While key support levels are still in place, the troops have been struggling lately, and that continued today after the monthly jobs data. Like the ADP numbers on Wednesday, the data were slightly under expectations, but still strong enough to stoke concerns about a September rate hike. If that is indeed the case, then the response in equities fits that narrative, but interest rates and the greenback both went off script.
It was an interesting dynamic, but regardless of the underlying mechanics, it was another tough day for stocks. The bulls were able to engineer another late bounce to close off the lows, but materials and energy led to the downside with notable losses, and utilities were the only major sector to show any semblance of a gain. There were a few decent bars in names like Stamps.com (STMP), 2U (TWOU), Nvidia (NVDA) and Autobytel (ABTL), but you had to be a sharpshooter to pick off any good trades today.
Most notably, the S&P 500 is back near its 200-day moving average again, which has helped bring the buyers out of hiding a few times so far this year. Can they pull yet another rabbit out of the hat? The answer so many times to that question has been, "of course," but the broader technical picture is deteriorating, particularly in the Dow and the Russell 2000. With the indices being knocked back consistently from resistance and support levels being repeatedly tested, it's hard to have the stomach to do a lot of buying at these levels.
The fat lady has yet to sing, though, and while health of the market is dubious, we still need to be open to outcomes in both directions.
·Just prepare to respond to pricing changes.
For months now, the market has been stuck in a lateral range. Just when it seemed like everyone was getting used to those endless creeper trends from the past couple years, the market gods change things up and give us a bout of streaky, choppy, whippy, directionless action that has made for an environment where it's extremely easy to get whipsawed.
That's certainly been the case this so far this week. Wednesday's session was particularly tough, as an early frenzy turned into a mad rush for the exits, and that that was followed up yesterday by a miserable session.
On the plus side, the losses weren't tremendous, a modest afternoon bounce prevented a close at lows, and key support levels remain in place. However, under the surface, there was some real damage in several individual names, which is all the more notable given the overall conditions of the charts out there right now.
As of yesterday's close, the percentage of stocks under their 200-day moving average stands at 64.9%, which is a pretty significant number. There are only three other times since the 2009 lows when that number has been above 63%: July 2010, October 2011, and October 2014. Each of those instances has marked turning points for the market, but it's by no means an indication that we're at a significant low here.
Suffice it to say that the majority of stocks out there are in bad shape, and all it takes is a stroll through a random sampling of charts to get a feel for just how bad things look right now.
All of this leads us to today's jobs report, which is all the more important since the Fed specifically said that the timing of their first rate hike would be heavily influenced by the July and August data.
I'm not the only one who's more than a little bemused by the fact that it seems like folks are freaking out over what honestly should be a positive event. Zero percent interest rates were supposed to be an emergency measure, not the "new normal", and the fact that the economy is finally back on solid enough footing to start backing away from an extreme monetary policy should be a good thing, right?
Regardless, there no telling how the market will respond if participants start thinking that a September lift-off is back on the table. That's extremely important since the indices are one really ugly session away from line-in-the-sand support levels, particularly the March lows in the S&P 500.
All we can do is be mentally prepared to respond as the pricing action develops. Right now, we're in a range, and that means being open to both bearish and bullish.
There are plenty of stocks that have sold off enough to provide upside fuel if the troops can finally manage to gain some traction, but there is still ample room to the downside for the bears to do some real damage.
At the time of publication, Jim Koford had no positions in the stocks mentioned.
The outcome of the national election that will run through mid-May likely will determine the pace of economic reform in the country.
Asia, outside China, is going to have to stand on its own two feet while China and the United States get their complicated dance partnership sorted out.
With both the Fed and PBC providing cheap capital, the market has a wind at its back.