With Friday's jobs report number nothing short of terrible (i.e., less than half the job creation than was expected), the futures went into free-fall on Monday. The Dow futures were down over 200 points, while the S&P 500 was down over 20 points.
Bad news was being treated as bad news for a change!
Or so we thought. The opening gap down was only a bit over 100 points on the Dow, and things reversed quickly, taking even the bulls by surprise. The market spent much of the day gradually climbing higher, before falling back a bit at the very end of the day. That said, the bulls have to be pleased, while the bears are not so happy as the market did what very few expected. Once again, the market is ignoring bad news as well as those nasty weekly and monthly charts. It doesn't make much sense, but that's pretty much what the market is all about.
There were red flags, though, as we did not see full participation from key sectors today. The transports were very weak, thanks in large part to great action with oil. It was a massive move higher for oil, and once we see oil moving higher it's no shock to see transport stocks moving lower. You can't have transports lagging for too long before it would have an adverse effect on the rest of the market.
We also didn't see great action from the banks, nor the semis. It would be nice to see those stocks leading, instead of more of the commodity-world stocks. Plenty of technology stocks did great, but many lagged badly.
Nonetheless, there was enough rotation -- there's that word again -- to keep things positive overall for the bulls.
Levels to watch are 2045 on the downside and 2119 on the upside on the S&P 500. 2045 represents a 1% break of key trendline support, while 2119 is the old high. You can safely say that anything in between those two levels is noise. But there has been some decent oscillator unwinding these past many weeks, so there is always the possibility that we can try to break out over the coming weeks, but we shall see.
Good unwinding of key oscillators, along with little in terms of price erosion, is not bearish. Watch those two levels for more guidance. Until then the bulls remain more in control big picture. Short-term is still mixed.
Jack Steiman
www.swingtradeonline.com
