The U.S. jobs data released on Friday was disappointing. Wall St. had been expecting around 203,000 new jobs, but Labor Department statistics showed non-farm payrolls increased by only 160,000 jobs. This step-down in job growth increases the chances that the Fed will hold back the next interest rate hike so it was not surprising to see the broad stock market rally a bit on Friday. Cycle analysis shows that it is late in the medium-term cycles of the DOW, S&P 500 and NASDAQ so all are due to bottom fairly soon. The DOW's cycle may have bottomed on Friday, but it is a little too early for a cycle bottom in the the S&P 500 or NASDAQ. Because this week puts us at the center of a potential reversal zone, I am going to take profits and cover my short position in the broad stock market now. We could easily see a brief (1-3 week) rally here that may or may not make new highs in these indices before they turn down again and make their final cycle bottoms (although that bottom may have happened last Friday in the DOW, but not likely in the other two indices). If we do get a rally now, we will look to re-short the top of that rally to ride a correction down to the final cycle lows (at least for the S&P 500 and NASDAQ). Taking profits and covering (unloading) my short position in the broad stock market now.
Gold and silver are still giving us mixed signals and are very tricky to call right now. The disappointing employment figures on Friday fueled speculation that the Fed will delay an interest rate hike which caused the U.S. Dollar Index to plunge briefly in the morning (but it immediately snapped back up). The precious metals responded with a rally, but this may have been just a "knee-jerk" reaction to the jobs data. Gold and silver prices could continue to fall this week and give us a good spot to go long or they may rally to new weekly highs and present us with a shorting opportunity. A significant move (up or down) could start late this week and continue into the following week so we will be on the alert for trade signals one way or the other. The longer-term picture for gold and silver seems to be turning bullish, but there could be a severe short-term correction before the bullish trend can assert itself so we need to be careful in our trading of these metals. Out of both gold and silver for now.
Like the precious metals, crude oil could prices could go either way this week. If they rally close to $50, we will consider selling short. If they fall close to $41, a long position may be appropriate. On the sidelines of crude oil.