Hot Jobs...Fear Of Rate Hikes... Hits Stock Market Hard.....

By: Jack_Steiman

It was a very interesting day for the stock, market because it received the type of great news no one wanted to hear. Sometimes good news is not good for your bottom line. It's nice to see a lot of jobs added, well above what was expected. While it is true that many of the jobs added were of the lower paying type, it was still good to see anything on the positive side of job creation. Now the problem. Too many new jobs equates to a few raising rates. The market doesn't want any part of that. It doesn't want folks to have alternative places to go with their dollars. Then real question ultimately will be whether this is the beginning of a rate hike cycle. A full cycle or will it be a onetime situation with the Fed needing a lot more information before making hikes more of a regularity. She is a dove and won't shock the market, but in the end it's not about her.

It's about the economy. If the job reports remain hot and then if we see improvements with other economic reports she'll have no choice but to begin more of a cycle. We are not seeing good numbers on GDP nor are we seeing good numbers from the Ism manufacturing report. We'd have to see that take place for multiple months before she'd start rocking with a repeated hike cycle. We're a long ways away from that, but it possible and that possibility is what spooked traders today. They know it's not bad to have a hike or two since rates are so low. Their fear is that we will soon see repeated hikes month after month, with some possible more than .25. So today was very nasty. It is likely to continue for a while unless the fed says something unexpected from here. A bearish day today for sure.

Gold was not happy today nor were many other sectors. There are areas we know that won't like rate hikes or at least the fear of them. Utilities and real estate stand out. What should do well are the banks and that's where today's real disappointment comes from. They exploded early on and even as the market sold off most of them refused to sell. Well, for a while anyway. We saw leaders such as Goldman Sachs Group, Inc. (GS) and JPMorgan Chase & Co. (JPM) give it up in a big way as the day came to a close. Both closed with very nasty candles. Strange and bearish to see the best group with regards to rates give it up.

Nothing to get bullish about with that type of behavior. Some banks did hold up well, mostly in the regional end of that sector but the big cap leaders did not hold up at all and that's just not good. Shows you the intensity of the selling. It was across the board. No rotation today. That too stopped. A change of trend. Hikes or the perception of them was a change of trend and the lack of rotation also a change. They match up. Not good for the bulls short term. Nothing spared today. The selling was real as evidenced by a horrific advance decline line. Please respect this and be very careful out there.

The S&P 500 closed at 2071 and is now only three points above the critically important 50 day exponential moving average. Over time I don't think it has a chance to hold but for the moment it is still above. If it closes below along with the Nasdaq which has its 50 day exponential moving average at 4815 which is a long way from here would be very bearish. Since the Nasdaq is so far above the 50's we focus on its 20 day exponential moving average currently a hair away at 4910. Nasdaq below 20's and S&P 500 below 50's would not be pretty. Technically the market has some real problems. There are now three open gap downs for the indexes to deal with. One filled but not closed above so still three open gaps.

That's real technical damage. Expecting a market to just recover that type of damage makes little to no sense. This alone tells you to be respectful of the market and that you shouldn't get too involved. If that's not enough, keep in mind the ridiculous levels of froth along with the indexes starting to lose key moving averages. Nothing is good for the bulls right now. Nothing terrible but nothing good for sure. Play accordingly.

Have a nice weekend!

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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