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Friday, October 6, 2017

Market Alert - The Close

Stocks started soft but started to bounce back upside. That move was chop-blocked and stocks fell into midday as NKorea talked of another test this weekend. That gave more reason to think more about the Trump version of the line from the movie '2010' -- 'What's going to happen?' asked Dr. Floyd. 'Something wonderful' responded the being that was formerly Dave Bowman. Trump's version after a dinner meeting with top military brass: 'this is the calm before the storm.' When a reporter asked what he meant, Trump responded 'you will see.' With that backdrop, when NK talked of tests and launches, stocks fell.

The indices fell to the early afternoon, but then recovered lost ground into the last hour. That flipped NASDAQ to positive as the NASDAQ 100 again led it higher while SOX was already showing very good action all session. The rest, well, they just limped home flat, happy to get to the weekend after a week of new highs was followed with a day off from the large cap indices and a good lateral test by the small caps and midcaps.

SP500 -2.74, -0.11%
NASDAQ 4.82, 0.07%
DJ30 -1.72, -0.01%
SP400 -0.08%
RUTX -0.12%
SOX 0.45%
NASDAQ 100 0.12%

Stocks were already soft pre-market ahead of the jobs report with SP500 lower while DJ30 and NASDAQ traded slightly positive. Then the September negative jobs report hit and stocks slid to negative. Not a sharp selloff, they just lost the already Jello-like bids the morning showed.

The jobs report actually showed some internal positives such as higher wages and participation, though the wages were not as strong as the headline stated (never quite are, right?) as the Food & Beverage sector (read waiters, busboys) lost 105,000 jobs. Take out those and you do skew the average wage higher. Even that, however, is countered by 935K new full-time jobs recorded in the month, in the top four highest ever. Moreover, 1.5M people HAD a job but just could not get to work. So, not as bad as the -33k non-farm payrolls headline suggested.

Given that, we though stocks would recover off a lower open. They were indeed doing that until NKorea started flapping its jaws again. Then stocks had to recover yet again, and on this Friday ahead of Columbus Day (NOT a market holiday anymore) that was a bridge just too far.

Even so there were some solid moves. NFLX continued upside along with GOOG, both breakouts from cup with handle bases. AMZN added more upside HTHT took off upside once more. INFI of the small biotechs still solid. CNAT surged then faded, catching us in between. AMAT started upside again. There were some very good moves as noted, but mostly modest gains to flat action. After the rally on the week, not bad.

Thus, stocks made it to the weekend holding gains on the week, avoided a potential blowup on the jobs report, and face next week with the same situation if once again the world avoids any serious pitfalls. Of course Monday is the Catalonian meeting regarding the independence vote, the market is significantly overbought, bulls are higher, magazines covers depict bulls in every market, and the algorithms are still out there. Kind of business as usual.

Business as usual and thus far none of that has stopped the advance. We let positions work higher whether that meant watching them make good moves as noted above or just testing/resting after very good moves. New weeks are always approached with some apprehension as you wonder if this is the week the algos hit. Well, I can tell you, if there is a test on NFLX, GOOG, HTHT or other good movers to start the week, they will be quite tempting to pick up a few more positions.

Have a great weekend!

Jon Johnson, Chief Market Strategist
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