A New Leg Down?

Last Friday's market action ended exactly the way I predicted it to... slightly upwards no matter how the Jobs report turned out. Yes, the Jobs report was dismal with a 6.1% unemployment rate! To most economists, going above 5% is going into the danger zone. So why was the market slightly up? Simply because this outcome has already been priced in on Thursday when investors go short ahead of the jobs report and when it turned out lousy as expected, it is time to take some profits by covering positions, hence the intraday reversal.

Strangely, the US dollar have been gaining a lot of strength lately, putting tremendous amount of pressure on oil price. In fact, the US dollar is now at its strongest level since October 2007! We have never in recent years seen the US dollar rise so much so quickly.

Clearly, sentiments are still decidedly negative as the Dow forms a bearish continuation pattern, signalling the possible start of a new leg down. Short term support would be the July low.