What the heck? Friday trading was weird enough to stand out even in a year of extreme volatility, states Jon Markman, editor of Strategic Advantage.
Bulls and bears alike were on their heels and shaking their heads all the way into the closing bell. After rising 550 points in the morning and then plunging down into the red for a couple of hours midday, the Dow Jones Industrials pulled a sharp u-turn in the last half hour and sprinted into the close to record a 400 point gain, or 1.25%. It could have been much worse, but nothing on Friday made sense.
New government data showed that public and private payrolls gains in October were much stronger than expected, which would normally be cause for celebration. But this year investors want to see the economy sink in sync with the Federal Reserve’s objective to chill inflation. It’s like the old joke, “Beatings will continue until morale improves.”
Although there are clear signs the global economy is weakening, deep cyclical stock groups such as banks, industrials, and semiconductors, were leaders Friday. They should have collapsed. Clearly, professional investors are beginning to put money to work for the fabled year-end rally. They will make up a reason for their bullishness later. There is overhead resistance for the benchmark at 3,815, the declining 50-day moving average. That level is in play. Support remains at 3,680.
The Trade: Current position is WisdomTree Bloomberg Floating Rate Treasury ETF (USFR), a cash alternative. We’re still in a bear market that is not trending. However, if the S&P 500 (SPX) can close above 3,815 this week there should be a tradeable rally to 4,090.