Coolhand's Market Analysis

Yesterday, I had said the Seven Sentinels were suggesting weakness soon. And while it may have been another volatile session, we got the weakness forecast by the Sentinels.

The headline event was this morning's September jobs report. It showed nonfarm payrolls grew by 103,000, which was better than expected, but media reports cite that the increase is mostly due to the end of a strike at Verizon. If those workers are taken out of the equation, payrolls increased by 58,000. That was much closer to expectations. Private payrolls increased by 137,000, which bested estimates of 83,000.



The unemployment rate remained unchanged at 9.1%. As an aside, job gains primarily consisted of part-time employment. This means the real unemployment rate rose 16.5% from 16.2% in August.

Overseas, Fitch cut their ratings on Italy and Spain, which wasn't much of a surprise.

Financials were hit hard today, mostly likely the result of a downgrade by Moody's of over a dozen banks in the United Kingdom and Portugal.

Here's today's charts:



NAMO and NYMO dipped today, but remain in buy conditions.



NAHL and NYHL continue to hold steady and also remain on buys.



TRIN and TRINQ both spiked upward with TRIN just barely flipping to a sell and TRINQ remaining just barely on a buy. Both are largely neutral now.



BPCOMPQ ebbed upward a bit, but may be about to turn if we get any follow through to the downside early next week. It remains on a buy.

So the system issued an unconfirmed buy signal yesterday, but officially remains in a sell condition.

I realize we now have seasonality on our side, but I'm not sure how much help that's going to be in a market that's spiking from one end of the trading range to the other. The risk on, risk off trade appears to be the dominating theme. And after today's trading, it would seem overhead resistance has now rejected price and that suggests the major averages are about to begin another down leg. Our sentiment survey flipped to a sell for next week too, so it's not unreasonable to expect some measure of weakness.

After missing so many opportunities near support, I am seriously considering taking a modest position in stocks (10%-20%) if we get near 1100 again. And I'm willing to increase that amount should this market fall below that level. It's seems to be a reasonable approach to managing risk in a bear market, while still affording myself the opportunity to pick up some gains. And unless sentiment gets much more bullish, I have to assume the downside is truly limited.

Stop by Sunday evening and I'll have the tracker charts posted. See you then.