Jobs Report Saves the Week Somehow?

Friday, August 3rd

What a rollercoaster ride this week with the FOMC, ECB and economic data. Throw in some earnings and you don’t expect a 2% rise on Friday. Go figure! The Fed kicks the can down the road relative to stimulus on Wednesday, the ECB all but says they can’t do anything without authority on Thursday and the economic data was mixed at best all week… and we rally? Most of us would have believed there would be some major selling in response that data flow. However, you could see in Thursday’s trading the market wasn’t selling. If anything investors were willing to step up and buy some stocks as a result of stimulus expectation. Not the best logic in the world, but it was something to act on. Friday morning the jobs report showed 162,000 new jobs added versus the 100,000 expected. That added to the buying and we end the day up 2% on the news. Investors want to believe and thus they are buying.

S&P 500 Sectors-to-Watch:

SPY, SPDRs S&P 500 index has managed to hold above the $136.65 mark as key support on Thursday. The index closed at the 1390 level target we set when this adventure began. We have taken a very difficult route to get there, but we made it. Now what? The momentum is the thought of stimulus coming from the central banks in September. The carrott continues to dangle and investors continue to believe that is a solution to the growth problems facing the US economy. Not buying it, but we have to honor the direction and the momentum of the index.

The rotation in leadership continues with each pivot point. Currently Energy and Telecom are the two sectors on top. Financials and Healthcare are attempting to put in a push higher, but they are following the broader index currently along with Technology, Consumer Staples and Industrials. Utilities, Basic Materials and Consumer Services are lagging the index. The volatility has picked up and the sentiment continues to shift almost daily. Follow the leaders below for the upside in the index.

Telecom – The sector accelerated higher off the test lower at $22.10 on IYZ. The sector gained better than 13% off the low before testing the strength of the move with $23.23 the key support to hold for now. The renewed love for Apple has helped the sector as well as the stock, and it has brought buyers back to the sector. Bottom line is the earnings and data have been good and the sector still looks positive.

WATCH: IYZ – Hold and keep your stops at $23.20

Energy – Big test back towards the down trendline held on Thursday and the upside follow through on Friday helped the uptrend. We hit our stop on positions in the sector, but as we stated Thursday the outlook for the sector remains positive. The move back above resistance was a positive on Friday. Crude jumped nearly 5% on Friday relative to the euphoria. Give the volatility room.

WATCH: XLE – Entry @ 69.25. Stop 67.80 (Adjusted for the renewed volatility).

Financials – Holding above $14.40, but you are going to have to be patient and accept the volatility to own the sector near term. Hit  against resistance once again and pulled back to test support at $14.40. Looking for a break above the $14.80 mark on XLF.

WATCH – XLF – Entry @ 14.55. Stop 14 (have to use lower stop due to the volatility short term.) Use entry if you missed the trade on the last pullback.

Healthcare – volatility in play more than usual. Hold positions and and managing the risk. 50 day moving average is a good stop for now. Expect the volatility to remain as we go forward. Bounced back on Friday from selling, but we still have to manage the risk near term.

WATCH – XLV – Entry @ 38.10. Stop 50 DMA

Consumer Staples – The sector has been leading to the upside for the broad index, but pulled back on selling Thursday. Uptrend in play and looking for a steady move higher for now.

WATCH – XLP – Entry $35.31 (gapped higher on the open Friday) Watch for test.

Consumer Services – The consumer has been spending less, but the retail data showed today it is stock picking sector. The overall move by XLY Thursday was positive based on the data, and it puts a potential bounce off $43 in play. The gap open at $44 made that a tough feat. Now looking for the follow through on the upside and break at $44.50.

WATCH: XLY – Entry $42.70 (Gapped higher on Friday) Watch for break above $44.50 as play.

OTHER ASSET CLASSES:

Volatility Index – The index bounced back near 19 on Wednesday, but despite the selling early on Thursday the index fell to 17.7. Even the ECB debacle couldn’t spark a rally in the VIX index. The jobs report was better than expected and the index is testing the lows near 16 to close the week.

WATCH: SVXY – Hit $95 on test lower Tuesday. Entry $97.10. (HIT ENTRY THURSDAY) Stop $102.25

Dollar – The dollar has picked up too much volatility to play short term. We exited our positions on Tuesday.

WATCH: UUP – Watch to see if the upside plays out.

Treasury Bonds – This is another area of increased volatility based on the ECB and Fed issues. Stimulus or not is creating the movement. We took a short position against the bond this week and it has been volatile.  TBT closed higher, but we had to manage our stops relative to the volatility. The 10 year is back at 1.57% again, and 30 year at 2.66% again.

WATCH: TBT – $14.80 entry. Stop $14.50 (stop on the close) Manage stop short term relative to volatility.

NASDAQ Index – Tested 2900 support on Thursday and bounced. The index is at resistance and needs to find the catalyst higher. The NASDAQ 100 index on the other hand has broke above resistance on the . NASDAQ 100 index moved above 2660 and found the upside finally. Looking to add to our position on the move next week.

WATCH: – QQQ Entry @ $65.25 Friday. Stop $64

Small Cap Russell 2000 Index – Tested low at $76.23 on Thursday. Negative trend in play, but not enough to entertain a short play currently. Watch for move above $79 and through the downtrend line off the July high. $77.30 was goal (hit Friday) and cleared $78.40 up 2.4%.

WATCH: IWM – Close above $79.20 would be of interest.

Commodities: Mixed signals as investors waffle on the reason for the move higher (ECB). Watch for any opportunities as the volatility picks up. Oil jumped on Firday, but the volatility remains across the sector… Manage your positions accordingly.

Crude Oil – Crude fell 2.4% Tuesday, gained 1.6% Wednesday, fell 1.7% on Thursday, and gained 4.7% on Friday? Talk about confused.  Watch the direction to unfold as the crazy pattern plays out. The bounce Friday gives room on the stop, but we keep our exit as posted. Support is $21.15 and if we fall below 21 into the close exit positions.

WATCH: OIL – Entry $20.75 – Stop $21.00 (stop on the close)

Gasoline – bounced back and pushed against the previous high at $54.45. Closed at $56.04 Friday to establish the new high. Watch for your downside risk and manage the position. The upside for the fund still in play, but watch oil prices.

WATCH: UGA – Entry at $52.75 – Stop $54.75 (negate the breakout)

Natural Gas – Big sell off to end the week as analyst make comments of weaker prices going forward? Watch for the opportunity as we find support with the commodity.

WATCH: UNG – $19.60 support – holds look for entry on the bounce.

Global Markets: The global markets respond to the lack of action by the ECB on Thursday. The EAFE index had moved higher on the tough talk and action by the ECB, but sold today giving up 2%. Watch and manage any opportunities short term.

WATCH: EFA – Entry $50.50 break above resistance on volume. (HIT ON FRIDAY)

China – Tested lower on the European news held and continued higher on Friday. This has been volatile based on the global economic issues and the economic slowing in China. Watch for a upside move on the improving outlook for China? Expect volatility short term.

WATCH: FXI – Entry $34.20 – Stop $33.50

Mexico – Moved lower after a test of the March highs and bounced on Europe news. Watch the volatility and manage the position.

WATCH: EWW – Entry $62.25 Friday. Stop $60.30

Singapore – moving back above the high at $13. tested back and bounced off support at $12.50, and we took the entry at $12.70 on Tuesday. Nice follow through to new high. Solid gain on Friday.

WATCH: EWS – Entry $12.70, Stop $12.88

LEADERSHIP:

Housing – Positive outlook for housing sector and the homebuilders going forward. The new home sales data didn’t go over well, but we tested the support and bounced. The sector is tested support near the $20.80 mark level yet again. A break lower is something to watch short term. The upside is still in play with some stalling short term taking place. Watch and manage the opportunity going forward.

Watch: XHB – testing support at the $20.80 mark. Support at $20.80 — $21.90 entry opportunity on breakout from consolidation.

Energy – Bounced off the support Thursday and followed through on Friday.

WATCH: XLE – Entry $70.80 watch

Retail – Same store sales were up 4.4% and better than expected. The sector remains one set to lead if the upside resumes for the broarder markets. That said this is a stock picking sector. AMZN looks solid and earnings were good along with guidance. EBAY made solid move on earnings as well and equally testing the move. COST cleared another new high and testing the move. TJX and TGT both in position to break higher as well.

MONDAY:

More economic data from July on tap and earning continue to be the key for investors.

S&P 500 index hitting against resistance at 1390.

Watch the Treasury yields as clue relative to market direction overall. Yields move back to 1.57% on the 10 year bond. TBT play is still worth adding to if the yields climb with stocks. High yield still trading at big gap on yield to the Treasury look for the prices to break above the $92.50 level.

Dollar remains are wreck on the up and down movement with the ECB and Fed actions.

Europe over the weekend for surprise data or changes relative tot he ECB or Germany. Watch for announcements.

Economic data progressed through the week mixed. Tuesday started the parade with better personal income, higher home prices and improving Chicago PMI. ADP Jobs s data on Wednesday was positive, ISM Manufacturing was disappointing at 49.7%, construction spending was in line with expectations and FOMC produced nothing of interest. Thursday disappointing factory numbers, OK jobless claims and ECB laid a rotten egg. Friday the jobs report was better at 162,000 new jobs and the ISM Services data was flat at 52.6%. Great way to end the week wit rally on the jobs report. Watch to see if the momentum carries through to next week.

Watch and play according to your risk tolerance. Everyone has different trading styles and you have to find what works for you and your personality. Don’t put yourself in positions you don’t understand or take risk you can’t tolerate. Not every trade results in a profit, but controlling your downside risk determines your long term results. Trade smart.