Happy jobs day. Markets dribbled higher yesterday after positive signs from the European Central Bank, and are sitting at all time highs going into jobs report Friday. Much as I don’t like using cliches, signs are pointing to a potential “melt up”, a slow gradual upward drift of the major indices, barring a disastrous jobs number. Yesterday’s price action was entirely consistent with this hypothesis; as is evident from the 5 minute chart, movement in the direction of trend has been unflaggingly consistent.
This is not to say that we won’t “downshift” to a more modestly sloping trend again, as we did in October, at some point in the near future. However, its impossible to predict if and when it will happen; looking at the daily chart, multi-year overhead trend-line resistance doesn’t come into play until 2068, so there is plenty of room for the market to run from a longer term technical perspective.
On the downside, the near term support come in around 2025, 2020 with the lower band of the trend channel originating from October 22, and below that, the 2000 level. As always, on deeper sell-offs, we will take a close look at price behavior at the major moving average support levels.
Looking longer term, its clear that 1.) the longer term trend is intact, and 2.) rapid advances off of lows like those in October are common based on recent history, and generally have enough momentum for significant upside follow through after reaching new highs. The only reliable indicator of a loss of upside momentum in each case is price behavior, so we will continue to monitor the market and watch for those actionable price action ques on a daily basis.
Today’s jobs report, while technically a disappointment with its below consensus headline number (214k jobs added) is nonetheless a great number for the market. Its not too hot, not to cold, Goldilocks profile is just what the doctor ordered as far as investors are concerned; just enough to keep the economy on an even growth keel without stoking concerns about overheating that will force monetary tightening.
So, while equities may sell off modestly today, we can continue to rely in coming weeks on systematic price action being the rule of the day for the markets, and position accordingly.
Good luck out there!