Market Update

The Non-Farm Payrolls report comes out at 8:30 US Eastern time.  It’s a tough call on what the market wants to see.  The market is as capable of celebrating a bad number (Fed on hold!) as it is a good one (economy is still humming!).

It will come down to technicals and sentiment.  On the latter, sentiment has inexplicably gotten more bearish this week (bullish for the market) as stock prices have bounced.  What bears wanted to see was already over bullish sentiment get more so.

Here is the aggregated data from Sentimentrader.

smart.dumb

Within this, the AAII has really gotten a case of the yips with the market’s bounce, and come off of its strenuously over bullish stance.

aaii

While sentiment is not over bearish, it is now neutral and so it is no longer an advantage for bears.

As for the technicals, we have noted that the S&P 500 must not exceed and hold above 2065 or the bear view is toast for the near-term.  Until the latest sentiment data printed I did not think there was a good chance of that happening.  Now, with that underpinning to a bear case evaporated, this resistance is more suspect.

Further, the Dow broke above its series of lower highs and lower lows yesterday and the Russell 2000 (another post-2012 leader like the Semi’s that we reviewed in yesterday’s update) is breaking upward from the Diamond consolidation.  From NFTRH 328:

“RUT is forming a Diamond-like pattern, which simply means it is consolidating prior to something. Hey, that’s a big help; it’s either consolidating prior to upside trend resumption or reversal. A break of 1200 or 1150 will help decide.”

It broke above 1200 and that is bullish until proven otherwise by a quick reversal.

spx.indu.rut

 Bottom Line

The bulls are taking the ball back.  The ‘jobs’ report is a wild card.  Respect parameters.

Speaking as a bear (SPXS position), I feel less secure in this position.

Speaking as a bull (various long positions), I feel better about the sentiment backdrop.

See you Sunday with what should be a tight and focused NFTRH 329, including precious metals status (unchanged from the last update; constructive for an eventual pop higher, but respecting support levels that are lower) and a commodities and global stock markets view, along with some discussion about the Machine Tools data for December, manufacturing in general and its relevance to a finanicialized economy.