Navigating the Jobs Report After a Great Week
Are we due for a dip?
Guys and gals, let’s be honest here: We have absolutely obliterated this past week. AMD, NVDA and TSLA continue to bombard higher and that has raked in the gains. I want to go into the weekend on a good note and not force anything after such a strong run.
Remember, we have the jobs report to handle before the open. So I don’t want to do anything stupid that jeopardizes this week’s gains.
Below is a daily look at the SPX, which highlights the recent boom-rally we’ve seen from the October lows. These “melt ups” can be tricky if not identified early enough, as traders keep looking for the pullback — however minor it will end up being — but continue to see the market climb higher. This creates “FOMO.”
Since bursting over the 10-day moving average on Oct. 14, the S&P 500 has been on a tear. In the current stretch, the S&P 500 has rallied in 15 out of 17 sessions. One of those two declines was a loss of just 0.11% and the index has run 8.15% during the current stretch. Honestly, it feels like more.
On Thursday though, we had some interesting observations.
First, the VIX was up almost 7% at one point during the day. That’s not something you typically see as the market is making new all-time highs. Although it did close higher by “just” 2.25%.
Second, breadth was a bit of an outlier. We actually had a ~66% downside volume day on the NYSE. Despite the Nasdaq climbing 0.8% and the QQQ jumping 1.3%, Nasdaq volume breadth was about 50/50. Advance/decliners were similar, with just 42% upside in the NYSE and 42.8% in the Nasdaq.
Third, crude got hit, down 2.5% on the day following Wednesday’s 3.6% fall. The dollar, gold and bonds all climbed on the day. It feels a bit “risk off” when looking at these five assets — dollar, bonds, gold, crude and VIX — and excluding stocks.
But we can’t simply exclude the S&P to fit a certain narrative. Price is the leader and that’s our No. 1 indicator. The market can continue to push higher while these observations remain true. That said, we are due for a minor dip and if we get it, it would be healthy action for the bulls.
Gold
Speaking of gold, the commodity continues to struggle with its declining 200-day moving average. However, it’s now above this measure after finding the channel midpoint as support.
If it loses $1,755, then we could see $1,700 and channel support before the end of the year.
On the upside though, there is reason for optimism if we can see a further rotation. Specifically, let’s see if gold can go monthly-up over $1,815.50. If it can, that opens the door to the Q3 high and clear resistance near $1,837.50. A push above that could unlock $1,900+ going forward.
Square
Square is getting hit on earnings, but that doesn’t mean its charts are doomed. The stock is currently trading near its 50-week and 10-month moving averages in the premarket. If we open at those measures, aggressive bulls may consider a dip-buy.
However, more important will be to see how the stock reacts to these measures. Do bulls step in to buy the dip or does support fail?
Both measures have been key support so far this year and held strong as the bear market in growth stocks came to an end in May. If they fail, it will put the October low in play near $223. That’s potentially followed by the $200 area. Keep in mind, growth stocks are not trading that well despite the market’s push higher. Just look at ARKK.
If support holds, I would love to see a close over $245, putting SQ above yesterday’s low and the 200-day moving average. More ideal would be an eventual push through $254, where the stock currently finds a cluster of shorter-term moving averages — the 10-day, 21-day and 50-day to be precise.
Like I said, I’m not looking to force anything today, as it’s been such a good run lately.
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!