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The calm before the Jobs Report

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Stocks spent most of the morning in negative territory on Thursday but drifted higher in afternoon trading and closed with slight gains. The Dow gained 28-points and that was about the same percentage gain as the S&P 500 and Nasdaq. The small caps and Transportation Index were both basically flat on the day, and another drop in the dollar kept the I-fund positive.

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The China trade deal seems to be all that matters now, and without some kind of headline the market could be relatively quiet. Trading volume was quite light heading into today's jobs report.

The November jobs report may have some impact, and estimates are looking for a gain of 182,000 jobs and an unemployment rate of 3.6%. But after the week ADP Report the other day, the "whisper" number is more like 135,000, which sets up an interesting situation. If the number comes in less than the original 182K estimate, but still above 135K whisper number, could we get a rally because of that lowered expectation whisper number?

Update: Jobs report comes in very hot at +266,000 and an unemployment rate of 3.5%. So much for a whisper number and weak ADP. Futures jump on the news.

With the Fed basically saying there will be no more rate cuts, I think a lower number can't be good for stocks, but for trading purposes a lower than expected reading that comes in above 135K has a chance to see a short-term buy the news reaction, but it would probably be a rally that needs to be faded.

Other than that, we're awaiting the next "trade talks are going quite well", or "there's a roadblock in the negotiations" headline before the December 15 deadline where new tariffs are scheduled to go in effect. If those tariffs are implemented, watch out!

The Judiciary impeachment hearings are still going on, if anyone is paying attention, and on Monday the "FISA" abuse report is scheduled to come out. Wall Street has largely ignored this Washington news but look for another surprise headline to come out to try to steal the political news cycle away from this report, which has already been delayed several times.

It was a slow, quiet day so let's go through these quickly...

The S&P 500 (C-fund) was up slightly on the day, and it closed near the highs of the day after spending most of the morning in negative territory. The gap from Wednesday morning remains open below 3100, and barring a blockbuster jobs report, I'd expect that to be filled rather quickly.

The DWCPF (S-fund) nearly filled its open gap from Wednesday, but it is still slightly open, and this index did not close near the highs of the day like the S&P 500.

The Dow Transportation Index was flat and that makes three straight closes below the 50-day EMA, which is a warnings sign, but since it remains above the 200-day for now, let's give it another day or two to decide what it's going to do, before we call this a bullish or bearish situation.

The EFA was down yesterday but the I-fund was up and that was likely because the dollar was down for a 5th straight day. The 50-day EMA continues to hold after that flat top pullback.

Here's the chart of the dollar and it sure looks like a big old bear flag that could be getting ready to break down. But, being at the bottom of the flag does not mean it won't try another move toward the top of the flag before breaking down. The jobs report may set the tone.

The AGG (F-fund / bonds) was down as it it did some tidying up filling that open gap from Tuesday. So far the bull flag breakout is holding, and the pullback test at the top of the flag also held, so to me this looks bullish for bonds.

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Thanks for reading. Have a great weekend!

Tom Crowley

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