It was a sea of red on Wednesday as the major index ETFs extended their declines and all nine sectors fell. That's the bad news. The good news, perhaps, is that the stock market is short-term oversold now. The upcoming employment numbers represent the uncertain news. The economic data has been mixed of late - not too hot and not too cold. Even though jobless claims are falling and non-farm payrolls are growing, we are not seeing GREAT numbers. They are simply good enough. At this point, the markets are dependent on these employment-related reports. Better-than-expected numbers could produce a rebound in stocks and selloff in bonds. Worse-than-expected numbers would be negative for stocks and positive for bonds. The PerfChart below shows stocks and the Dollar falling this week. Meanwhile, oil, copper, gold and Treasuries rose. Strength in commodities stems from weakness in the Dollar. Strength in Treasuries stems from weakness in stocks. Dollar traders will also cue of the upcoming employment reports because these will influence the expectations for QE.
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Key Reports and Events (all times Eastern):
Wed - Jun 05 - 07:00 - MBA Mortgage Index
Wed - Jun 05 - 08:15 - ADP Employment Change
Wed - Jun 05 - 10:00 - Factory Orders
Wed - Jun 05 - 10:00 - ISM Services
Wed - Jun 05 - 10:30 - Crude Inventories
Wed - Jun 05 - 14:00 - Fed's Beige Book
Thu - Jun 06 - 07:30 - Challenger Job Cuts
Thu - Jun 06 - 08:30 - Initial Claims
Thu - Jun 06 - 10:30 - Natural Gas Inventories
Fri - Jun 07 - 08:30 - Nonfarm Payrolls
Charts of Interest: Tuesday and Thursday
This commentary and charts-of-interest are designed to stimulate thinking. This analysis is
not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise).
We all need to think for ourselves when it comes to trading our own accounts. First, it is
the only way to really learn. Second, we are the only ones responsible for our decisions.
Think of these charts as food for further analysis. Before making a trade, it is important
to have a plan. Plan the trade and trade the plan. Among other things, this includes setting
a trigger level, a target area and a stop-loss level. It is also important to plan for three
possible price movements: advance, decline or sideways. Have a plan for all three scenarios
BEFORE making the trade. Consider possible holding times. And finally, look at overall market
conditions and sector/industry performance.
About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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