U.S. Indexes Await Jobs Report, Other Markets Trending Higher

[Excerpted from Bill Cara's Daily Report]

The plot thickens as the resolution to this US equity market consolidation range draws nearer. Friday morning's US unemployment report for January may very well be the catalyst for a multi-week directional move in the broad averages. If overseas market action is any indicator, there could be an upside break-out.

Early Friday, the Asia-Pacific equity markets were solidly in the green: Nikkei 225 (+1.60% to 8076.6); Hong Kong (+3.61% to 13655.0); Shanghai (+3.97% to 2181.2); Australia (+1.03% to 3407.5), and India’s Sensex BSE 30 (+2.31% to 9300.9). Australia has been subdued, but the rest of these equity markets have been very strong, particularly China this week.

Also Friday at 7:43am ET, the French CAC (+0.33%), German DAX (+0.85%), and UK FTSE 100 +0.60%) and the DJIA futures (+13 at 8007) were modestly higher ahead of the Jobs Report.

Thursday in NY, after selling off for the first hour, equity traders decided to take prices broadly higher and all the major US indexes closed with solid gains, although not that much higher for the week. The DJIA (+106.41 +1.34% to 8063.07), the S&P 500 (+3.62 +1.64% to 845.85), and the NASDAQ Composite (+31.19 +2.06% to 1546.24) denied the negative corporate and economic news of the day and seized on the few positives.

The Toronto Composite (+167.89 +1.93% to 8860.98) and the Venture Board (+8.17 +0.92% to 898.22) also had solid gains on the day. The Venture Board, an index of mostly high-risk stocks, is, as I have been reporting, particularly strong (+5.7% in the past ten sessions for this).

In NY, the leading sectors, for consecutive days, were the Basic Materials (XLB +2.7% Thurs and +1.2% Wed.) and Energy (XLE +2.5% Thurs and +0.9% Wed). Oil Services ($OSX +4.0% Thurs after being a leader on Wed +3.4%) was strong among industry groups. Semi-conductors ($SOX +4.0%) was also strong. The Goldminers ($XAU) gained +2.8%.

The weakest sector was a winner too: Utilities (XLU +0.7%), while REITs ($DJR -2.2%) held the Financials in check (XLF +1.6%).

In the Cara 100, the 89 winners were Brunswick Corp (BC +13.2%), Juniper (JNPR +9.2% on +119% average volume), Electronic Arts (ERTS +8.3% on huge volume or the second day and following the previous gain of +11.4%), SanDisk (SNDK +7.8% following the previous gain of +7.3%), and Potash Sask POT +8.2%). The 11 losers were led by Dell (DELL -3.7%), General Electric (GE -3.6%), Deutsche Bank DB -3.4%), and JC Penny (JCP -2.3% on +193% average volume).

During the day, the Treasury Department reported that Sec. Geithner would be announcing on Monday a re-work of the $700 billion financial bail-out plan, or what's left of it. Geithner hired another Goldman Sachs employee as his assistant, raising the ire of many traders.

The long Treasury Bond ($USB +0.21% to 126.91) almost regained what it lost on Wednesday. Yields on the 30-, 10-, and 5-year Treasuries ended the session at 3.634, 2.900, and 1.885 percent, respectively.

The US Dollar (+0.34% to 85.94) lifted, strongest against the Yen (-1.86% to 109.78), and also the Euro (-0.50% to 127.86) as central bankers appear to be trying to hold back the price of gold as they ratchet down rates, one after the other. The Pound gained +1.11% to 146.20, but the Cdn Loonie was flat against the USD.

Thursday the $GOLD contracts lifted +$12.00/oz, which follows the previous day's gain of $9.70/oz, closing yesterday at 914.20, poised to attack the 930 resistance again.

Early Friday (7:40am ET), the spot price of gold, palladium, platinum and silver was on the rise again although gold is being restrained for now), compared to Wed and Tuesday morning at this time, in brackets: 917 (917.00) (898.50); 210 (201) (189); 983.5 (982) (962); and 12.96 (12.77) (12.38), respectively.

Friday morning at 7:40am ET (compared to Thursday at 7:59am), the $USD is higher at 86.46 (86.06) and the Euro lower at 127.93 (128.34). But precious metal prices appeal to be decoupling from the $USD trade.

We await the US Jobs Report, shortly. Traders are expecting a brief counter-move, followed by a burst of strength or weakness for the balance of the morning. The hours in NY following the close in Europe, however, is the most important.

Comments

[David White:]

The SPY is currently at about $86 (and apparently still rising so far). It has seemingly broken above its recent pennant formation (a strong upward momentum signal). Add the likely passing of a stimulus package soon. Add some further help for banks soon. Add some help for the real estate markets in the form of "bad banks" or tax breaks for home buyers, etc. There may be a good push upward over the next week or more.

Feb 06 09:53 AM