The market had potential catalysts for a big move but the pattern that has been in place for ages played out again. The jobs news, movement in bonds and the ongoing Greece crisis presented some good excuses for increased volatility, but after the standard dip buying after a weak open, the senior indices were close to flat.
The good news is that there was positive action under the surface as small-caps and momentum names outperformed. There was strength in cyber security in particular, various China names and a number of biotechnology stocks. The high beta names are being chased as traders look for a convenient way to outperform the flat indices.
Although the S&P 500 was decidedly lackluster, breadth was 3,200 gainers to 2,500 losers with the Nasdaq leading. Oil, solar energy and biotechnology were the best performing groups, which is a reflection of an interest in momentum.
Bonds were under pressure again as reflected in TLT, but the market doesn't seem to care much that the bond market is already pricing in higher rates. The consensus is that the Fed is still on hold, but the debate over whether they will allow rates to lift off this fall or in 2016 is growing louder.
The bulls won the day overall today, but the indices are still pinned in a trading range. It's a deceptive market as there are pockets of action that look pretty good, but the indices don't look lively at all.
We continue to have extremely good support but aren't able to muster the sort of momentum needed to provide a break to new highs. We only had about 185 or so stocks making new highs, which is quite low for a market in this position.
Have a great weekend. I'll see you on Monday.
June 5, 2015 | 8:59 AM EDT
The 'No Memory' Buyers Are Pushing
- This confirms we still have little clarity on the Fed's next move.
Although there is quite a bit of big-picture news for the market this morning, the pattern action remains largely unchanged. We had some early pressure, but that simply attracted the dip buyers that automatically jump in on any weakness. Breadth is still fairly poor at around two gainers to three losers, but the indices are heading for positive ground now.
Typically, the market has gone dead after the early bounce action and given that it's Friday afternoon and the weather is nice in many parts of the country, the conditions are good for slow action, but at the moment the squeeze is on and the "no memory" buyers are pushing.
This action confirms what I mentioned earlier, which is that the jobs report did little to clarify what the Fed may do as far as rate hikes. The report was a bit better than expected, but we still have a number of negatives and few signs of inflation. Bonds are a bit nervous lately, but they have shrugged off some of the early issues and are at the highs of the day as I write.
We are still in a trading range and after the poor action yesterday and little reaction to the Fed today, the traders figure they might as well buy it again, as that looks like the best way to make some short-term money.
I've been adding to a position in VASCO Data Security International (VDSI) and have a few other things of interest on my screens, like Amicus Therapeutics (FOLD) and eHi Car Services (EHIC) but I'm not being very aggressive.
June 5, 2015| 8:59 AM EDT
These Jobs Numbers Offer No More Clarity Than Before
- They weren't dramatic enough to really change anything.
The May jobs numbers are generally stronger than expected, although the unemployment rate did tick up to 5.5% from 5.4%. Not only were the payroll numbers ahead of expectations, but hourly earnings ticked up 0.3%, which was higher than expected.
Following the news, the iShares 20+ Treasury Bond ETF (TLT) was hit, the dollar spiked and the indices were down. But we are already seeing a reversal of those reactions. The SPDR S&P (SPY) moved to essentially unchanged, but is now fading again.
While the numbers may have been stronger than expected, they weren't dramatic enough to really change anything. Many pundits expect the first rate hikes in September, while others predict a delay until 2016. No one is worried about a hike later this month.
The issue here really isn't the numbers. They are a bit stronger than expected, but the real concern among traders is trying to game the timing. There are plenty of folks that expect the Fed liftoff to produce a market correction, but they want to stay with the market uptrend as long as possible and not miss out by being overly anticipatory.
We are back down as I write, as the market wonders if good news is bad news. There are some additional positives such as the increase in the labor participation rate, but the big issue remains the timing of the Fed and we really don't have any greater clarity now than we did a few hours ago.
June 5, 2015 | 7:22 AM ET
Jobs Report Holds the Key to the Fed Move on Interest Rates
- Will last month's 'Goldilocks' data be repeated?
"Winners make a habit of manufacturing their own positive expectations in advance of the event."
For several months now, the market has ignored big-picture headlines and traded in a tight range. Support levels have been tested and there have been some probes of overhead resistance, but neither the bulls nor bears have been able to gain much traction. Both sides in the never-ending battle have been offering up a slew of arguments as to why they will prevail, but nothing has been able to propel the market out of its trading range.
Today we have a number of news events that can serve as justification for a breakout move in either direction. Keep in mind it isn't the news itself that matters most. The state of the market will determine if the news is good or bad.
The first event on the block is Greece, which has become a ridiculous farce as it has dragged out for many years now. The latest news is that they will not make the current payment but will bundle a number of payments and then borrow the funds from the IMF so it can pay the IMF. It is a mess, but it has been delayed and deferred endlessly and will likely be delayed and deferred again.
We have the semi-annual OPEC meeting today, which will cause some movement in the oil market. Oil has had a great rebound since March, but it has shown signs of weakness, and the United States Oil Fund (USO) is now threatening to break key 50-day simple moving average support. Oil isn't a major market mover, but it can have an influence on sentiment.
The big event today will be the May jobs report. No major changes are expected but the big question is whether the numbers might be hot enough to push the Fed to start its interest rate lift-off. Last month we had a "Goldilocks" number that wasn't too hot or too cold and the market reacted very favorably. However, after one strong day we fell back into the trading range and have not made much progress since then.
The market is obviously becoming more concerned about interest rates and that is reflected in the volatility in bonds that we have seen lately. It has caused some jerkiness in international markets but has not reached a point where it is causing a major change in market character.
The action yesterday was poor and gives the bears a slight edge going into the news flow today, but this market has typically done a great job of reversing weakness like yesterday, when it starts to contemplate what the Fed may or may not do.
Technically, this market has a long base and conditions are ripe for a new trend to eventually emerge. Will the news flow today be the tipping point? It is possible, but market players don't see it capable of developing the type of emotion needed to create a strong response.
I'll be back after the jobs news with an update.