Major averages fell Friday on higher volume, marking another distribution day. A stronger-than-expected jobs report sent Treasury yields soaring. Unemployment fell to 5.5%, theoretically considered to be a "full employment" level, while wage growth, however, remained sluggish. The reality however, remains one of Orwellian proportions as the economy is touted as being strong, and jobs growth "robust" with a "full employment" unemployment rate allegedly being achieved, yet interest rates remain near 0%, an unprecedented, contradictory, and paradoxical occurrence in any supposed economic recovery.
The S&P 500 has broken through support at the top of its prior two-month price range, negating its prior breakout to new highs, and is now testing its 50-day moving average, while the NASDAQ is holding well above its own recent range breakout. If the S&P 500 cannot hold support at the 50-day moving average, then this creates a situation where we could see the NASDAQ move lower towards its prior range breakout point in the 4810-4815 area while the S&P 500 slices through its 50-day line. Investors should know clearly where their exit points are if the situation continues to deteriorate.
Investors are increasingly nervous the Fed will have to raise rates sooner than later on the basis of stronger economic data. Of course, 5.5% may be quite off the actual mark of where the real unemployment rate lies, but it nevertheless is what the Fed goes by, thus could prompt tightening. That said, the global economy remains on the ropes, and since there is a high degree of correlation between major economies, the Federal Reserve Chairwoman Yellen may keep rates low for longer than the market can guess as she is perceived to be quite dovish.