The sticker shock from the 74K headline print for Non Farm Payrolls was barely softened by the 34K upward revision to November (now put at 241K). What did resonate was the BLS revelation that 274K workers were unable to work due to the weather which compares to an historical 30 Year December average of 138K,which did contribute to a general conclusion that this was a rogue number and which could be revised away in the coming months.
What the Payroll Number has done is squash concerns that the Fed could accelerate the pace of QE tapering beyond the $10 billion per meeting. A January 29 announcement of a further $10 billion tapering by and large remains intact,and indeed last Friday’s two Fed speakers Bullard and Lacker both suggested that tapering is unlikely to be suspended. Bullard said he was disinclined to act on one month’s number but that’ if inflation stepped lower in a material way that would give me some pause’. Lacker said it would take more than one labour market report to be convinced that the trend has shifted. The other key component of Friday’s Report was the drop in the Unemployment rate to 6.7% from 7% last month.
Equities displayed something of a ‘bad news is good news’ attitude to the Payrolls Number, assisted by lower Bond Yields, with the S&P closing up 0.23% and the Vix dropping down to 12.14 which is its lowest level since last August. On the currency markets the US Dollar weakened whilst Sterling underperformed after the weaker than expected Industrial Production data was released.
On the economic front we have no news from the Euro-Zone or the US today and it will be interesting to see how the US Dollar and the equity markets react to last Friday’s numbers.
March S&P 500
After I posted last Friday the S&P traded up to my 1842 sell level but unfortunately did so before the Payrolls were announced. I had no position and the market had a nice sell off just missing my 1825 buy level with a 1826.5 low before having a strong rally into close and in the process closed the Gap outstanding since December 31st. To me this is bullish and I would expect the market to test the 1846.50 contract highs from the end of the year. Today I will be a small buyer from 1833/1837 with a 1829 stop while I will be a small seller on any rally to 1846/1850 with a 1853 stop.
Euro/USD
Last Friday was another great example of how well the Bollinger Bands and Williams Index worked especially when they hit on the downside which they both did when the Euro was trading at the 1.3550/1.3580 level over the last few days. Last Friday the Euro just missed my 1.3690 sell level and given that we have had such a strong buy signal given by the Williams my only interest in selling the Euro today is on a rally to 1.3725/1.3750 with a 1.3770 stop. I will also move my buy level higher to 1.3610/1.3640 with a 1.3590 stop.
March DAX
I was very unlucky on Friday as the market just missed my 9435 buy level with a 9448 low before having a strong rally into the close. The rally on Friday shows why I do not want to be short the Dax at this time. Today I will raise my buy level to 9470/9500 in small size with a wider 9455 stop.
March FTSE
The FTSE also rallied strongly into the close on Friday and in the process traded over my 6695 buy level. I bought it at 6698 and I will leave my stop the same at 6655 as I look for the market to play catch up with the other major indices.
Dow Rolling Contract
The Dow is underperforming both the S&P and the Nasdaq 100 which is a worry going forward. After the Payrolls were released the Dow traded down to my 16390 buy level before having a nice rally into the close enabling me to cover this position at 16440 and I am now flat. Today I will be again be a small buyer from 16390/16420 with a tight 16360 stop. I still do not want to be short at this time.
March BUND
The Bund traded through my sell level after the Payrolls were released on Friday and as a result I was not able to get a short position on. Today I will be a buyer on any dip to 139.70/140.00 with a 139.50 stop while I will also be a seller on any rally to 140.65/140.95 with a 141.05 stop.
Gold Rolling Contract
Gold finally had a nice rally on Friday. I am still long from 1225 and today I am going to raise my stop to 1230. I still like Gold especially if we can close over 1255 this evening. I still believe that Gold will retest the key resistance at 1300/1350 before trading lower.
Silver Rolling Contract
Silver just missed my 19.30 buy level before following the Gold market higher. I still believe that Silver is trying to put in a major bottom and if Silver can break the key resistance at 20.30/20.50 today I will be a small buyer with a 20.10 stop. I will also be a buyer on any dip to 19.70/20.00 with a 19.48 stop which is just below last Friday’s low.
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