Markets dodged another bullet last week as they started the week with both a high (Transports) and low in the semiconductors. That’s not easy to accomplish. When a divergence is that wide, it means a rotational market which is a game of musical chairs. Eventually, the music stops and somebody is left holding the bag. Many market watchers were looking to the jobs number. Like most, I’m always hoping for a better economy which comes from a good number.
But as a trader the reaction to the number is much more important. If there is a bad report and the market sells, that’s bearish. A bad report and a neutral reaction can be bullish. A good report and neutral reaction is not so good while a good report and reaction is bullish. We had the latter but I have to pour a little cold water on it. The headline number came in at 222,000. It was greater than the 179,000 the so-called experts anticipated.
Here’s the good news, 8,000 jobs were attributed to mining and any jobs in that beaten down arena is welcome. But 37,000 jobs were attributed to health care. Why isn’t that good? Some of you will recall the only reason Obamacare exists is that Fannie Mae and Freddie Mac have been looted to the tune of billions. It is called “Net Worth Sweep.” It was first reported months ago by Jerome Corsi but confirmed several weeks ago by Mnuchin on the Maria Bartiromo show. It was on May 1, here’s the clip.
What does that mean? Pull the plug on “Net Worth Sweep” and you have that underwhelming 185,000 number. I support this President but I’m not a shill to anyone. The number is coming together with smoke and mirrors. Correct me if I’m wrong but the Trump administration has not pulled the plug on this scheme yet. If you break down the jobs number this sort of statistic has been going on for quite some time, why talk about it now? It’s because the healthcare debate has reached critical mass.
Health care takes center stage this week on several levels. McCain and McConnell do not believe the GOP will get a bill. It’s possible they may come up with a repeal bill but it will likely take them all of August to get it done if they are don’t take their traditional August recess. I’ve heard they are moving ahead with tax reform but how many times have we heard no health care, no tax reform?
Then we have North Korea. Alex Jones high-level sources report commanders in the Pacific are ready to strike if called upon. So, there are a lot of opportunities for the crowd to get upset in the coming days.
Technically speaking, in the last update we spoke about a Dow Theory confirmation with the Transports and Dow at new highs. Recall it happened last Monday on the low volume half-trading holiday session. The good jobs number helped confirmed Monday’s move as the Transports hit yet another new high. Aside from that several semiconductor names had interesting vibrational square outs which are now kicking in.
On Friday, they started to confirm with CEVA at 47.50 vibration and 49 hours down as it has settled in at key polarity. Until Friday this chart and others could’ve gone either way. But on Monday morning INTC got downgraded. For now, even the heavily weighted tech usual suspects are behaving better.
The key to the week is whether stocks like these overtake polarity or get repelled right here. There’s a handful of them. We had a divergent rotational market a week ago. If Transports stay well, that’s one thing but if tech gets well that’s something else. What you are looking at is a key point and quite possibly the key point for the whole week.
Another key point to watch is the crude oil market, which exceeded everyone’s expectations on the initial move off the bottom but got hit extra hard last week. They hit an interesting vibration by Friday and started moving off the low. It gapped up on Sunday night on an interesting reading but failed overnight, starting all over again. Can oil stocks come to the aid of the semis? Can the Transports stay up? There are more questions than answers to this market. Because there is no such thing as a crystal ball that means risk is increasing no matter what the VIX might say.
Finally, we are tracking the CAC which has a long-term reading which could already enable it to have peaked for this season. Right now, it has a 5442 high and trying to turn up at 44 days down. In the very near term, it looks promising but as you can see from the daily perspective, nothing much is happening yet.
Markets opened on the flat side on Monday morning as the crowd was not revealing its hand. My concern is we could play this cat and mouse game all summer. There are giant-sized cycles maturing at the end of the summer. In terms of the psychology, if markets digest the news of no health care reform this year, does it really mean there will be nothing done on taxes? When you read between the lines, Congress, as well as Mnuchin, appear to be proceeding ahead as if there will be something done with taxes. At this moment, our lawmakers are back in session but scheduled to go on hiatus again in only two weeks. As traders, we will always get by, but for the sake of the economy and the market, one could only hope we are not being set up for a major disappointment.