NFPayrolls Report Day -Friday Nov-05- Setups Review

The warm days of scuba diving in the tropical seas are over. Is time to head for the Snow Mountains for some skiing.

The broad market consolidated its strong gains after yesterday’s ( Thursday ) moon shot. A last minute buying spree ( Short Covering Squezze ) just lifted the Dow, which had traded much of the day in the red, to a sixth consecutive gain. The Nasdaq 100 slipped slightly. Meanwhile, the S&P 500 outperformed, gaining nearly 0.4% on a second consecutive day with relatively heavy volume (of 4.68 billion shares). The S&P 500 has now closed above its April 2010 peak; it is the last of the major indexes to do so. The volume on the E-Mini S&P was 8% less than the previous day.


Initial further upside could be limited and give way to a consolidation / modest retracement over the short-term. Broad Markets were mixed to risk adverse during the overnight session.


Similar to yesterday’s market action, today’s trading produced another surplus of proprietary bearish signature clues.  I think this could further limit upside potential in the market over the short term. I see more of a flattening out of the current rally and think that there would be only limited further upside, followed soon by a modest pullback.

Many of the US indexes struggled today, with the exception of the S&P 500. Once again, this lack of progress was attributed to the US dollar which was up today, adding 0.9%. The dollar gained on the news that the US non-farm payrolls report for October brought some unexpected strength. Nonfarm payrolls were up by 151,000 while 159,000 private payrolls were added last month (consensus estimates: an increase of 60,000 in each category). However, the unemployment rate remained at 9.6% and the labor market participation rate continued to dwindle (as more and more job seekers give up the search for employment).


The financial sector clearly outperformed today, up 2.1%. Bank stocks did well amid speculation that some of the funds from the Fed’s quantitative easing exercise could soon enable banks to raise their dividends and repurchase shares.

Among other economic data releases, September pending home sales were off 1.8% on a month-over-month comparison (consensus estimate: an increase of 2.5%). September consumer credit came in with a gain of $2.1 billion in September (consensus estimate: a decline in credit of $3.3).

The Fed’s move to a second round of quantitative easing may have boosted the market over the past two days, but it also has its critics, notably on the international stage with policy makers in emerging markets sharply criticizing the move as it could spark a wave of protectionisms and currency tensions. Germany’s Chancellor Angela Merkel has also voiced concerns. Finally, some market commentators point out that if there were a sudden resurgence in economic growth, the Fed’s QE2 program would likely become unnecessary. Good economic news would thus contribute to a potential sell-down in US equities, as the market might fear a withdrawal of stimulus money. The fact that today’s relatively positive jobs numbers did not lead to a greater market rally may be a signal of this issue, one commentator suggested.

Sunday, Globex Session UPDate :
As submitted to Investor Group:
SHORT Swing position from Friday at 1222.50 now in profit + 5.25 pts
Expecting a breakdown of Prev Low
Trade Setup :
60min - MACD Bearish Divergence
RSI ( 2 ) Reading : 100 two cons. days
VIX Count
Other clues as submitted