By: Tom Gentile
on October 6th, 2023
As the markets continued its September swoon into the first few trading days of October, which based on seasonal patterns shows the month tends to be more bullish than bearish, one had to start asking themselves, what if the season expected for October doesn’t happen?
A concern for the markets going in to today is what the jobs report will come in at and what that signals the Fed’s action will be and are we truly headed for a recession.
The Jobs Report
This isn’t the full report, but some of the key numbers:
Nonfarm payrolls increased by 336,000 for the month. This was much higher than the Dow Jones consensus estimate, which was for 170,000.
This was obviously the opposite of expectations, which was for a slowdown in the jobs market.
The unemployment rate was 3.8%, compared to the forecast for 3.7%.
Higher for Longer (Interest Rates) Concern
Investors and traders even, I believe, have had a constant concern lately that a resilient economy could force the Federal Reserve to keep interest rates high.
Powell’s statement that has been used as a sound bite and headline statement that they may have to keep rates higher for longer, possibly spurring on more rate hikes since inflation remains elevated.
Here is a piece of data from the jobs numbers that may be deemed a slight positive. Wage increases.
Hourly wage increases were reported softer than expected. The average hourly earnings showed they were up 0.2% for the month and 4.2% from a year ago. This compared to estimates for 0.3% and 4.3% respectively.
This dropped the futures markets prior to the open and even on the open the markets traded lower, and dropped to their lows of the day.
Bullish Reversal on the Day
Come 10:20am US ET the markets pivoted into and went on a bullish run.
This move could be deemed a short-covering rally – fine, call it that.
This move could be deemed an oversold bounce – fine, call it that.
It could be BOTH.
Regardless of what you want to call it, I call it a bullish reversal day.
The key to this move today now is whether or not we see follow through for the move.
Should the markets open up Monday and continue higher then we have a follow through day. That would be deemed bullish. Then we have to monitor and see if it can continue that type of bullish price action.
There is the prospect of investors and traders taking profits off this move higher, or maybe they are even back to break even on some of there recent trades from the prior downdraft that the markets experienced.
This may cause a bit of selling, though not so much so the up day gets taken out and the downtrend resumes.
There may be a day or two to three where the price action consolidates within the range of this bullish day. That may bring bearish harami days, where again the trading range of the days form inside the open and close body of this bullish day.
That speaks to consolidation, which may end up being a ‘continuation’ pattern that then resolves itself to the bulls stepping in and continuing their purchasing of equities and the up moves start to become an uptrend.
The Latest Power Profit Trades Podcast
Chris Johnson and I finished our latest Power Profit Trades podcast yesterday, one day prior to the jobs numbers that came out today.
We talk about the seasonal bullishness for some of the most popular stocks that may come our way in October. We discuss that it may not specifically start right away, but the market should end up finishing bullish for the month based on seasonals.
We discuss the strikes going on with UAW. We discuss Airbnb and what is going on in that industry and what that says about the economy. We then finish up the podcast with a discussion on bonds and how the price, the TLT is my representative for the bond market, is at year lows and has been in a bear trend for the year thus far.
We all can see the yields for bonds are cranking to highs not seen since 2007 (and a high yield is tough for technology). Chris shows an alternative to TLT which is TBT.
We then talk about the VXX and what its current price action is and an investment idea I pay attention to called SGOV.
I encourage all of you who have yet to subscribe for free to my YouTube channel where you will find these podcasts on a regular basis to go and do so. Subscribe now: https://www.youtube.com/@TomGentileTrader
— Tom Gentile
C1P: Chief 1-Percenter
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