Recapping Thursday's action, the market bears are in control of the markets currently. The holiday-shortened trading week ends with the weakest week of the year thus far. This action is accomplished by four major sectors falling into the bear camp over the last few days; commodities, utilities, copper and semiconductors. Keystone's algorithm, Keybot the Quant, continually identifies sectors in real-time that have the greatest impact on the broad indexes including target values that will affect the broad indexes either bullishly or bearishly. All four of the sectors mentioned have failed and remain in the bear camp; CRB 312, UTIL 464.68 (note that for the current trading week ending today the number of interest was 463, for next week the bulls have an even tougher road to hoe), JJC 48.87 and SOX 423.50, respectively.
The bulls need to push at least one of the four sectors above the listed levels for the markets to recover and yesterday in the early going copper, JJC, was targeted. The bulls pushed JJC above 48.87 to create buoyancy in the broad indexes, but then the bulls lost their grip and JJC fell back under to stay under the remainder of the session. But the bulls are smart so the money chased semiconductors, SOX, instead, figuring this would be the easiest sector to regain to help stop the bearish direction for markets. This resulted in a knock-down drag-out fight at SOX 423.50, and in the final one-half hour of trading, the bears won. The trading day began with all four sectors bearish influencing markets negatively, and ended the same way. It is perhaps significant that the bulls attempted to lift both copper and semiconductor sectors to boost markets but failed at both tasks. The go-to guy for the bulls, since mid-January, is AAPL, so the buoyancy in Apple helped the bulls line the broad indexes out sideways to close the week. Apple is the markets.
Thus, watch the four sectors highlighted like a hawk. For now, the bears are running. If the bears maintain their hold on the markets, watch for deterioration in financials and retail sectors next. U.S. equity markets are closed today in Observance of the Good Friday holiday but traders are attentive to the Monthly Jobs Report at 8:30 AM EST. The consensus estimate forecasts a gain of about 203,000 jobs. The average over the last three months is a 245K gain. Estimates are between 200K and 215K for the most part so use this as the gauge of a great number (the economic recovery is real) versus lousy number (the recovery is a joke). The unemployment rate is expected to stay flatish at 8.3%. Average hourly wages are expected to grow 0.2%. Predictions and forecasts always provide fuel for looking stupid but your skills as a forecaster can never be improved without writing lines in the sand. With that said, Keystone is looking for 175K jobs, 8.5% rate and flat wage growth obviously under consensus forecasts.
The 245K average job gains in 2012 are mainly due to the non-winter weather. The northeast continues to enjoy spring weather, all winter long, and this boosts employment. The question is how much of the potential spending and employment gains are pulled forward perhaps setting up a slower-than-expected summer period. The warm winter also caused the beat down in natty gas price as inventories build. The jobs number is released shortly and will set the tone for Monday's trading.
Note Added 4/6/12 at 8:50 AM EST: The jobs report lays an egg, and although brown, we are not talking about a chocolate Easter egg. The payrolls increased by only 120K (huge miss) causing shock waves around the world. The unemployment rate is 8.2% and hourly earnings increased 0.2% meeting the general consensus. Good ole Keystone had the lowest estimate of anyone on the Street and that was not even low enough. Hours worked dropped and you do not need to hire people if the people working are working less hours. Retail jobs were axed stongly going against the recent good news in the sector. It appears, as mentioned above, the weather did borrow from the future which is bad news moving forward.
Futures markets are plummeting lower, the Dow is down over triple digits, about -110, the Nasdaq is down -25 and the S&P's are down about -13 handles. The dollar is flat to down and euro flat to up, which is a bit odd. The 10-year yield is at 2.08% dropping lower in yield, higher in price, forgetting about any inflation concerns and instead moving towards disinflation.
The futures markets are only opened a short while longer but it looks like Monday's open is going to be ugly, the S&P may dump about 15 handles to move into that 1370-1390 range, and the Dow will lose the 13K level. The Nasdaq futures are not leading the downside as compared to the S&P's so bulls will hang their hat on this tidbit. After Monday's open, however, if the Nasdaq leads lower, the downside will be ugly and sustainable. The market bears will be dancing bears all weekend long, filling up their punch bowl, donning lamp shades and looking forward to the Monday carnage.
The global economy was placed inside an Easter egg, and hidden, and it appears that no one can find it during the egg hunts. Perhaps that is an Easter egg that will only be found a year or two from now, not unlike the Easter egg found years later deep inside the couch cushions. Happy Passover and Happy Easter to all.
Note Added 4/6/12 at 9:20 AM EST: The final numbers target a drop on Monday of 17 to 20 handles for the S&P, down about -1.2%. the Dow Industrials would open down about 140 to 150 points, about one percent, and the Nasdaq would drop about 30 points. SPX S/R of interest for the Monday bell is 1394, 1391, 1389, 1386, 1378, 1372, 1371, the 50-day MA at 1370.05, 1368 and 1366.
Great job. Of all the blgos I read, you are the only guy on top of it day in and day out.
ReplyDeleteDanke Freddie, but in trading you are only as good as the latest call, so we will just take it all hour to hour and see what happens.
Deletewill you pls change the background of the page to white?
ReplyDeletethe black background hurts eyes.
thanks.
Hello Unknown, it is a standard template we use so too difficult to change. Perhaps explore the settings on your monitor, as well as in the control panel, as well as trying anti-glare screens, or even changing the size of the text. Perhaps the smart readership here can provide more specific suggestions.
DeleteIf in Windows, go to the 'View' tab, click that, and then click 'Style', then click 'No Style', and that should fix you up.
DeleteCongratulations. I've only been reading this blog for the last 4 days and I must say you certainly do your research. But more importantly, you appear to keep a very impartial position. Keep up the good work
ReplyDeleteDanke John, as traders we could care less which direction the market moves, the only thing that matters is that the trade is in the correct direction. One bad week, however, does not mark a change, we will see how it goes.
DeleteKS, maybe the trend has finally changed or is this another head-fake? We'll have to see how the buy the dips crowd come in on Monday. Take care and thanks again for all your great insights.
ReplyDeleteSteve
Hello Steve, yep, take it hour to hour. The killer for the bears would be a China triple R easing (QE) since that will immediately bounce copper, commodities and equities. The copper action was showing that many traders believe in this outcome in the short term, but as JJC showed on Thursday, the confidence in the China easing started to dribble away slightly as the JJC fell under 48.87, a level identified by Keystone's algo.
DeleteKS, you're humor is awesome. I already stated on Tuesday that the "slaughter fest" had started at exactly 2pm, when the market dropped hard (supposedly on Fed min, but that's BS, since N O B O D Y can read that fast, and Bernanke hadn't even opened his mouth yet; in other terms news is often noise -not in this case; the jobs report).
ReplyDeleteGiven all the negative divergence everywhere, the underlying skewed gains (e.g. Russell 2000 has been lagging hard, as well as DJT etc), this will be a long anticipated and very healthy correction.
Levels to look out for:
20d-SMA (1401.14). SPX already closed (AND opened) below it's 20d-SMA. That's the first serious warning right there! Close below 20d SMA has happened only once since Dec 20, 2011... when the SPX HIT 1340 early March. The last time SPX closed and opened below 20d-SMA was Dec 19...
50d-SMA (1370.05). This would be the first logical target and bounce level. With futures currently indicating an open at 1378, the 50d-SMA is really close... Thus the next big target would be mid SPX 1360s
SPX mid 1360s: has found support and resistance previously. If that fails, then SPX 1340 is next big target, as that's where prior wave IV ended and wave V started. Anything below that and we could be looking at 1320s (since that's where 20W-SMA runs). But, let's not get ahead of our selves, one level at the time!
Hello Arnie, agree entirely about 20-day MA, for all traders in any of your positions, use that as a key reference for all your trades. Also agree about the 50-day MA, the SPX S/R was posted for the week ahead so check out the confluence at 1370-1371, a line in the sand. Before going too low, perhaps the SPX needs a right shoulder for the H&S now in progress, then roll over for extended downside. QE3 will not occur until CRB is well under 300 so those looking for Fed stimulus will be waiting a while, China stimulus would be more likely which would bounce markets and perhaps create the right shoulder.
DeleteExcellent info and comments on the markets. Before I read any financial news I read Keystone first.
ReplyDeleteKeep up the good work.
I join Arnie, Anonymous, Unknown, Jack Black, and ehhhm, Freddie Mac in my thanks to you. You have been dead-on, and a wonderful mentor to boot. Thank you very, very much.
ReplyDeleteThe moon tonight is simply amazing, however that might affect Monday morning.
Happy Easter to you all!
Danke to all but markets can only be handled an hour at a time, especially these days, lots of twists and turns lay ahead. The full moon has been dramatic the last couple days, reaching its peak yesterday morning. For the full moon, markets are typically bullish in front of the full moon (about two-thirds of the time) and this manifested as keeping the markets somewhat buoyant late in the week, after the drop occurred from 2 PM EST Tuesday to 11 AM Wednesday. Markets are also typically buoyant the two days in front of a three-day weekend so that also helped create a sideways skid into the weekend. The affects from a full moon should not be a factor now.
ReplyDeleteMarkets tend to drop the couple days in front of the new moon, which is 4/21/12. Staying with the esoteric theme, a Bradley turn occurs 4/11/12 so a window is open for a market trend change 4/4/12 thru 4/18/12, and another Bradley turn date occurs 4/23/12, for a 4/16/12 thru 4/30/12 window, which creates an overlap 4/16/12-4/18/12. Thus, with a couple of market turns expected to occur over the next couple weeks, there may be a wild ride ahead.
Watch volatilty, VIX, since if this starts climbing higher you will see much greater point move ranges each day in the broad indexes and the markets will become much more jumpy.