Friday, November 02, 2012

SPX Turned Away At 50-Day Average

The markets were higher in early trading after a better than expected jobs report, but the S&P 500 ran into resistance and all of the major indexes turned lower such that they are currently back in the red.

Today's nonfarm payrolls report surprised to the upside with 171,000 payrolls added in October vs. consensus of 125,000.  The prior month's reading was also revised higher to 148k jobs added from the initial estimate of 114k.  The unemployment rate ticked a notch higher to 7.9%.

Separately, September factory orders showed an increase of 4.8%.

Overnight, markets in Asia ended mostly higher after the big gains in the U.S. yesterday.  Japan and Hong Kong led the way.

In Europe, markets got a boost this morning from the US nonfarm payrolls data.  The Financial Times reported that stock buybacks from European companies have slid to their lowest levels in three years.

Stocks rising on earnings reports: SBUX, PCLN, TRIP, WPO, RL, HAR, CTB
Stocks falling on earnings reports: AIG, SSYS, MHP, IT

The dollar is getting a big boost today and that is weighing heavily on commodities.  Oil prices are weaker near $85.44.  Gold prices have fallen back below the $1700 level to $1685.  And silver and copper prices are sharply lower.

The 10-year yield has gotten a boost from the economic data today, rising to 1.73%.  And the VIX has bounced off its 50-day support back to the 17 level.

Trading comment: Yesterday I commented on the price action of the SPX and how the overhead 50-day average would be a test.  This morning the senior index rallied right up to that resistance level and promptly was turned back.  I suspect after a little backing and filling that we will see a successful retest of the 50-day with a breakout above it.  The election still is a big element of uncertainty for investors, but next week that uncertainty will be removed one way or the other and that could lead to a rally in the markets. 

KAM Advisors has long positions in PCLN, SBUX


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