MLR - PMP 1/10/14
Major averages were mixed on lower volume. Markets overall continue to trend higher bolstered by quantitative easing by central banks around the world. Meanwhile, bonds have been in a downtrend as the risk in holding US Treasurys continues to grow. China said recently they will no longer be net buyers of US Treasurys. Other countries are probably making similar adjustments. This could cause interest rates to increase which would make the already burdensome debt levels in the US even more onerous. But as long as the Fed continues to unleash quantitative easing in full measure, stocks should continue their uptrend. The plethora of pocket pivots we have witness over the last several days bodes well for the internals of the market.
In economic news, he U.S. added just 74,000 jobs in December which is the smallest increase since the start of 2011. The unemployment rate fell to 6.7% from 7.0% which is the lowest level since October 2008, but the decline had well to do with more people dropping out of the labor force as it was reported that around 347,000 Americans were no longer looking for work in December. The labor force participation rate fell to 62.8%, a 36-year low.
Economists expected an increase of 193,000 nonfarm jobs, with unemployment holding steady at 7.0% in December.
Futures initially fell sharply on the unemployment report but have since partially rebounded. The weakness bodes well for continuation of quantitative easing in full measure. On the other hand, it creates nervousness that the economy is not yet rebounding after all of this money printing. Thus as can be expected, central banks will have to continue to print print print which, if history is any guide, will artificially continue to prop markets higher, but with a potential day of reckoning at some point. Price/volume action will be our guide.
Meanwhile, the flurry of pocket pivots and other buy points that greeted the New Year slowed down yesterday, and many extended leaders pulled back sharply, including Chinese internets Sina Corp. (SINA) and Qihoo 360 Technology (QIHU). While SINA remains above its recent pocket pivot, QIHU failed miserably after Wednesday's buyable gap-up move. This morning Splunk (SPLK), pre-open, is also flirting with the 73 intra-day low of its buyable gap-up move on Tuesday. Remember that not all buy signals/pocket pivots/buyable gap-ups will work, and setting proper stops for any initiated trade and then sticking to them should be routine.
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