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Today's Commentary (Short Term Outlook)
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Update:
October Jobs Report:
-190,000 vs. -175,000 estimate.
Unemployment Rate: 10.2% vs. 9.9% estimate.
September revision: -219K from -263K.
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Jobs report meets market rally
Stocks went parabolic yesterday as the
Dow gained over 200-points, the S&P 500 added 20, and the Nasdaq 50.
The TSP stock funds were up between 1% and 2.55% with the S-fund leading the
way. Even the bond fund was up 0.15%.
This morning we get the October jobs numbers and estimates are for a loss of
175,000 jobs, and an unemployment rate of 9.9%.
It should be a very interesting day, and possibly very telling. As you
can see below the S&P 500 rallied right back up to the old support - turned
resistance. A strong employment report will help it break back into
the wedge keeping the uptrend intact. However, a weaker than expected
report will likely push the index back off of the resistance setting up
possible give back of yesterday's gains.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP Talk
A closer look shows the S&P 500 may be in the process of creating a head &
shoulders pattern (H&S) and it would now be in the right shoulder
(RS).
Charts provided courtesy of
www.decisionpoint.com, analysis by TSP Talk
That could mean we have a little more
upside to go, but the H&S is a bearish pattern if completed as most of them
break below the neckline eventually.
Speaking of head & shoulders patterns, we are seeing inverse head &
shoulders patterns forming on the charts of the 10 and 30-year bond yields.
Inverse H&S patterns are bullish patterns but unfortunately for the F-fund,
when bonds yields go up, bond prices and the F-fund go down.
Charts provided courtesy of
www.decisionpoint.com, analysis by TSP Talk
The 30-year T-bond yield has already broken out of the H&S pattern.
On to sentiment: This week's AAII Investor Sentiment Survey came in at
22% bulls, 56% bears for a 0.39 bulls to bears ratio. This is a very
bearish reading, and as you may know that tends to be bullish for stocks.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP Talk
That survey was taken on Wednesday and
as if on queue, the market blasted off on Thursday.
The 56% bears was the highest bearish reading since the early July bottom,
and the 0.39 to 1 ratio is the lowest bulls to bears ratio since the market
lows last March. All this sounds positive for stocks.
The TSP Talk Sentiment
Survey was taken yesterday (Thursday) so most of our readers got to see
the big rally before making their bull/bear decision. Because of that,
the bulls (54%) to bears (34%) ratio was 1.59 to 1. Quite a
change from the 0.76 to 1 bulls (37%) to bears (49%) ratio just a week ago.
I'm not usually a fan of using highly emotional trading days as indicators
of what is coming next, but with the S&P 500 on the border of breaking out
or pulling back, today's jobs report could be telling us which way the
market goes next.
The problem is, sometimes the initial reaction to a jobs report is a fake
out - similar to what we saw on Wednesday / Thursday after the Fed policy
announcement. The market tanked after the announcement, and came
roaring back the next day. So, as much as I'd like today's action to
be telling, it could as easily be a fake out.
That's all for today.
Thanks for reading. Have a great weekend!
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Today is the 5th trading day in November:
Chart provided courtesy of www.sentimentrader.com
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