Courtesy of Blain.
Bulls really put it to the bears this week and Friday was no different. Despite a quite solid jobs report, indexes sold off a bit in the opening 30 minutes but once again buyers came in despite overbought conditions and indexes pushed out another gain. The S&P 500 added 0.33% and the NASDAQ 0.20%. Fun fact: Today was the first time since October that the S&P 500 has enjoyed a four session winning streak.
“I think the equity market has basically recovered from the recession fears that were out there and the collapse of oil three or four weeks ago. The ramp up we’ve had is more of a relief rally. Things aren’t as bad as they’ve been generally feared,” said John Bredemus, vice president at Allianz Investment Management.
“Expectations went too far on a recession expectation. That’s why the market has rallied in the past two weeks. It’s pricing out a chance of a recession,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.
The nonfarm payrolls report showed creation of 242,000 jobs in February, topping expectations. Economists were expecting 190,000 new positions. The bulk of the job gains came from health care, retail and bars and restaurants, which added 57,000, 55,000 and 40,000 new positions, respectively. The unemployment rate remained unchanged at 4.9%, while labor force participation was 62.9%. One concerning aspect of the employment report was a 0.1% monthly drop in average hourly earnings. Job quality was titled toward part time, which the household survey indicated grew by 489,000, while full-time positions increased by just 65,000.
“Wage pressure or lack of thereof suggests that the economy is on a slow growth path. A March rate hike is definitely off the table and June is questionable, but a hike in September or December is still likely,” said Chris Gaffney, president at EverBank World Markets.
The S&P 500 closed as close to 2000 as it could without going over! It is now right at the 100 day moving average as well.
“The S&P 500 went from being very oversold to very overbought in only three-and-a-half weeks,” said Adam Sarhan, CEO of Sarhan Capital. “During that time, the S&P 500 vaulted a very impressive 10 percent and a little bullish fatigue is now kicking in.”
We are showcasing a very long term chart for the NYSE McClellan Oscillator to offer how “rarefied” the air is. This indicator almost never hits 90 – only a handful of times in this nearly 18 year chart. As for over 100? This is only the second time in that same time frame. So we are in historic overbought conditions at least by this one measure. We could see it drop all the way to +60 and still have it be considered an extreme overbought reading!
[click on chart to expand it to full size]
This has been a violent rally in the 10 year bond as well – yields punctured 1.7% and now are back to 1.9% in a short period of time!
We have noted quite a few times in our recaps the past week or so that oil is actually acting bullish and the next push up if this rally continued would logically take it to the $37s area where we have a lot of congestion from December. That rally continued today.
Oil gained 9.58% for the week, its best week since August and its first three-week win streak since May 2015.
For the third day in a row we’ll post Chesapeake Energy (CHK) simply because it’s been an amazing run of nearly 20% a day!
We’ve mentioned this breakout in the emerging markets ETF (EEM) all week and it continued sharply today.
Even copper is playing along with a spike to the 200 day moving average. Copper gained 7% for the week, its best since December 2011.
Apple (AAPL) is motoring along and doesn’t face much resistance until about $110.
Have a good weekend and we’ll see if bears can make a dent next week.
