Nervous Market Waits for Job Report

11/01/2012 11:11 am EST


Thomas Aspray

, Professional Trader & Analyst

Sandy, the election, and employment numbers are all creating unease in the market that may not be settled for a few weeks. MoneyShow's Tom Aspray outlines what investors should plan for during these troubled times.

The opening of the US stock market Wednesday did not change the technical outlook much from last Friday, as most of the market's early strength was lost by the close. The stock index futures are a bit lower in early trading on Thursday.

The Dow Jones Utilities and Dow Jones Transports did the best, up 0.82% and 0.65% respectively. The market internals were more positive than the price action, but the major averages need a close above the last five-day highs to indicate that a short-term low is in place.

The strength of the next rally should provide more data to give me a better idea of how close the market is to a sustainable bottom.

The precious metals were a bright spot Wednesday, closing higher. There are signs that the worst of the selling in the metals may be over.

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Chart Analysis: The daily chart shows that the NYSE Composite is still resting on its daily uptrend (line a). A close above the 20-day EMA at 8,272 would be positive sign.

  • There is stronger resistance now in the 8,400 to 8,470 area.
  • The NYSE Advance/Decline line is still holding support (line d) that goes back to September.
  • A move in the A/D line above its WMA would be a good sign, but a breakout above resistance (line c) is needed to turn the A/D line bullish.
  • On a break below the recent lows in the 8,150 area, the 38.2% support is at 8,022.
  • The more important 50% Fibonacci retracement support is at 7,869.

The Spyder Trust (SPY) broke its daily uptrend (line f) over a week ago, but is still holding the 38.2% support in the $140.11 area.

  • This retracement support also corresponds to the chart support from the latter part of August.
  • The 50% Fibonacci retracement support is at $137.64, with the still rising 200-day MA at $137.90.
  • The S&P 500 slightly violated its uptrend (line h) last week, but is still holding above the late July and late August lows.
  • Since July, the A/D line has been in a broad trading range, and a move back above its WMA would be a short term positive.
  • SPY has minor resistance at $142.30, and a close above this level should signal a rally back to the former uptrend in the $144 to $144.50 area.
  • A daily close above the October 18 high at $146.52 would be the first clear sign that the worst of the selling was over.

NEXT: Will Small Caps Lead the Markets?


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The PowerShares QQQ Trust (QQQ) violated its daily uptrend and the 50% Fibonacci retracement support last week.

  • QQQ is holding its 200-day MA, with the key 61.8% retracement support at $64.05.
  • The daily Starc- band is currently at $63.80, with the weekly Starc- band at $62.80.
  • The daily relative performance line did diverge at the September highs (line b), and is still well below its downtrend.
  • The RS analysis shows no signs yet of bottoming, and the weekly (not shown) is also below its WMA
  • The daily on-balance volume (OBV) broke its uptrend on October 10, and needs to overcome its downtrend (line c) to turn positive.
  • There is initial resistance at $66 to $66.40 and the former uptrend, with the 50% retracement resistance currently at $67.60.

The iShares Russell 2000 Index (IWM) is still holding its daily uptrend (line d), with the 50% Fibonacci retracement support at $80.

  • If this level is broken, the more important 61.6% retracement support stands at $78.31.
  • The short-term pattern in the relative performance is looking more positive. The RS line needs to overcome its longer-term downtrend (line e) to indicate that the small caps are leading the S&P 500.
  • The daily OBV is still below its WMA and the downtrend (line f).
  • Both levels need to be overcome to turn the daily OBV positive.
  • The weekly OBV (not shown) is below its WMA, but is still holding above its longer-term uptrend.
  • There is resistance now at $82.15, and a daily close above $84.20 would be a positive sign.

What it Means: Both the bulls and bears are nervous as we head into the jobs report, and a 200-point swing is possible in either direction in reaction to the report.

A 200-point rally in the Dow Industrials with very strong A/D numbers is needed to signal that the worst of the selling is over. If this occurs, we could still see some further basing before a sustainable new uptrend can get underway.

If instead the market breaks to the downside, it could push many of the market indicators to oversold levels normally associated with a market low.

The magnitude of the storm's damage and personal loss will unfortunately become even clearer in the next few weeks. The markets are not likely to return to normal until after the election, but I would not base your investment strategy on either the election or the storm.

Just be sure that you have a firm plan in place. I still think the current correction presents a buying opportunity in those selected stocks that are outperforming the overall market.

How to Profit: No new recommendation.

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