Strange Rally...
I got the first half of what happened today correctly but what happened during the second half truly surprised me.
Jobs Report turned in much much worse than expected today, leading to an immediate reaction during the opening hour. It didn't take investors very long to realise that it also mean that the rate hike hammer isn't going to be dropping anytime soon, leading to a rally all through the day. It is the rally that actually surprised me. Apparently investors are far more concerned with the rate hike than the fact that the economy is in trouble today. Which makes next week a very dangerous week for traders and investors who jumped in on this bull trap. The second week of each month is what I call "Digestion Week". A week of no heavyweight economy data and a chance for investors to cool down and seriously think about what the ISM index and Jobs Report released on the first week mean. It won't take investors much to realise that even without the rate hike, the economy is in trouble with economic data going the way it has. The scariest thing is, the Fed can no longer do anything to help the economy. There simply isn't anymore rates to cut and all they can do is sit and watch the economy sink, now, that is scary and I think we would see investors react to that realisation next week.
The technical front looks extremely uncertain for next week as well. The SP-500 looks like it formed a standard double bottom reversal right now but I have my reservations, especially when it is up once again against the 30MA line. The 30MA is a critical resistance/support line and a place where alot of bull traps and dead cat bounces reveal their true nature. This, along with the fact that the market has already been up for 4 consecutive days makes next week an extremely dangerous week where we could see the market take back all these gains.
Market Crash Timer: ORANGE
For now, the market turns a short term bull trend within an intermediate neutral trend and primary neutral trend.
Jobs Report turned in much much worse than expected today, leading to an immediate reaction during the opening hour. It didn't take investors very long to realise that it also mean that the rate hike hammer isn't going to be dropping anytime soon, leading to a rally all through the day. It is the rally that actually surprised me. Apparently investors are far more concerned with the rate hike than the fact that the economy is in trouble today. Which makes next week a very dangerous week for traders and investors who jumped in on this bull trap. The second week of each month is what I call "Digestion Week". A week of no heavyweight economy data and a chance for investors to cool down and seriously think about what the ISM index and Jobs Report released on the first week mean. It won't take investors much to realise that even without the rate hike, the economy is in trouble with economic data going the way it has. The scariest thing is, the Fed can no longer do anything to help the economy. There simply isn't anymore rates to cut and all they can do is sit and watch the economy sink, now, that is scary and I think we would see investors react to that realisation next week.
The technical front looks extremely uncertain for next week as well. The SP-500 looks like it formed a standard double bottom reversal right now but I have my reservations, especially when it is up once again against the 30MA line. The 30MA is a critical resistance/support line and a place where alot of bull traps and dead cat bounces reveal their true nature. This, along with the fact that the market has already been up for 4 consecutive days makes next week an extremely dangerous week where we could see the market take back all these gains.
Market Crash Timer: ORANGE
For now, the market turns a short term bull trend within an intermediate neutral trend and primary neutral trend.
posted by Jason Ng at 6:52 PM
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