Pre-Jobs jitters

Stocks opened higher yesterday, flat-lined most of the day, then sold off in the last half hour after comments from the Fed about possibly raising interest rates before the jobs market recovers.  The Dow lost 86-points when it was all over, and the TSP stock funds all closed down.

   

It is not uncommon for the market to make a sharp move late on a Thursday afternoon prior to jobs report Friday.  Call me suspicious, but it makes believe that there is some word on "the street" about the report - whether it is a valid rumor or not. 

There were other issues yesterday including a congressional proposal to add taxes to stock transactions and, in a 225 to 200 vote, the U.S. House of Representatives voted to prevent the federal estate tax from expiring on Dec. 31.  Higher taxes and interest rates hurt corporate profits and that may have also contributed to the late selling.

The S&P 500 pulled back from that overhead resistance again, so the battle goes on between rolling over and breaking out.  Volume picked up yesterday, and the PMO switched back to a sell signal, that fickle little bugger.


                  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The good news was that the Dow Transportation Index (the market leader) made a new high!  The bad news is that it couldn't close above the old highs. We are still looking at a triple top that could pop any day now.  A quadruple top is very rare so I am expecting this chart to breakout to the upside very soon.  A new high in the Transports would be a good sign for the broader market.

                    
                  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The NYSE overbought/oversold indicator had moved over 400 on Wednesday and if the market had not sold off late, might have seen 500 yesterday.
                   
                  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
                       
This is one of the indicators that concerns me because the market has not been able to push this indicator above 500 since September, and each time it tried the market pulled back.

The VIX is another concern.  It had moved down near 20, which is an overly complacent reading (bad for stocks) but the sell-off last Friday took it up took it up to about 26. 
                    
                  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Since then it has drifted lower again, and dipped down below 21 before the afternoon sell-off.

     

With the November jobs report on deck, Friday could be another wild day.  I don't know which way it will go but there is a tendency for the initial reaction to reverse either later in the day, or in the following trading days.  So, I wouldn't put too much importance on the initial market move after the report is released today (6:30 AM ET).

The employment reports' estimates are looking for a loss of 125,000 to 150,000 jobs, with an unemployment rate of 10.2% to 10.3%. 

The TSP Talk Sentiment Survey System gave a sell signal for next week.  The 58% bull, 28% bears took the bulls to bears ratio to 2.07 to 1, which is over the 2.00 to 1 a sell signal.  The system will move to 100% G fund for Monday.

Thanks for reading.  We will see you back here tomorrow.

Tom Crowley