Stocks rallied after the opening bell but it didn't take the bear long to start pushing the indices lower into the late morning.  There was some afternoon buying and the indices closed mixed with the Nasdaq registering a gain with the Magnificent 7 stocks doing well.  Small caps lagged and a decline in the dollar helped the I-fund stay flat.  Bonds were up as yields slipped on weak employment data.

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The ADP Private Payrolls Report rose just 99,000 in August, well below estimates and down for the 5th straight month.  Yet, as we have often seen, the monthly non-farm payrolls jobs reports, which we get today, have not been bad, outside of the the July report which may have been skewed due to weather related issues. 

ADP Employment Change For August:  Actual: 99K vs. 150K Consensus estimate: Prior month: 111K revised down from 122K.

The August jobs report estimates are looking for a gain of about 165,000 jobs, with an unemployment rate of 4.2%.

Let's see what kind of number they throw at us after that ADP disaster.

The 10-year Treasury Yield was lower on the weak data, and it is nearing the August lows.  At this point I think a break below that low will be telling us that the bond market is in the recession camp.  A bounce here and perhaps an economic soft landing is still in play.

         

There were a couple of charts that have been bucking the bearish trend recently but yesterday both of them broke down.  First is the Dow Transportation Index which had been holding near that head test of the head and shoulders pattern, but as is often the case, the head test held as resistance, and yesterday it finally broke down.  The good news, there is a lot of support at yesterday's lows.

       

       

The financial sector had also been doing very well and making new highs while tech and the market in general have pulled back.  Yesterday that changed.  Not that this has to go up everyday, because this is a good looking chart with a test of the breakout area a very typical reaction, but something happened yesterday to chase the bulls out for a day.

The jobs report numbers have been questionable for a long time with consistent downward revisions, and yesterday's ADP Private Payrolls suggest another weak number should be coming.  I don't know what to expect, but with stocks off their highs and investors getting more bearish, would it be a surprise to see a strong number that catches everyone off guard, despite what the data leading up to this has been telling us? 

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The S&P 500 (C-fund) continued its pullback off the double top with a moderate loss of 0.30% yesterday.  It held at the 50-day EMA and partially filled that open gap that we have been obsessed over for the last few weeks.  It still looks like a possible inverted head and shoulders pattern, which is a bullish pattern, but the PMO indicator is nearing a negative crossover and while that could mean a short-term oversold rebound, it could mean trouble for the intermediate term.

        


The DWCPF (S-fund) is lagging again as investors get impatient over the rotation play.  Here as well, the bullish inverted head and shoulders is still in play, and the open gap was partially filled.  It has closed below its 50-day EMA for two straight days so it is cracking some.

       
 

The EFA (I-fund) was flat yesterday, thanks to another dip in the dollar.  The 20-day EMA is holding here but all three of those August gaps are still open.

BND (F-fund) moved higher again, and my concern for the bond market here would be a strong jobs report which would send yields higher, and the F-fund lower.  However, if the jobs report goes the way that the ADP report went yesterday, there could be more room to the upside here.

Thanks so much for reading!  Have a great weekend!

Tom Crowley


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