The March jobs number was weak at 98,000, but mining added 4,000, construction 49,000 and manufacturing added 30,000. There is the good and the bad, but let’s be clear, anything under six figures is nothing to write home about. Is this President Donald Trump’s fault? I don’t think so, but if he is going to take a lot of the credit when the report is good at this early stage of the game, he is going to have to accept some of the blame when it’s not good. That’s how this game works.
I’m certain he got a nice boost under the initial excitement of his policies last month. But you’ll recall it took a couple of years for Reagan to turn the economy around. A lot of the good that Trump is creating is really on the come based on repeal of Obamacare, tax cuts and getting rid of the regulations that have been choking business. At this stage of the game, all he’s accomplished is getting rid of regulations. But we are still in the first inning.
But the takeaway from the jobs report is the market didn’t crater. If this was a true bear phase; the Dow could’ve been down 2-3% on such a crummy headline number.
The most interesting session of the week was on Wednesday. The market was on fire early only to give us a very quick reversal in the middle of the session. Private sector jobs came in at 263,000 beating the estimate of 170,000. Many were taken by surprise at the reversal. But here’s what happened for the S&P 500.
With a first leg of 21 points, the 261 extension target was 2377, it peaked one point higher at 2378! I was not taken by surprise. That’s only part of the story. We still have a nagging divergence where the Nasdaq hit for a new high on Wednesday. You can obviously see the SPX did not and the Dow is more than a month off its high. Right now the Dow is defending this trendline. This chart will help you navigate the action this week. But last word on the NDX is heavily weighted names like Apple, Facebook, Amazon and Microsoft have made the tech sector look better than it is. The BTK has been hit hard so the theme here is divergence. Transports is hanging on while Housing bounced back. Banks not so much. I can’t remember the last time housing and banking were on the same page.
You can see the market is all over the map and while it is showing resiliency, it’s also showing transition which is what divergence generally is. With that being said, our old friend Mercury retrograde is back until early May. We don’t do financial astrology but the one area traders ignore at their own peril is the Mercury retrograde. This is the period where the fast planet Mercury, whose orbit laps the Earth several times a year. When it gets into our sphere of influence it messes with all kinds of communication. All I’m going to tell you is expect choppy action and take your profits too soon. This period is characterized by patterns which will under or overshoot the target. You have to watch out if you pick tops or bottoms. If picking tops or bottoms is a strategy of yours, you might want to add an extra criteria before you try it. Don’t say I didn’t warn you. I wouldn’t kid you about this.
Since the health care debate several weeks ago we know the market suddenly has become a political pundit. The big news of the week was Trump’s reaction in Syria. Crude oil reacted and is suddenly closing in on the highs made in December. Gold also shot up on the attack but couldn’t sustain it and on Monday started breaking down.