Unhappy New Years For Equity Bulls
Today’s Spotlight Market
This morning release of the December Non-farm payrolls report may be overshadowed by market participants given the wild market volatility we have seen this week. For those who may have missed it, the ADP National Employment Report was released on Wednesday with 257,000 private sector jobs created last month. This was above the 211,000 jobs created in the November report, with the service sector accounting for the bulk of the jobs created at 234,000.? Large companies (those with over 500 employees) accounted for the biggest additions of new workers at 97,000 jobs, with small employers (1 to 49 employees) right behind at 95,000 jobs added. December?s increase was the largest since December 2014 when 275,000 jobs were added.
Fundamentals
Global equity markets continue to experience a New Year?s hangover as selling pressure continued from Shanghai to London to New York.? Once again, the weakness began in China where the CSI 300 index fell by just over 7% shortly after the opening of trade which caused market circuit breakers to halt trading for the rest of the session for the second time this week. This drop caused an emergency meeting to be called by Chinese security regulators who have since announced that the new circuit-breaker will be suspended for the opening of trading on Friday. Analysts cite the Peoples Bank of China (PBOC) cut of the reference rate of the Chinese yuan for the sell-off in equities, as nations currency fell to its weakest level versus the U.S. Dollar since 2011. It appears that the PBOC is willing to let the value of the Yuan fall further as the country grapples with slowing economic growth. The continued sell-off in Crude Oil prices was also noted as a contributor to equity market volatility, as the lead month WTI Crude contract fell to its lowest levels in 11 years before a moderate price rebound occurred during U.S. trading hours. For 2015 U.S. Crude inventories rose by nearly 100 million barrels to just over 482 million barrels which is 36% above the 5-year average. This morning we will get the lasted data from the U.S. Bureau of Labor Statistics when they release the December Non-farm Payrolls report. Average estimates are for a gain of 200,000 jobs last month with the private sector expected to have contributed 194,000 new jobs in December.
Technical Notes? -? View Today’s Chart
Taking a longer-term perspective, we will look today at the weekly continuation chart for the E-mini S&P 500 futures. We notice the 20-week moving average (MA) holding just above the 100-day MA as prices have moved downward since the recent highs made back in November of last year. The recent down move could be viewed as a possible bull flag formation but we would need to see prices close above the upper trending of the ?flag? for confirmation. Two major support levels have yet to be tested including the August 2015 low of 1831.00 as well as the uptrend line drawn from the March 2009 lows which is currently near the 1700.00 price level. The 14-week RSI has weakened to a current reading of 41.99. This week?s low of1931.00 is now seen as near-term support for the front month future, with the next resistance level found at 2075.00.
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