The U.S. Department of Labor jobs report released this morning delivered no major surprises. The news of 156,000 new (non-farm) jobs for December was a little disappointing (economists had predicted 178,000), and the unemployment rate edged up a bit (from 4.6% to 4.7%); however, on the bright side there was a significant increase in wages this month.
The jobs data does not seem to be dampening spirits on Wall Street today as all three major market indices (DOW, S&P 500 and NASDAQ) are making new all-time highs. Directional momentum in this market continues to be 100% bullish. I am going to extend the current reversal zone for this market (and others) into early next week to allow the markets time to assimilate the jobs data. Even though we are at the end of this reversal zone, and cycles are suggesting a correction now, we are not yet seeing any intermarket bearish divergence (all three indices made new highs). If we get that (bearish divergence) next week, it may be a good signal to sell short for a brief but significant correction. Our main strategy, however, will be to buy the bottom of any correction now as it looks like this "Trumphoria" rally could continue for at least several more weeks (possibly months). Still on the sidelines of the broad stock market.
The U.S. Dollar Index seemed to benefit from the jobs data (the relatively neutral report most likely means that the Fed will not pull back on raising interest rates). The rising dollar, in turn, pushed precious metal prices lower, and both gold and silver prices were down a bit today. Could this be the turning point for a correction? Maybe, but like the broad stock market, both metals made new highs yesterday (no intermarket bearish divergence) so this dip may just be a brief knee-jerk reaction to today's jobs report. If prices do push higher early next week, we may see some bearish divergence (where one metal makes a new high but the other does not) and have a better signal to sell short. The cycles are still a little ambiguous for gold and silver so we will stay on the sidelines for now.
Crude oil's cycle is also a little unclear now. Crude prices did not move much today. What I wrote in yesterday's blog still applies:
"Because ideal turning points now would be near or above $55 (high) or near or below $49 (low), we may extend the current reversal zone into early next week to allow time for crude to move closer to those levels."
Still on the sidelines of crude.