Bulls see limited and sterilized technical gains from weak, but maybe better-than-expected mixed jobs data. As of 9:15 the SP-500 (SPY) is up 0.25% and striking fresh highs but testing potentially hazardous overhead resistance rather than enjoying blue skies and smooth sailing.
Following Thursday’s well-received “unlimited and sterilized purchases” ECB bond program and a foursome of much stronger-than-forecast, QE3-killing economic data; bulls are back at the trough and trying to feed on weak BLS nonfarm payrolls data which puts stimulus measures back on the table or at least in the rumor mill.
By the numbers and in stark contrast to yesterday’s ADP and Challenger reports, nonfarm payrolls for August grew by 93K compared to forecasts of 130K. Private payrolls were equally challenged with an increase of 103K versus estimates of 144K.
Upsetting matters more or perhaps allowing some tears of joy for the QE3 crowd, July data also saw downward revisions. And unemployment took a surprise dip to 8.1%, but the illusion of a stronger jobs market was revealed to be the work, pardon the pun, of those not working and leaving the workforce.
Elsewhere, after a couple weeks of rumors and non-binding pledges, long-awaited action from China is receiving some confirmation in the form of infrastructure projects aimed at stimulating its economy through a roads and rails package.
And across the other pond, the ECB’s President Draghi unveiled its Outright Monetary Transactions program. Also, pleasing economic reports with stronger industrial production reports from both Spain and Germany, import / export data not causing a furor in the latter and better-than-forecast input and output PPI data from the UK are helping support bulls.
In those intertwined markets of influence, the EUR/USD is up a staunch 1.19% but now up against critical resistance from its short-term uptrend channel and a much more formidable weekly downtrend line which began in May 2011.
Eurozone country ETFs (EWP, EWI and EWG) are showing solid gains as well and led by the Greece’s (GREK) 3% extension which puts its three day tally from a congestion zone breakout at about 10%.
The 20-Yr (TLT) is off narrowly by 0.22% but showing continued bearish tendencies. Friday’s price action is establishing an engulfing bearish candle which found resistance from a partial gap fill and its 30 and 50SMAs. The technical weakness suggests today’s data isn’t so stimulating to bulls as to force the Fed’s hand, as well as having the backing of investors still not finished devouring riskier assets.
The US Oil Fund (USO) is up 1.5% and displaying relative strength. Friday’s bid is the likely resolve of bargain-hunters focusing on bullish reports from across both ponds, the oil proxy's technically lagging position beneath the 200SMA and potential stimulus optimism trumping the weak US jobs report.
On the corporate confessional side, Intel (INTC) is off 3.5% and setting year-to-date lows as it tests levels last seen in late December. The world’s largest semi manufacturer cut its Q3 outlook below Street views. In sympathy, shares of rival and perennial second best nominee AMD (AMD) is off 5.25% and testing three year lows set on Wednesday. Shares of NVIDIA (NVDA) are down 2.70% and the Semis HOLDRs (SMH) is off 1.15% in inside trade trying to find support from the 200SMA.
Athletics apparel and retailer Lululemon (LULU) is stretching higher by 11%. The outfit topped profit views by $0.08, narrowly missed revenue forecasts with growth of 33.1% and raised its FY13 EPS outlook from below Street views of $1.63 to above consensus estimates with a range of $1.76 - $1.81. Technically, shares are now quickly back in favor with growth traders with LULU in the upper portion of a first-stage cup-shaped base.
Finally and in those sometimes accurate heat-seeking option markets, the VIX ($VIX) is off an unsurprising 6.25% near 14.6% and 12% below its 10SMA. With the uncertainty surrounding the payrolls data removed and bulls clearly enjoying the “risk on” game, the added temptation of collecting weekend decay, is standard operating procedure. Of course, with the SP-500 at four year highs, testing up-channel resistance and the VIX confidently moving towards complacent extremes both near and longer-term; other par for the course processes such as profit-taking might be considered worth preparing for in advance.
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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