WEEKLY MARKET DIGEST: MIXED EMPLOYMENT REPORT CREATES INDECISION UNCERTAINTY AND HIGH RISK FOR STOCKS, GOLD, OIL, AND BONDS $GLD $SLV $USO $DIA $SPY $TBT $TBF

WEEKLY MARKET DIGEST: MORNING CAPSULE: MIXED EMPLOYMENT REPORT CREATES INDECISION UNCERTAINTY AND HIGH RISK FOR STOCKS, GOLD, OIL, AND BONDS $GLD $SLV $USO $DIA $SPY $QQQ $TBF $TBT

(The Weekly Digest reproduces the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers. ) 

MIXED EMPLOYMENT REPORT CREATES INDECISION UNCERTAINTY AND HIGH RISK

Employment report released by the U. S. Department of Labor was expected to be decisive.  However, the report is mixed creating indecision, uncertainty and high risk.

Here are the key points from the report.

  • August Non-farm Private Payrolls came at 140K vs. 210K consensus
  • August Non-farm Payrolls came at 173K vs. 217K consensus
  • July Non-farm Payrolls revised upwards to 245K from 215K
  • August unemployment rate fell to 5.1% vs. 5.2% consensus
  • Average hourly earnings rose 0.3% vs. 0.2% consensus
  • Average work week came at 34.6 vs. 34.6 consensus

The problem here is that the report provides significant ammunition for both bulls and bears.  This is likely to create an indecision.

Here is the key question, “Will Fed raise interest rates in September?”  This report was supposed to be make-or-break.  Unfortunately, the report provides no direction.

Expect markets to gyrate.  Machines will take over as soon as algorithms determine which side, bulls or bears, is winning and exaggerate the move.

Gold, silver, oil, copper, bonds and stocks first went up on the number and are now ticking down.

Dollar first weakened and is now strengthening.

It is not clear how emerging markets will react to these numbers as markets in Asia are closed and Latin American markets are not a good overall indicator at this time.

European markets are reacting negatively to these numbers.

Our very, very short-term early stock market indicator is negative.

What To Do Now?

If you have been following and acting on our posts, based on probabilities, you are positioned perfectly. Consider doing nothing until more data becomes available for our algorithms.

Gold futures are at $1127, silver futures are at $14.73, and oil futures are $46.57.

S&P 500 resistance levels are 1962, 2000, and 2017; support levels are 1860, 1838, and 1800.

DJIA futures are down 204 points.

DRAGHI MAKES HIS BAZOOKA BIGGER AS HE SEES NEGATIVE INFLATION RATE

ECB chief, Draghi, sees negative inflation rate over the coming months.  To counter this threat he is making his bazooka bigger, now ECB can hold 33% of an issue compared to the prior limit of 25%.

The foregoing development was totally unexpected and for this reason is causing major moves in the markets.  The dollar has become much stronger against euro, interest rates are falling, and gold is falling.  The momo crowd is aggressively buying silver.  Oil initially dropped but is now running up.

The U. S. Initial Jobless Claims came at 282K vs. 275K.

Our very, very short-term early stock market indicator is positive but can quickly reverse.

What To Do Now?

If you have been scaling in during market dips, it is time to take profits on those buys on any move up from here.

Consider continuing to hold long-term positions.

Gold futures are at $1121, silver futures are at $14.57, and oil futures are $46.13.

S&P 500 resistance levels are 1962, 2000, and 2017; support levels are 1920, 1860, and 1838.

DJIA futures are up 92  points.

STOCKS GAIN FOOTING

Stocks across the world have gained footing.

ADP Payrolls came at 190K vs. 200K consensus.  Market likes this data.

Yesterday oil gave up all of its big gains from the prior day but is experiencing short covering again and moving up.

Gold and silver had pulled back on the employment data. The pull back was met with aggressive buying by the momo crowd.

Interest rates are drifting lower.

Our very, very short-term early stock market indicated is positive.

What To Do Now?

Continue to lightly scale in long positions in the lower one-third of the buy zones.  Hold a large amount of cash.

Wait for a significant spike up before initiating any short positions.

Gold futures are at $1136, silver futures are at $14.58, and oil futures are $45.72.

S&P 500 resistance levels are 1962, 2000, and 2017; support levels are 1920, 1860 and 1838.

DJIA futures are up 169 points.

SENTIMENT GETTING VERY NEGATIVE AND THAT IS GOOD, EVERYTHING BEFORE FRIDAY IS NOISE

Everything before the key employment data on Friday is simply noise.

Sentiment is getting very negative and that is good because extreme in negative sentiments marks bottoms.  Sentiment is not at an extreme level yet but getting there.

Negative sentiment is obvious from the fact that stock markets across the globe are in retreat on Chinese Manufacturing PMI data.  However, Chinese Manufacturing PMI data was in line with the consensus meaning that it was already discounted in the market.

Overnight Chinese aggressively bought gold and silver.  Smart Money is inactive in gold and silver.

In India GDP came at 7% vs. 7.4% consensus but still a robust number, the best in the world.

Oil has staged the biggest rally in over 25 years in the last three days. The rally was triggered by EIA changing the way it computes U. S.  production. The new method shows that U. S. production is declining.  There were also reports of musings of cooperation among Russia and OPEC members to raise oil prices.  In our analysis, such speculation is more than likely untrue and simply floated to manipulate the oil market.

There are significant bearish data points ahead for oil.

Money is flowing into Japanese yen and euros as the new safe havens.

Interests are slightly pulling back as money rushes into the safety of U. S. Treasuries.

Our very, very short-term early stock market indicator is negative.

What To Do Now?

It is prudent to not take any aggressive actions before Friday.

Consider holding a large amount of cash or in the alternate, hedges against long positions.  Consider lightly scaling in only in the lower one-third (1/3) of the buy zones.

If a position falls below the buy zone, it should not be bought.

Consider short-selling only if there is a specific post.

Gold futures are at $1145, silver futures are at $14.68, and oil futures are $47.35.

S&P 500 resistance levels are 1962, 2000, and 2017; support levels are 1860, 1838, and 1800.

DJIA futures are down 435 points.

FISCHER SAYS FED TO STICK TO THE PLAN

The Fed vice chairman, Stanley Fischer, clearly stated at Jackson Hole that Fed will stick to the plan and  rate hike will be considered at the September meeting.

The sentiment that is coming across from various Fed officials is that the Fed is not likely to get off track due to 10 days of market volatility and issues in China.

In our analysis the key determinate will be the employment report to be released on September 4th.   If non-farm private payrolls come over 250K, the Fed will have little reason to not raise rates.

The big questions is how the stock market will react.  The prevailing consensus is that if the Fed raises rates, stock markets all across the world will fall.  On the other hand if the Fed does not raise rates, the stock markets across the worlds, especially emerging markets, will spike up.

In our analysis, this time prevailing wisdom may turn out to be wrong.  The Fed raising rates demonstrates that the U. S. economy is strong.  Regarding emerging markets, the rate increase has been so well telegraphed that there may be a relief rally after an initial tantrum.

There are reports that China is about to give up buying stocks as this maneuver has not helped.  Overnight China interjected $22 billion into its banking system.  But Shanghai markets still closed down.

There was some buying in gold and silver in China overnight.  North American momo crowd continues to aggressively buy gold and silver this morning.  However Smart Money is lightly selling into up-spikes.

Oil is giving up some of its gains from Friday that were the result of a short squeeze.

Money is rushing into safe havens of U. S. Treasuries and yen.  Ironically, euro has also become a safe haven.  As a result, dollar is becoming weaker and interest rates are falling.

Our very,  very short-term early stock market indicator is negative.

What To Do Now?

Until Friday when the employment data is released and market reaction is known, it is best to be on defensive.

Consider new positions or additions to existing positions only in the lower one-third (1/3) of the buy zones until Friday.  Also consider NOT aggressively short-selling at this time.

Gold futures are at $1128, silver futures are at $14.48, and oil futures are $44.21.

S&P 500 resistance levels are 2000, 2017, and 2038; support levels are 1920, 1860, and 1838.

DJIA futures are down 148 points.

 

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