The futures got a little pop higher before the open on Friday when the jobs report was announced, but it didn't last long and we saw the Dow down between 150 and 200 points for most of the day, closing down 170.50. Bonds were up.
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If you missed it, the jobs report came in with 252,000 jobs being added in December and an unemployment rate of 5.6%. Both were slightly better than estimates and you might expect a positive reaction on Wall Street. Instead investors saw it as possible fuel for an interest rate hike. Add to that the terrorist attacks going on in France and you can understand why, after the big 2-day rally on Wednesday an Thursday, there may have been some profit taking before the weekend.
For the week the S-fund lost 0.82%, the C-fund was down 0.61%, and the I-fund lost nearly 2%.
Earnings season kicks off with Alcoa reporting after the close today.
The SPY (S&P 500 / C-fund) created an open gap on Thursday and it spent the early hours on Friday attempting to fill it, but it is still partially open. The bottom of that gap is adjacent to the 50-day EMA so that would be a nice clean target if the indices decide to continue to the downside. As we have been discussing with our TSP Talk Plus subscriber, there's a reason why this reversal from a market low may be different that the "V" bottom reversals we saw repeatedly in 2014.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) is getting squeezed in a wedge formation, and it does resemble a cup and handle formation, which is bullish, but until we see a breakout that holds above the overhead resistance line, caution is warranted.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index, the market leader, looks to have formed a new bear flag and they tend to break to the downside. There was a similar one in early December which behaved as we might expect, so the Trannies are showing signs of short-term trouble.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) looks bearish. The open gaps will likely get filled and possibly on the upside, but make no mistake about it - This is what a bear market chart looks like.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) moved higher on Friday as investors tend to send money to the bond market when stocks are moving lower. You can see that it is dealing with a double top but the overhead resistance actually looks more penetrable than the strength of the support below.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The 10-year Treasury Note yield has created a bear flag which may be indicating lower yields are coming (higher bond prices), and I have to say that surprises me since the economy is supposedly strengthening. Yields would normally be rising if that were the case. This is a bit of a warning sign for stocks and the economy.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the Sentiment Survey Results and 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 TSP Talk Market Commentary
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