Volatility Remains High Following Stock Plunge
The market had a positive response to this morning's jobs report, but the enthusiasm was short-lived as investors remain skittish following yesterday's stock plunge, and there may be some hesitancy about buying stocks ahead of the weekend.
This morning's jobs report was much better than expected, and should at least take the recession talk off the table for a bit. Nonfarm payrolls grew by 117,000 in July (vs. 84,000 consensus), which is far better that some of the whisper numbers. Moreover, the prior month's payrolls were revised higher. And private payrolls spiked by 154,000. This helped push the unemployment rate down to 9.1%.
Outside of the jobs report, there hasn't been much in the way of news. All eyes are still focused on Europe, where leaders are said to be holding a conference call over the weekend to discuss solutions. Those markets remain lower this morning, and Asian markets were lower overnight also.
The dollar is lower again today, which is surprising. Gold prices are higher today to $1665, while oil prices continue to fall below the $86 level. Hopefully prices at the pump will also work their way lower in coming weeks.
The 10-yr yield is higher today near 2.49%, following a big multi-day plunge from 2.90% at the end of July. As for the VIX, it was lower at the open, but has since spiked another +10% higher to nearly 35. That is a huge move, and it has only been this high one other time in the last 2 years.
Trading comment: Long-time readers know that I usually don't trust strong market opens. They are just too easy for traders to sell into and knock back down. Especially when the market has been weak, as it has been lately. So I wasn't too excited about this morning's open. The most positive action we could see would be this move lower that we are seeing now, but then a reversal later today that finishes back above the SPX 1200 level.
Remember, markets don't usually make "V" bottoms. So you don't have to try to buy this dip. The normal course of action is for the markets to bounce, and then come back down for some sort of retest. If that retest is successful, it will offer a much lower risk entry point for short-term investors. I think it is too early to be talking about making long-term investments until the market downtrend has run its course.
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