TSP Talk Blog

7/09/12

Stocks opened sharply lower on Friday after the June jobs report was released. As you may have heard, the report came in about 20,000 jobs short of estimates, with the unemployment rate remaining at 8.2%. The Dow lost 124-points on the day.

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After breaking to the upside of the triangle formation (red) the S&P 500 pulled back and the old resistance line acted as support - although that line is declining.


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

The market was overbought leading into the jobs report so this pullback is nothing too concerning yet, but we'll have to look for the support levels, as well as the moving averages, to hold if the pullback continues.

If you recall in June, the market dropped sharply after the May jobs report was released (on June 1) but within a day or two the market bottomed and we saw a decent rally.


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

According to sentimenTrader.com: "When the S&P 500 has lost -0.9% or more on Nonfarm Payrolls day, it suffered further losses over the next two days 60% of the time. When it was trading above the 200-day average, then it lost ground 7 out of 9 times, but tended to rebound following that."

I am still a little concerned about the two open gaps below 2900 and 2800 on the chart of the Nasdaq. As we know, most gaps eventually get filled - usually sooner rather than later, but not always as you can see by the open gap above 3000.


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

If the two open gaps below get filled we would obviously be down testing the lows.

Other than those gaps, I do like what I have been seeing in the charts, but earnings season starts this week and historically July struggles after the first week of the month and if we are going to get a prolonged pullback, this would seem like the logical time for it to happen.


Chart provided courtesy of www.sentimentrader.com

I try not to use seasonality as a primary indicator so the chart's support levels will be weighted more heavily for me, but caution over the next few days might be warranted while we see if investors are willing to buy the jobs report sell-off. And we'll want to see how the market reacts to the release of the earnings reports. A "sell the news" reaction is certainly in order after a nearly 10% gain from the June low to last week's high.

Thanks for reading! We'll see you back here tomorrow.

Tom Crowley



Posted daily at TSP Talk Market Commentary

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