Market Recap Feb 5, 2016

February 5, 2016

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An “ok” jobs report that was below expectation did little to please the market as indexes started a bit in the red and just sold off almost the entire session. The S&P 500 fell 1.85% while the NASDAQ was slammed 3.25%. The NASDAQ was just crushed by technology stocks as LinkedIn’s selloff caused panic. It can’t be long now before traders demand a Fed rate cut!

The U.S. economy added 151,000 jobs in January, according to the Bureau of Labor Statistics. Economists were expecting a gain of 190,000. The unemployment rate, however, fell to 4.9 percent from 5.0 percent, while wages rose 0.5 percent. The strong 292,000 gain in December was also reduced by 30,000 workers. The labor participation rate did pop 0.1% but is still near multi decade lows.

Keep in mind if people give up looking for a job for 6 months or work in the underground economy they fall out of the government’s statistics and are thus no longer “unemployed” so take that 4.9% figure with a lot of salt.

An interesting blurb from Bespoke Premium on dividends:

Whenever you see comparisons between any period and 2008 it grabs your attention, and that’s certainly what happened to us when we saw the above headline earlier this week. As shown in the

chart below, according to data from Standard & Poors, there were a total of 394 dividend cuts for calendar year 2015, surpassing 2008’s total of 295 by nearly 100. Dividends are often considered sacrosanct by investors, so for most companies, the decision to cut it is not done willy-nilly.

Not to minimize the significance, but the peak year for dividend cuts was actually in 2009 when there were 527, and there is still a ways to go before we get there.

As we have been saying lately, if you were trying very hard to be a bull – not something we have been advocating – you at least had a level to trade against on the S&P 500 this past week: 1900. That level broke today so there is now zero reason to be a bull near term. The NASDAQ never gave you a signal to be bullish as it was unable to break above this trendline in blue we have used to connect multi year lows. So we’ll just repeat the matra of the past month or so – there are times to make money and times to preserve money; this is one of those latter times.

We have noted the Russell 2000 often here of late and said it looked like a “bear flag” was forming and any break below this bear flag would be a bad thing. Today a bad thing happened.

Usually the NYSE McClellan Oscillator being positive for quite a few days in a row is something bulls want to see… but it has to be supported by the index charts and we did not see that. So this was a ‘false positive’ if you will. It still somehow remains positive even after today but it doesn’t mean anything right now as we are in a bear market of sorts.

This is an amazing selloff of a fine company – but this is what happens in bear markets. LinkedIn (LNKD) guided low yesterday and it was down 28% in after hours…. it got worse today.

This filtered out to a lot of stocks that a lot of momentum traders favor.

This even includes companies that recently reported very good things such as Google (GOOG) and Facebook (FB) so it’s a situation where there is nowhere to hide which tells you all you need to know.

Not as well known but worth noting is business analytics company Tableau Software (DATA) as stocks that fall 50% in 1 day that are not in biotech are a rare thing. The company reported a fourth-quarter loss of $41.3 million, or 57 cents a share, compared with a profit of $20.7 million, or 27 cents a share, in the same quarter last year.