The jobs number was very good at 288,000. It was the best number of the young century. The Dow was not up 200 nor was the Nasdaq up 72. That’s really all you need to know. I’ve chronicled for you the numbers during the last really strong period of job growth during the Clinton years. During the Clinton years the United States averaged around 227,000 jobs a month.
Last month’s initial figure came in about 40,000 shy of that number yet the market got hit simply because it was priced to perfection. Its improving but there is still a problem with the labor participation rate as more people have continued to fall away from looking for employment and these people are simply not even being counted anymore. The other problem is that retail created 35,000 generally lower paying jobs while bars/restaurants created 33,000 which we know are not even minimum wage because those people are paid by tips.
This number was much better and the market did absolutely nothing. Sure they blamed it on Ukrainian crisis. Okay, I’m down with that. I hope you are catching on. This Putin power play isn’t going away anytime soon. It will continue to impact financial markets that on the one hand are allergic to military action but also gets a sour stomach on the thought of a larger sanctions war. If you doubt that, have a look at the Crude Oil chart which broke an important Andrews channel last week.
The other problem for this complacent market is the bond market. The bond market usually goes up on the anticipation of a weaker economy. The fact this chart is beyond the 134^00 level is very serious because they took 3 whacks at it before it broke through. What you need to keep in mind is around this time last year I told you I had serious concerns for bonds and it dropped from 144 to 125 in roughly 4 months. This steep drop represents serious overhead resistance and the slope of the drop gets more serious above 134. The fact they are pushing above 134 means someone is serious about not liking this economy. But unless you are looking at the Russell 2000 most of the equity people are not paying attention to the bond market.
In a healthy bull market the Russell 2000 is leading to the upside. Why? There are 2 reasons. First of all you never want to see the same stocks which led that last bull market leading the next bull. There always has to be new blood and technology percolating in an economy. If the environment doesn’t support leadership and growth for young and emerging companies something is wrong. Here the small caps are either lagging the establishment or leading to the downside. You decide if the cup is half full or empty. I think it’s a problem, especially when I see the bond market breaking out against stiff resistance.
Overall, a week ago Friday the Nasdaq put in that big minus 72 goose egg. Since this is a market both frustrating to bulls and bears I thought it could be the only distribution day of the we’d see for a while and it was. They spend the whole week working its way back to the declining trend line which has defined this correction and it’s also now meeting a declining 50 day moving average. Here we are early in the week with potentially the defining moment for the correction. Also notice the Fibonacci calculations for the low. On May 22nd I’m doing a Fibonacci webinar based on this style for the ICE and we are going to concentrate on products like the Russell Emini and U.S. Dollar Index (NYBOT:DXM14).
While all of this has been materializing the Dow managed to put in a new closing high. In the same sequence our friends over in France at the CAC put in a new overall high. I’m told the French media finds all of this very amusing but I can assure there’s nothing funny about it.