The Canadian jobs report surprised to the upside, reporting a gain of 39.5K versus the consensus estimate of -50K. Also, the US jobs reports came in with a lower number of losses at -539K versus the median estimate of -625K. This may have a positive impact on the markets today.
One of the challenges in trading and investing is trying to determine the trend or direction of the market. Some traders keep it very simple by just following a key moving average such as the 200 day or 150 day moving average. If the major indexes are below this average, the markets are considered to be in a bear trend and if the markets are above this average, the markets are considered to be in a bull trend. This is a useful view, but it is applicable to an intermediate or longer term trend. The question than arises, how to determine the possible market direction on a shorter basis for the purposes of swing or shorter term trading. In addition to tracking the major North American indexes, you will notice I always mention the DAX. The DAX is the index for the German markets. The reason for tracking the DAX is based on the work of Constance Brown, a highly respected technical analyst. Her research found that the Asian markets are really just responding to the price action that occurred in the North American market. The DAX, however, is more closely linked to the North American economies from a manufacturing perspective, and seems to act more as a leading indicator of potential short term price action. So far, it seems to be fairly reliable. Tracking the future and the DAX pre-market gives us an idea of how the markets will open. The market condition scans help us to determine whether a positive or negative open will sustain through the day and what is most likely in terms of market close. Finally, the market bias indicators give us a way of applying statistical probability to short term price action and are based on the concept of reversion to mean.
Therefore in the morning, by looking at the futures number and the DAX, we see that the markets will open up today. However, the market bias and market condition scans are giving us mixed signals indicating a choppy day which has the potential for whipsaw and low follow through. The market condition we are in is classified as a bottoming market according to the work of Martha Stokes, another respected technical analyst. You will also notice that in the tables below, we also indicate what phase the markets are in. Currently, the markets and primary sectors are in a Recovery phase and have been holding this phase, which is a positive sign.
This is telling us that the current rally is weakening, but we are not likely to see more severe selling as we did earlier this year. However, it would be healthy for the markets to at least consolidate for a while and build energy to move into the next phases and return to a bull market. Also, since the market condition scans are continuing to show strength in the institutional scans and the RSI scans, we can review the charts in these scans to try and determine which industries are showing the most interest and build a potential watch list of 20 to 40 companies that I will try and share on this blog.
| Index | Change | %Change | Level | Phase |
| TSX | -176.38 | -1.74% | 9967.05 | Recovery |
| DJIA | -102.43 | -1.20% | 8409.85 | Recovery |
| Nasdaq | -42.86 | -2.44% | 1716.24 | Recovery |
| SP 500 | -12.14 | -1.32% | 907.39 | Recovery |
| Russell 2000 | -12.15 | -2.41% | 492.94 | Recovery |
| NYSE | -90.46 | -1.54% | 5800.09 | Recovery |
Source: Telechart
Short Term market outlook:
Bias: Scans showing a neutral bias but more positive momentum than negative momentum
Energy: moderate
Primary Trend: Remains down to sideways
| Sector | Phase |
| Consumer Staples | Recovery |
| Healthcare | Recovery |
| Technology | Recovery |
| Utilities | Recovery |
| Energy | Recovery |
| Financials | Recovery |
| Industrials | Recovery |
| Materials | Recovery |
| Consumer Discretionary | Recovery |
Source: Telechart
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