Jobs Day Will Drive the Indices...For Both Good or Bad
Alibaba is showing some signs of a big rotation (chart).
Technical Breakdown
NYSE Breadth: 63.6% upside volume
NASDAQ Breadth: 50.5% upside volume
Thursday’s breadth figures mimic what we saw in the price action. Neither direction could sustain momentum and we were left with a doji candle on the S&P and Nasdaq. The former comes at the 50-day, while the latter searches for a low amid rising rates (and is the most affected, of the three major indices).
Today is the non-farm payrolls report for December and it’s usually a market-mover.
With the Fed eying the labor market (according to them, anyway), it’s even more likely to have an impact on the end-of-day readings.
The overall trend remains with the bulls, but today’s action could have an altering impact on that observation. Don’t dig in your heels if you find yourself on the wrong side of the action.
I am keeping my positions a bit smaller and working with smaller timeframes to capture any opportunity.
Game Plan
I talk repeatedly about knowing your environment — striking when the iron is hot and knowing when to back off. Right now, we are more defensive overall until a more clear trend emerges.
There is no point in engaging with low-quality setups.
That said, I am also keeping an eye on the list we compiled yesterday of top stock setups. As the market continues to gyrate, the list is getting smaller, and what we lose in quantity, we can gain in quality.
S&P 500
Sitting on the 50-day with a doji candle, let’s see if the S&P 500 can regain any momentum.
A daily-up over 4725 puts the 10-day back in play and would get the index back above all of its short-term daily moving averages and the 4718 resistance level.
A daily-down rotation below the 50-day could eventually put uptrend support (blue line) and the 21-week moving average in play.
The caveat in both cases is a rotation above or below these respective levels that’s quickly reversed — aka, a stop run. Watch yesterday’s high and low carefully to see how the S&P reacts to them.
Nasdaq
If the QQQ can get a sustainable daily-up rotation, it could put that cluster of moving averages in play, up above $390.
The key here is a favorable NFP reaction and a dip in rates. Without both, the Nasdaq faces headwinds in the short term, not tailwinds.
Below last month’s low near $377.50 and $374 could be on deck next.
Remember, we had a larger analysis of the Nasdaq over multiple timeframes yesterday.
Individual Stocks — A Go-To List & BABA
Here’s our evolving list of go-to names as the market looks to find its footing. It’s not too much to do the charts, but it can be overwhelming and drag out the newsletter. What do you think? (Leave a comment or reply to the newsletter, if you can! I would appreciate the feedback.)
Charts, watchlist or a mix of both?
Energy stocks have been incredibly robust. COP, PXD, XOM — you name it. These are go-to buy-the-dip stocks as long as oil has a bid. Banks have been pretty solid as well (as they benefit from a bump in rates).
Others include:
BLDR
F — robust strength. Like the market isn’t even struggling.
CVS
ABBV
TD
PG — strong but tired?
MU — one of the few tech stocks still holding up; recently made new ATHs
RACE — $257 to $260 is key downside area to hold (held yesterday)
KO (defensive)
MDLZ (defensive)
Alibaba
I know China-listed stocks are not exactly a go-to right now. But BABA is trading better, Charlie Munger is buying and the stock is flirting with a monthly-up rotation.
I will likely use a daily close above last month’s high at $129.50 as my trigger. But if BABA can go monthly-up, it’s not crazy to be talking about $147.50 to $150 next, then potentially the declining 10-month moving average.
Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!
Economic Outlook
Wages up, but jobs miss. Does that take a little heat off the Fed? My gut leans yes but we’ll see. Wages down and a jobs miss would have been better IMO, (re: Rates).
