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Will the jobs report push indices to new highs?

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Stocks opened slightly lower on Thursday and the bears proceeded to put some pressure on until late morning when we saw some buying kicked in. The indices were mixed with the Dow ending the day down 43-points, the S&P 500 pushed back toward even, the Nasdaq posted a modest gain, while small caps were down sharply.

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The I-fund had a big day as the dollar broke down from its trading channel. Bonds finally got the day we were expecting after two days of being short changed. I actually thought it would be more than +0.48% since the AGG gained 0.42% and it seemed like it was owed more, but once again a lot of the strength in bonds came late in the day.

In all the excitement of getting settled in the new year I forgot to mention this week that the jobs report comes out this (Friday) morning. Estimates are looking for an addition of 175,000 jobs and an unemployment rate of 4.7%.

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The SPY (S&P 500 / C-fund) pushed against the top of its flag at the open yesterday before pulling back toward the middle of it again. The strong close had it heading right back to the top for a nice positive reversal day, despite the small losses. Perhaps the jobs report will be the catalyst it needs to help it breakout? If not, then it may be waiting for earnings season, but we're getting away from the stronger holiday seasonal days and it could be running out of time.

The DWCPF (S-fund) did break out of its flag on Wednesday but on Thursday it failed to make a new high above the December high. It did find support at the top of the red flag, which is a good technical sign for now, but the jobs report could be the important factor on its next move.

The Nasdaq 100 (QQQ) actually closed at a new all-time high on Thursday as those "FANG" stocks made a nice come-back. This is another good looking chart if the weakening indicators that we are seeing doesn't smack it down.

The Dow Transportation Index has still not shown any life this year like the other indices, and being the market leader, it's lagging is a little concerning. Again, will the jobs report make or break it?

The EFA (I-fund) led the way yesterday with another strong move. The open gap near 59.0 which looked a mile away just a month ago, was filled on Thursday. There are now two open gaps below that may need some attention but the dollar may have to show some strength for that to happen.

The dollar (UUP) has been hit hard the last couple of days and broke out of a two-month rising channel yesterday. The 50-day EMA is there to try to provide some support. Even though the channel broke the trend is still up so this is just strike one for the green back.

The AGG (bonds / F-fund) had another big day the dead-cat bounce seemed to have some staying power. To push above the 50-day EMA so easily is surprising in its bear market. The 200-day EMA shouldn't be as easy unless the bear market in bonds is coming to an end already. That doesn't seem likely but the market loves to fool us when it can.

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Thanks for reading. Have a great weekend!

Tom Crowley

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S&P 500 (C Fund)
DWCPF (S Fund)
Dow Jones U.S. Completion Total Stock Market Index (^DWCPF)
EFA (I Fund)
iShares MSCI EAFE Index (EFA)
AGG (F Fund)
iShares Lehman Aggregate Bond (AGG)