After a couple of rough sessions, brave investors began to venture into the market, scouting for opportunities. It seemed the S&P 500 could close higher momentarily, but there was never any oomph yesterday.

It's not out of the realm that the S&P 500 could pull back to test 4,600. That would be a textbook move, adding credibility to the next leg.

Close, But…

I worry about coming so close to a new high but failing.  I’ve seen this so often with the broad market and individual stocks that come within a razor of establishing new highs, only to stall and then turn lower. It’s been a long time since the S&P 500 reached a new high and the longer it takes, the harder it becomes to make that breakout.

Heat Map

Banks were intriguing. Mega-cap names struggled and Energy (XLE) was slammed.

S&P 500 names changing hands above their 20-day moving average, which has plunged.

Small and Not Mighty

When will the small-caps catch a break?  My goodness. Yesterday, the Russell 2000 came out of the gate with determination. Once it stopped moving higher, it lurched into a freefall without any resistance.

• Open: 1,964
• High: 1,970
• Low: 1,957
• Close: 1,957

Retail investors remain bullish.

Jobs Report

• Consensus: 167,000  
• High Estimate: 225,000
• Low Estimate: 80,000

The jobs report has become something of a sad joke: 

1. The consensus has been far too low
2. There have been massive downward revisions recently

It's become a crapshoot and setup because revisions are never newsworthy, no matter how large.

What Does Powell Know?

This report will be even more important than usual because of speculation the Fed has insight into something ugly in the economic pipeline. Jobs has been an area that’s held up better-than-expected. 

This is a late cycle data point, so if there is a sudden and sharp decline in jobs, the broader economy could be weaker than recent economic data suggests.

Moot Point

Goldman Sachs (GS) is modeling a steady decline in job creation compared to the Street.

Portfolio Approach

There are no sector weighing changes in the Hotline Model Portfolio.

Today’s Session

Allow me to retort.

It was NOT a strong jobs report.  In fact, it was a depressing jobs report.

• 676,000 folks left the labor force (where are they going?)
• 683,000 fewer people are employed (a monster single-month decline)
• 33,300 workers lost their temp job.
• 22,600 workers lost their transportation and warehousing job.
• October revised lower -45,000 to 105,000.
• November revised lower -26,000 to 173,000.
• 164,000 private sector jobs.
• Employment to population ratio -0.3 to 60.1 the pre-pandemic; level; was 61.1.

The recent hiring trend continues.  Outside of areas within the government influence and taxpayer spending, labor force has been a labor farce and now it might be getting worse.

 

Wages were better-than-expected, but that’s because employers still dealing with small pool of folks that want to work.

Bottle line the report wasn’t strong, but right now algorithms are reading bottom lines. I don’t see the needle changing on rate cut expectations and I wouldn’t be surprised to see the market edge higher today.

Comments

I'm in a better position now to invest for the long term (6-mths out and beyond if needed) than I was before. Nibbling here and there, not all in and keeping more powder dry just in case. A retest of 4600 in the S&P might be in the cards, it might even be healthy if it is successful. I don't know, but see the Fed-R around what they do or do not remaining in play for a several of months ahead around rate cuts. Just trying to adapt and place more attention towards market Behavioral reactions, in combo with technical and fundamentals. Throwing some small speculative swings out the as well.   Terry Dowler on 1/5/2024 1:42:59 PM

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