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Oil and bonds fall

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Stocks were mostly lower yesterday, although the Nasdaq managed a small gain. The price of oil had its worst day in a long time and strong employment data shook up the bond market and all but cemented a rate hike by the Fed later in March. The Dow lost 69-points.

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The February ADP Employment Change report came in came in more than 50% higher than expected and that sent bond yields highs / bond prices lower, and gave the Fed a little more reason to raise rates next week. The Fed Funds Futures now put the odds of a rate hike in March at about 85%.

The February non-farm payrolls jobs report comes out on Friday and estimates are looking for a gain of 188,000 jobs and an unemployment rate of 4.7%.

The price of oil had its worst day in a long time as it hit the lowest levels of the the year after a strong inventory report. This kind of decline tends to put some pressure on the larger cap indices because of the large oil company stocks getting hit.

The SPY (S&P 500 / C-fund) continues to inch down from the highs made after President Trump's Address to Congress. Technically, there is no issues here at all, but we are seeing some cracks in other parts of the market.

The DWCPF (S-fund) was down and it it now testing some important support in the 50-day EMA and the bottom of the rising trading channel. It looks pretty strong so we'll see.

The Dow Transportation Index fell below the 50-day EMA intraday on Wednesday but closed slightly above it. This is where the bulls will really want to see buyers show up. It has been a while since the 50-day EMA has been breached on a closing basis here.

The price of oil fell over 5% yesterday after moving virtually sideways most of the year. It fell right through the 50-day EMA and it is already coming down near the 200-day EMA. The chart was looking so nice but it just wasn't breaking out after consolidating for a long time. The oil bulls may have missed their opportunity.

The EFA (I-fund) shows a bit of a crack after falling below another support level. It is still well above its 50-day EMA, however so nothing serious yet.

The AGG (bonds / F-fund) had another bad day on Wednesday creating another another downside open gap. The ADP employment report had a big impact here so I suspect the jobs report on Friday may let us know how serious this decline in bonds is.

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

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)