As the US Dollar Index made a new 3-month low, stocks traded in narrow ranges relative to previously volatile sessions and changed very little percentage wise. Exceptions to this were the DJ-20 Transports, DJ-30 Industrials and the Russell-2000. Basic Materials and Industrials were the top two leading sectors while Consumer Staples, Consumer Discretionary and Healthcare stocks lagged.
The narrative is now shifting to the employment landscape, which has been about the most pleasant picture in the economy. A higher than expected increase in today’s Jobless Claims report is morphing into concerns for weakness in Friday’s upcoming January-2016 Employment Situation report. An unanticipated contraction in newly created jobs has the potential to send the market lower to retest support levels @ 1870 and perhaps even the “War @ 1812” fought valiantly by both bulls and bears less than three weeks ago.
Among other assets, Gold is outshining other commodities and has gained over 100 points since bottoming @ 1045 at the beginning of December-2015. Within Real Estate, the Home Construction Index made a quadruple bottom yesterday and could potentially find some short-term support. Lastly, the Bond Market has benefited from fear and demand for safe haven assets as yields for 10 year treasury notes continue to fall.
So far, this trading week has been one of consolidation for equities. If the market can close relatively unchanged after tomorrow’s employment numbers, this would be a “morale” victory itself. Until further notice, expect periodic short-term rallies when the bear covers himself after feasting and before slumber.
Signing off @ Hillbent…
*Trends: ST = short-term; MT = Intermediate-term; LT = long-term
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