'Nervous' Close Gives Bears Added Hope for Day of Reckoning
Despite minor signs of stress, it will likely take more than minor softness to shift the character of the market.
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A poor ADP jobs report on Wednesday morning provided ammunition for the bears, but they were unable to capitalize on the news. There were a couple of brief dips and a weak close, but the buyers kept on coming and were able to hold the indexes close to flat on positive breadth. Small-caps IWM, after a few days of outperformance, and the Magnificent Seven MAGS kept the Nasdaq 100 QQQ in the green.
Bonds took the employment data more seriously than equities and rallied as interest rates fell. Fed Fund Futures are now pricing in two interest rate cuts this year starting in the fall. However, the dollar weakened, which may have to do more with monetary shifts caused by trade and tariffs.
Jobs news will be on that agenda again Friday when the May jobs report is issued. Weak numbers in this report would likely generate a much stronger response. On one hand, weaker jobs news is a market positive as it pushes the Fed to cut rates, but, on the other hand, it may just be an indication of a negative trend that is developing as the impact of tariffs is felt.
The action at the close on Wednesday was weak, which is an indication of some nervousness, but technical conditions are still solid, and it will take more than minor softness to shift the character of the action.
The pessimistic bears are convinced that a day of reckoning will occur soon. Price action is still king and holding up well, but there are a few minor signs of stress.
Have a good evening. I’ll see you Thursday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
