All Eyes on Friday’s Unemployment Number

U.S. Equity Markets

I am currently on the sidelines in the U.S. equity markets.

I have a sell signal on the weekly charts in the U.S. equity markets. I am looking for the U.S. equity markets to sell off heavily over the next couple weeks and get to a significant oversold condition. A similar situation to the extreme oversold condition when the S&P 500 futures traded down to a low of 1,804.25 and were over 140 points below the 10-bar moving average on the daily chart. From that extreme oversold condition the S&P futures rallied about 130 points and the Dow Jones Industrial Average rallied over 1,200 points in only a week and a half.

We saw extreme volatility in the U.S. equity markets today. The Dow Jones Industrial Average closed up 79.92 (0.49%) at 16,416.58, the S&P 500 closed up 2.92 (0.15%) at 1,915.45, the NASDAQ Composite closed up 5.32 (0.12%) at 4,509.56, and the Russell-2000 closed up 4.49 (0.44%) at 1,014.79.

Tomorrow at 8:30am the U.S. Department of Labor will be releasing the nonfarm payroll unemployment number for the month of January. Expectations are for 188 thousand new nonfarm payrolls and for the unemployment rate to remain at 5.0%.

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Crude Oil

I am currently on the sidelines in crude oil.

Crude oil is within a range between the low of 27.56 and the high of 34.82. I am looking to see if crude oil can make a new low and possibly push down to the 25 level or even lower. If crude oil pushes down to this point I would probably be a buyer of crude oil as I believe OPEC would then call for an emergency meeting to cut production, pushing crude oil prices back up.

Crude oil traded up to a high of 33.60 today before closing down 0.56 (1.73%) at 31.72. The oil companies are feeling the pain of low crude oil prices. Today COP (ConocoPhillips) cut its dividends by two-thirds.

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I am currently on the sidelines in gold.

If gold closes above 1,131.30 tomorrow I will get a buy signal on the weekly chart. I already have a buy signal on the weekly charts for the gold stocks NEM (Newmont Mining) and ABX (Barrick Gold). If I get this buy signal I will then have a buy signal on both the daily and weekly charts for gold and the next pullback to an oversold condition should provide a great buying opportunity. On this pullback I will also be looking to buy names such as NEM (Newmont Mining), ABX (Barrick Gold), and GLD (Gold ETF).

Gold was up 16.20 (1.42%) today, closing at 1,157.50. Gold is up 30.30 in only two days.

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Thank you,

Stephen Kalayjian

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