Market Likes Strong Job Growth
The market is constantly searching for a piece of news it can latch onto. This morning ADP reported that 263,000 new jobs were created in the private sector in March. This was a very “hot” number and the S&P 500 is up five points before the open. Financials and energy stocks have a strong bid and we should see a nice rally today.
The Fed has an aggressive tightening agenda. That means we need strong economic data. ADP was 100,000 over consensus estimates and this bodes well for Friday’s jobs report. ISM manufacturing was strong last week and ISM services will be posted an hour after the open. I’m expecting a good number.
Official PMI’s in Asia and Europe were strong last week and global growth is improving. The PBOC and ECB hinted that QE is ending and global yields are moving higher. It’s been years since I can say this but “good news is good news”. Strong economic data will spark buying and weak economic data will prompt profit-taking. Interest rates need to get off the deck and we need to distance ourselves from zero interest rate policy (ZIRP).
Earnings season will begin next week and pre-announcement warnings should be light. Q4 was excellent and guidance was strong. Stocks tend to rally into earning season and there should be a bid to the market.
The political mudslinging will continue, but economic growth and earnings will be in focus. Trump will buy little time and I’m expecting him to pick some low hanging fruit. He should be able to find some easy tax cuts that will gain bipartisan approval. If he can’t accomplish this in the next two months the market will grow impatient.
Swing traders should be long calls since we closed above our stop (SPY $235). Add to positions if we close above SPY $236.50. I’m not looking for a massive rally at this juncture. There are too many headwinds. The market will rally on the news and stall. Then it will wait for the next event.
Day traders should try to get long early this morning. We will see a nice pop and we should get a second run when ISM services is released at 10:00 AM Eastern time. I will get more aggressive with my longs if the SPY is above the first hour high.
Look for positive price action today and a close near SPY $236.50. Stocks are likely to pause tomorrow and wait for Friday’s jobs report. Initial jobless claims have been creeping higher the last few weeks and the Unemployment Report might not be as strong as ADP. That means that good news will be priced in and this might be the only decent move we get this week.
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