SHORT TERM: monthly payrolls report disappoints, DOW -168
Overnight the Asian markets were mostly lower -0.8%. Europe opened lower and closed -1.9%. US index futures were relatively flat overnight. At 8:30 monthyl Payrolls were reported lower than expected: +115K vs 120K, but the Unemployment rate dropped: 8.1% vs 8.2%. The market gapped down at the open and continued to decline. By 10:00 the SPX broke below the OEW 1386 pivot range and continued lower. Around 12:30 the SPX hit 1368, bounced to 1372 by 2:00, then remained in that range into a 1369 close.
For the day the SPX/DOW were -1.45%, and the NDX/NAZ were -2.35%. Bonds gained 15 ticks, Crude tumbled $4.05, Gold added $6.00, and the USD was higher. Support for the SPX drops to the 1363 and 1313 pivots, with resistance at the 1372 and 1386 pivots. Short term momentum is once again extremely oversold. Last night the FED reported a decline in the Monetary base and the M1-multiplier. Today the WLEI dipped into economic slowdown territory at 49.4%.
It is early May again. Seasonally, during this bull market, it has not been a good time to own risk assets. Today’s action in the Crude market reminded me of the first week in May, during 2010 and 2011, when commodities across the board were sold off. Since many commodities, this time around, have already been in downtrends for a few months the impact was not that noticeable as in the past.
For the second time in two days the market reacted negatively to a negative economic report. On thursday it was the ISM services decline, and today it was the Payrolls report. If you recall, on tuesday the market soared to SPX 1415 after the positive ISM manufacturing report. This market has certainly become news sensitive again these days.
Today, the market gapped down at the open and traded down to SPX 1368 before it started to stabilize. The six day rally, from SPX 1359 to 1415, was nearly totally retraced in just three trading days. The bias, as long as the rallies remain under 10 SPX points, remains to the downside. The market has taken the most probable OEW direction: an Intermediate wave C down. We’ll cover this, and more, in the weekend update. Best to your weekend!
MEDIUM TERM: downtrend-uptrend, now downtrend likely underway
LONG TERM: bull market