Did anyone get the license plate number of that truck that hit the market on Friday? After the jobs report was announced, which I thought hit the "sweet spot", stock opened strongly but started to retreat and didn't stop until the close.
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The Dow lost 160-points, which percentage-wise isn't horrible. It's actually less than 1% while the S&P 500 gave up 1.25%. But the small caps, and particularly the large cap tech stocks of the Nasdaq 100, were hit very hard with the QQQ falling 2.7%. And volume was suspiciously high. Surprisingly, all of the TSP Funds ended the week with gains thanks to the strength earlier in the week in stocks.
As far as the jobs report goes, the 192,000 jobs added and 6.7% unemployment rate was just off the estimates but seemingly close enough not to cause a major sell-off in technology stocks. As a matter of fact, just missing the estimates made me think investors would jump all over it thinking the Fed could consider backing off from their tapering. And that may be why stocks rallied after the report in pre-market trading and even during the first hour of trading. But then something went wrong.
What it was exactly, I don't know, but if you want to start a conspiracy theory, the unusually high volume in the electronically traded Nasdaq has me suspicious that high frequency traders, who have been dragged through the mud over the last week or so, could be up to something. Total conjecture on my part, and probably not true, but I can't explain the tremendous increase in volume.
The SPY (S&P 500 / C-fund) posted a negative outside reversal day on Friday, plus produced a failed breakout. It is still above the key moving averages but the rising wedge is nothing to get excited about. If we don't see a positive reversal early this week, and that's not something we normally see following a negative outside reversal day, then this could get serious.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq 100 took a big hit on tremendous volume on Friday. As I said above, I really can't explain this without getting into conspiracy theories. This action does not seem to be a result of a jobs report that came in just short of estimates.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps were also hit hard but the Russell 2000 held above the late March low and that helped the S-fund post a small gain for the week last week.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Transportation Index lost over 1% on Friday, but like the Dow and S&P 500, did not see the carnage that we saw in the Nasdaq indices. Hopefully this index will be the tell for the rest of the market. That is, whether or not the Dow is going to hold up, or if the sell-off in the Nasdaq was an overreaction.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
While we're talking so bearishly, here is another reason to be concerned about this recent pullback from the highs. Here we are in April - normally a good month, but historically during mid-term election years, it has been the month where stocks peak until bottoming in October.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
Bonds are still in their trading range. The TLT may look to try to breakout again as it nears resistance, but the IEF is right in the middle of the range, although it moved above the 20, 50, and 200-day EMAs on Friday.
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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