Weak Jobs Data, Stocks And Gold

Let‘s move right into the charts (all courtesy of www.stockcharts.com).

S&P 500 Outlook

S&P 500

Yesterday‘s downswing didn‘t attract much volume, making it a short-term hesitation That‘s the meandering, the search for direction just below the 3,900 mark that I had been tweeting about yesterday. If you look at the equal weighted S&P 500 chart (RSP ETF), it‘s clear that new highs are still a little off given the sectoral balance of power.

S&P 500 market breadth

The market breadth indicators reflect the daily indecisiveness fittingly. While not worrying in themselves, they‘re showing that Monday‘s session wasn‘t the beginning of an endless bullish streak. Rather, it‘s just a part of the bullish turn that would over time prevail more convincingly.

Credit Markets

HYG:SHY vs stocks

The key leading credit market ratio – high yield corporate bonds to short-dated Treasuries (HYG:SHY) – is slightly leaning bullish here. And that‘s good given the talk of bubble bursting, significant correction just ahead (started) – that‘s what I am looking for in uncertain times. Ideally though, such a bond market leadership should last a bit longer than one day, to lend it more credibility.

Technology

technology vs S&P 500

Technology (XLK ETF) once again reversed to the downside, or so the chart says. While high, the volume isn‘t trustworthy – it doesn‘t stand comparison to the visually similar early Sep pattern, which was followed by a break to new lows in the latter half of the month. Then, as the overlaid S&P 500 (black line) shows, high beta pockets and value sectors have assumed leadership, powering the S&P 500 advance.

Dollar

dollar

The USD index is keeping close to the 91 mark, and yesterday‘s candle reveals that the potential upside isn‘t probably all that great. This is consistent with the dollar being in a bear market, sliding to new lows in 2021 with likelihood bordering on certainty. Plain and simple, it‘ll be on the defensive regardless of where long-term rates go.

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Monica Kingsley 2 months ago Author's comment

Quick update:

Morning selling pressure appears abating, stocks returning above 3,850, HYG apparently refusing to decline more, and if XLK keeps above 130 today, we're still in that now again shallow correction that I talked before Feb 24.

Gold refused to decline below $1,700 - but needs to clear off the low $1,720s (yeah, that's another $10 today still to go if I am to like the short-term bullish turn). Still nothing to call home about in the metals. The dollar better tank again over the coming days... Gold and silver haven't yet lost the recovery momentum, and the $1,730s and above $26.50 are attainable still. The bull market in gold needs a rebound off strong support, otherwise it's becoming suspect.