A better-than-expected jobs report resulted in a hike in investors’ confidence despite the increased likelihood of a reduction in the Federal Reserve’s bond-purchasing program.
The Dow industrials jumped 1.3%, which snapped a five-day losing streak. But despite Friday’s rally, the week ended at a loss, the first in nine weeks for both the Dow and the S&P 500.
The Labor Department reported that the unemployment rate fell to a five-year low of 7%. The economy added 203,000 jobs in November, where 180,000 were anticipated. But the market appeared to rally because the increase in employment was not sufficient for the Fed to begin tapering immediately, and several economists said that a move in that direction probably would not occur before March.
At Friday’s close, the Dow Jones Industrial Average was up 199 points at 16,020, the S&P 500 rose 20 points to 1,805, and Nasdaq gained 29 points at 4,063. The NYSE’s primary market traded 670 million shares with total volume of 3.1 billion shares. The Nasdaq traded 1.7 billion shares. Advancers topped decliners on the Big Board by 2.6-to-1 and by 2.1-to-1 on the Nasdaq.
After five losing days for the Dow, we began to wonder if the support on the broad indices would hold. Friday’s strong rally gave us the answer.
After five losing days for the Dow, we began to wonder if the support on the broad indices would hold. Friday’s strong rally gave us the answer.
Note that the Nasdaq held just above the support line at 3,995 and the round number of 4,000. And internal indicator MACD turned flat from down as the index made a new intraday and closing 13-year high.
The broad-based S&P 500 also held above the first line of support at 1,775. It also recovered the space above its 20-day moving average at 1,792 and the round number at 1,800. Round numbers have no technical significance, but the psychological impact on traders is usually positive.
Conclusion: Friday’s strong performance, supported by excellent jobs numbers, has demonstrated that there is buying power present even after a 26%-plus move up for the year in the S&P 500. Bulls have lots of cash on the sidelines and are willing to make commitments at clearly defined support levels.
As a result of the S&P 500’s reversal on Friday from the November breakout at 1,775, its rebuff of the pullback on Nov. 20, and it again holding last week, this number has become a powerful inflection point.
The bull arrived last week to demonstrate its power in the middle of what is traditionally the strongest three months of the year. I anticipate that Santa will arrive with a gift of a 1%-2 % rally before 2014.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
