A Long-Term Look At Employment Days

Employment days have an interesting history and they have contributed to some worthwhile studies over the years. Below is a chart of SPY performance on Employment Days. For this equity curve I filtered to only include days where SPY was > its 200ma. Each trade was a fictional $100k.

Triple US Equity Index Check on Push to New Recovery Highs

This morning’s better than expected Jobs Report sent US Equity Indexes into or above key target areas that – if the momentum continues as it appears currently – will break price into New Recovery High territory which you’ll want to monitor closely. Let’s take a look at the S&P 500, Dow Jones, and NASDAQ to compare current structure and what may occur on a breakthrough beyond these prior high resistance levels. First, the S&P 500 Daily Chart:  

Some Names on My Radar

Yesterday morning, Europe was strong and we gapped up. The news out of Europe was the same as the news we’ve been hearing for 18 months. They finally got “some sort of a deal.” I gotta tell you. I don’t think I’m even going to mention Europe anymore because I don’t know what the heck is going on over there. It seems like every time they say they’re saved—they’re not. But the market couldn’t care less. As I have told you the market has completely ignored Europe.

S&P 500 1,343 Will Provide Insight

S&P Nearing A Top?

Is the S&P approaching an intermediate high? Figure 1 shows why I see this as a possibility. From Oct 10 2010 to Nov 11 2011, we see that the daily ATR was 30 points (with a standard deviation of 10); and the daily volume as 2,301,165 (with a standard deviation of 602,436). Now compare this to the move from Nov 13 2011 to date.

Golden Cross Can Lead To Golden Loss

A golden cross occurs when a market’s 50-day moving average crosses above its 200-day moving average. We believe conditions have improved since central banks have cranked up the printing presses, which means the recent “golden cross” in the S&P 500 may turn out to be golden for investors. At the 15:08 mark of a January 17 video, we noted in 2008 emerging markets were “decoupling” from the economic problems in the United States, much as we are told the U.S. is decoupling from Europe today. While the emerging markets were acting as market leaders in ‘08, as the U.S. is today, the index experienced a golden cross (see below).

As you can see from the chart below, a golden cross can be followed by bearish outcomes as well. In fact, the emerging markets had already peaked when the golden cross occurred in May 2008. Therefore, it is important we keep an open mind about developments in Europe and the possible outcomes in the U.S. after the S&P 500’s recent golden cross.

Back home in the present day United States, we have high levels of bullish sentiment and an extended market. As we noted in the January 31 video below, the S&P 500 may make another charge higher. The outcome between current levels and 1,343 may set the tone for the next three to six weeks.

 

 

We have heard for weeks “a deal is imminent” between Greece and its private creditors. Despite the brave face, the situation is far from fully resolved according to the Guardian (01/31/2012):

Greek officials launched a vociferous behind the scenes attack on European Union and International Monetary Fund negotiators as talks in Athens over the country’s mounting debts appeared to stall.

Before a deal can be finalized, the European Union (EU) and Greece must agree on the terms of the next bailout payment. In those negotiations, the EU is turning the austerity screws again with Germany applying the most force. Getting additional cuts passed in Greece is no walk in the park. From the Guardian:

Prime minister Lucas Papademos told aides that a crisis meeting of party leaders would be called as early as Thursday to thrash out a response to an increasingly intransigent negotiating team sent by Brussels, which is demanding severe austerity measures before sanctioning a further €130bn (£109bn) of bailout funds.

“The troika doesn’t appear to be willing to accept any concessions whatsoever on reducing the minimum wage and scrapping bonuses,” said the government aide. “No political party is willing to move either, saying wage cuts are a red line they are simply not going to cross. You tell me how this is going to be resolved. We have no idea and we’re very worried.”

While both CCM market models have jumped back into bull market territory, the Bull Market Sustainability Index (BMSI) is approaching levels that are typically associated with market corrections (see arrow right side).

The Odds That Turnaround Tuesday Lives Up To Its' Name

I’ve shown before that of all days Tuesday has historically shown the highest propensity to halt a short-term pullback. The study below is one from the larger Turnaround Tuesday study. All stats are updated..

Key Levels in the Dow and S&P 500

Both the Dow Jones and S&P 500 face price challenges at critical levels currently, particularly that of the rising 20d EMA. Let’s take a look at these levels to watch and perhaps develop trades on any breakout from these levels. First, the simple S&P 500 Daily Chart:    

Respecting Recent Strength

The most recent push higher in the S&P 500 was relatively strong with daily RSI moving above 70. The 2011 chart below shows we may need a weak bounce sometime in the coming days if stocks are to move significantly lower. Notice the low levels of RSI (top) and MACD Histogram (blue bars) when the S&P 500 tried to recover from early weakness in a reversal pattern.

Markets Heading for a Crossroads