulders makes the downside case less attractive. Again, it would be nice to put more money to work on a steep pullback, but they don't make it that easy for us.
Yesterday the EFA was down 0.93%, ACWX was down 1.01%, and the "ex USA ex China ex Hong Kong Index" was down 0.68%. My guess is the I-fund will be down somewhere near 0.85%, but you can see the eventual final daily price and return posted on our site each evening.
The EFA chart broke down a little yesterday on the big rally in the dollar. You can see what the dollar (UUP) can do to this fund.
BND (F-fund) did not hold at the 20-day EMA yesterday with those yields popping higher. There's more support at 74.50, but breaking support is not a great sign for the F-fund. If this breaks down further, the Fed's rate cuts could be in jeopardy.
Thanks so much for reading! Have a great weekend!
Tom Crowley
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
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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.
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The September Jobs Report is the highlight of the week and it will be released before today's opening bell. Estimates are looking for a gain of 120K to 135K jobs. The unemployment rate is expected to remain at 4.2%. As I have been mentioning, I don't expect any big surprises, especially negative surprises, this close to the election. I am going to guess that we see a slight beat, maybe +140,000, just to show a stable economy without threatening the Fed's next rate cut.
Update: Nonfarm payrolls surged by 254,000 for the month. The unemployment rate fell to 4.1%, down 0.1 percentage point.
Here are the numbers from yesterday's Initial Jobless Claims report. It was just slightly weaker than expected and also weaker then the prior month's data. Larger numbers are weaker than smaller in this report.
Initial Claims: Actual: 225K, B.com Cons: 223K, Prior: 219K
Continuing Claims: Actual: 1826K, Prior: 1827K
The September ISM Services PMI came in at 54.9% with estimates at 51.7%, which was a big beat. The prior month was 51.5% so it moved up again off the lows earlier this year. This is a decent sign for the economy but it did have the effect of raising yields and thus putting some pressure on stocks.
The 10-year Treasury Yield rallied right up into the top area of resistance that I have been watching, and a move over 3.9% could mean some trouble, or at least volatility, in the stock market. Again, I don't expect any significant weakness from this jobs report, but one that is too strong could push this yield back toward 4%, which could get the Fed to take another 0.50% rate cut off the table next month. In the last week the chances of a 0.50% rate cut fell from 49% to 37%, with 0.25% now being the consensus favorite.
The dollar is popping higher, gapping up again and ripping above more resistance. This tends to weigh of stocks prices, or prices in general.
Despite the strength in the dollar, the price of oil moved near $74 a barrel yesterday as the war in the Middle East ratchets up. It was as high as $84 as recently as July, but it had tumbled as low as 65.xx on lighter demand earlier this month. Oil has been in a downtrend for months and the question is whether the recent move higher is another headline driven fake out against the trend, or if this action in the Middle East is game and trend changer?
Higher oil prices can get a quick reaction from the Transportation Index where fuel prices are integral to the bottom line for airlines and trucking companies, including delivery services. The market leading Transports have come down hard for three straight days and it is nearing important support again.
On a positive note, the dockworkers strike has been postponed until January.
Admin Note: In the coming weeks we may be working on a server and software upgrade that could disrupt the website periodically. I've procrastinated long enough and it's time to get it done. The maintenance could take part or all of the website down at times, but it will not impact Premium Service email and text alerts. I'll keep you posted.
The S&P 500 (C-fund) has pulled back and so far it has comfortably landed on the old highs and the 20-day EMA. The PMO Indicator is kissing its moving average and this probably sets up a big move - in one direction or the other. I suppose you want to know which way that will be? If I had to guess, I'd say up, but that's not what I want to see. I'd love to see more downside to shake out more bulls, perhaps test the 50-day EMA where the rising support line is coming up, then stabilize. One thing I do know for certain - it will never do exactly what I want or expect to happen.
DWCPF (S-fund) continued to pull back but it is not far from its recent highs and the chart looks pretty good actually. There is room for a decline down to the 2075 area where support is thick, but the bull flag and the large inverted head and shoulders makes the downside case less attractive. Again, it would be nice to put more money to work on a steep pullback, but they don't make it that easy for us.
Yesterday the EFA was down 0.93%, ACWX was down 1.01%, and the "ex USA ex China ex Hong Kong Index" was down 0.68%. My guess is the I-fund will be down somewhere near 0.85%, but you can see the eventual final daily price and return posted on our site each evening.
The EFA chart broke down a little yesterday on the big rally in the dollar. You can see what the dollar (UUP) can do to this fund.
BND (F-fund) did not hold at the 20-day EMA yesterday with those yields popping higher. There's more support at 74.50, but breaking support is not a great sign for the F-fund. If this breaks down further, the Fed's rate cuts could be in jeopardy.
Thanks so much for reading! Have a great weekend!
Tom Crowley
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
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.
