Are The Dog Days Of The Dow Done?
Today’s Spotlight Market
This morning?s release of the non-farm payrolls and unemployment rate might be the most highly anticipated economic report in years. It?s often been pointed out that the US Stock Market isn?t the same as the economy. The recent wild ride in equities and commodities will certainly be considered as the Federal Reserve meets on September 16th and 17th, but they will also peruse the most recent economic data when deciding if they will finally raise US interest rates from the 0% where they have been stuck at since December of 2008.
Fundamentals
August is a tricky month to measure unemployment and new jobs created. Vacations can cause the initial number to require a substantial revision. The initial report for August of 2014 was 142,000 jobs created which was subsequently revised upward to show a far more robust 213,000 jobs created. The unemployment rate will also be of interest. 5.2% is expected, which is inching closer the 5% rate which many economists consider to be the natural rate of unemployment. Dropping below 5%, such as in the late 1990?s, would tend to put pressure on wages, potentially leading to wage push inflation. Other recent economic reports the Fed may consider are the lower July trade deficit, which showed a rise in exports, as well as the ISM services index for August which came in at a strong 59%.
Technical Notes – View Today’s Chart
Turning to the three month continuation chart, we see a bearish chart with some indications of a potential reversal. The Mini Dow has bounced off recent lows and the 20 day Simple Moving Average (SMA) will be a nice resistance test. The Mini Dow found support near the 15662 level, which was tested several times, but held. 14 day Relative Strength Index is at a mildly bearish 37.35. The recent volatility of the past couple of weeks has caused the divergence between the 20 day SMA and 50 day SMA to widen, with the 20 day SMA showing a steeper downward slope.
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