Talks Of More Stimulus Buoys Market
On Friday we had a weaker than expected jobs number for the month of September coming in at 142,000 new jobs and unemployment remained at 5.1%. 90 economists were expecting over 200,000 new jobs. We saw the S&Ps trade down to 1882.75, the DOW trade down 258 points, and the DOW hold above 16000 with the print low of 16016. By 11:30 the market sharply reversed and closed up on the day about 200 points. I stated that the market was extremely oversold and I was expecting some type of bottom short term to work off the oversold condition. I am 75-80% certain that the print low of 15379 will be it for the year. I am still looking for a pullback to make a higher low in the next 1-3 weeks. I am going to raise the target I am looking for from 15500-15900 to 15600-16000.
The market has risen more than 700 points in two days. The market has gone from an extreme oversold condition to a somewhat overbought condition. There may be one or two more days of the market pushing up but then I am looking for backing and filling in the next week or so. The market rallied 300 points today because the bank of Japan is talking about more stimulus for their economy. The market loves stimulus. The central banks with their quantitative easing programs, and bond buying programs are in control.
When the DOW was in the 18100-18500 range I stated that I saw a lot of technical weakness on the weekly charts and that there was a lot of complacency in the market. Whenever there is a drop in the market people think that the Federal Reserve and the Central Banks are going to come to the rescue. That is a flawed mindset. If I was a long term investor I would have been looking to be in cash. The decline that we had was an opportunity to buy names with great earnings and significant cash in their balance sheets.
We had this 700 point rally, the bank of Japan is talking about some quantitative easing, and over the weekend a Federal Reserve official stated that they don’t expect interest rates to be raised in 2015. I am looking for the market to put some type of a bottom in make one more pushdown and that could be it for the rest of the year. I expect most of the loss of the year to be wiped out with either a small loss or small gain by the end of the year.
The key level for oil on the daily charts is 44.13-44.16. Oil traded down to 43.97 on Friday and now it is above 46.30. If oil breaks 44.13 on a closing basis I expect oil to pushdown then rally and then potentially push down to new lows. This is not a particularly good pattern for oil. I am on the sidelines waiting to see what happens.
Gold was up slightly on the day. I am not bullish here on gold. Gold had a bid due to the thought of there being no interest rate hike coming. If gold gets into the 1155-1175 range I would be looking to sell any gold or gold stocks. I do not believe that gold is in any type of a bull market. Gold has been down five quarters in a row and I have a significant sell signal on the weekly charts. Gold made a bottom going down deeper than I expected, shot up very sharply on Friday, and then held onto the gains today. I do not see this as anything to get excited about.