/ February 07
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Friday:
Non Farm Payrolls (170K exp.)Unemployment Rate (4.1% exp.)
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Friday:
N/A
Daily Briefing
*The stock market traded in mixed fashion through most of yesterday’s session; major indices traded above and below their prior closing levels due to a lack of conviction from either buyers or sellers; the S&P 500 and Nasdaq Composite ultimately closed near their highs, thanks to a late surge of buying in some mega cap names;
*There was no specific new item to account for the afternoon climb that was driven by an ongoing inclination to buy on weakness, along with some short-covering activity; Apple (AAPL, +0.3%) was among the influential beneficiaries of the increased buying after trading down as much as -0.9%;
*SPY is proving to be resilient, despite the unspectacular trading during the day; resistance stands at $613 (M-Trend), while short-term support is at $597 (50-DMA);
*The MACD signal begins to turn up without registering a SELL crossover first, indicative of a consolidation pattern;
*From an options market perspective, yesterday’s trading had bullish inclinations for SPY, Industrials (XLI), Financials (XLF) and Staples (XLP), while TLT lagged on this front; the chart below shows the cumulative short and medium term bullish percentage volumes for each, so that the higher the cumulative column, the better;
*In terms of risk, the options market is showing concern about the potential downside of the S&P 500 as well as Consumer Discretionary (XLY) — which show the highest potential loss to their respective Put Walls), while Energy (XLE) and Industrials (XLI) are least concerning; the highest upside in the short term is recorded by Tech (XLK);
*Market breadth was still negative at the close, however; decliners led advancers by a fractional margin at the NYSE and by an 11-to-10 margin at the Nasdaq;
*In terms of Factors, Momentum Stocks (MTUM, +0.97%) did well, while small caps (IWM, -0.32%) dragged; pressure is mounting in the riskiest parts of the market, starting with cryptos — we’ve recently added the most popular digital assets to the platform so that we can track their performance and derive the market’s risk appetite; you can add our Crypto Watchlist to your profile using this link;
*An equal weighted average of all meaningful crypto assets has just declined below the lows established in late December; the post election surge did translate into a +97% return in 3 months, even accounting for the decline; but it’s enough to make us wonder if reduced risk appetite will eventually hit the equity market as well in the near future;
*As Earnings Season rolls along, outsized moves are mostly reserved for stocks that hold conference calls; Qualcomm (QCOM, -3.7%) was a standout in that regard, sparking selling interest in other semiconductor-related companies; Ford Motor (F, -7.5%) and Skyworks Solutions (SWKS, -24.7%) were also noticeable laggards, logging fresh 52-week lows in response to earnings;
*Tapestry (TPR, +12.0%), Ralph Lauren (RL, +9.7%), and Phillip Morris (PM, +11.0%), which each hit a 52-week high, were standouts on the winning side, along with Hershey (HSY, +4.4%);
*Separately, the 10-yr yield settled two basis points higher at 4.44% and the 2-yr yield settled three basis points higher at 4.21%;
*TLT lost -0.04% and consolidated above our Stop-Loss level of $89; today is a highly influential session for the treasury market, as the January Non-Farm Payrolls data is to be released; the US economy is expected to have added 170K jobs last month, marking the slowest pace in three months; the Unemployment rate is also expected to stay unchanged at 4.1%;
*The options market is not pricing in a lot of potential downside for TLT, with short-term skew having stayed low all week (skew measures the implied volatility of OTM puts vs OTM calls, where a higher number indicates concern for downside);
