There Could Be An Upside Breakout After Release Of US Unemployment Report

The plot thickens as the resolution to this US equity market consolidation range draws nearer. This morning’s US unemployment report for January may very well be the catalyst for a multi-week directional move in the broad averages. If overseas market action is any indicator, there could be an upside break-out.

Earlier today, the Asia-Pacific equity markets were solidly in the green: Nikkei 225 (+1.60% to 8076.6); Hong Kong (+3.61% to 13655.0); Shanghai (+3.97% to 2181.2); Australia (+1.03% to 3407.5), and India’s Sensex BSE 30 (+2.31% to 9300.9). Australia has been subdued, but the rest of these equity markets have been very strong, particularly China this week.

Also today at 7:43am ET, the French CAC (+0.33%), German DAX (+0.85%), and UK FTSE 100 +0.60%) and the DJIA futures (+13 at 8007) were modestly higher ahead of the Jobs Report.

Yesterday in NY, after selling off for the first hour, equity traders decided to take prices broadly higher and all the major US indexes closed with solid gains, although not that much higher for the week. The DJIA (^DJI) (+106.41 +1.34% to 8063.07), the S&P 500 (^GSPC) (+3.62 +1.64% to 845.85), and the NASDAQ Composite (^IXIC) (+31.19 +2.06% to 1546.24) denied the negative corporate and economic news of the day and seized on the few positives.

The Toronto Composite (+167.89 +1.93% to 8860.98) and the Venture Board (+8.17 +0.92% to 898.22) also had solid gains on the day. The Venture Board, an index of mostly high-risk stocks, is, as I have been reporting, particularly strong (+5.7% in the past ten sessions for this).

In NY, the leading sectors, for consecutive days, were the Basic Materials (XLB +2.7% Thurs and +1.2% Wed.) and Energy (XLE +2.5% Thurs and +0.9% Wed). Oil Services ($OSX +4.0% Thurs after being a leader on Wed +3.4%) was strong among industry groups. Semi-conductors ($SOX +4.0%) was also strong. The Goldminers ($XAU) gained +2.8%.

The weakest sector was a winner too: Utilities (XLU +0.7%), while REITs ($DJR -2.2%) held the Financials in check (XLF +1.6%).

In the Cara 100, the 89 winners were Brunswick Corp (BC +13.2%), Juniper (JNPR +9.2% on +119% average volume), Electronic Arts (ERTS +8.3% on huge volume or the second day and following the previous gain of +11.4%), SanDisk (SNDK +7.8% following the previous gain of +7.3%), and Potash Sask POT +8.2%). The 11 losers were led by Dell (DELL -3.7%), General Electric (GE -3.6%), Deutsche Bank DB -3.4%), and JC Penny (JCP -2.3% on +193% average volume).

During the day, the Treasury Department reported that Sec. Geithner would be announcing on Monday a re-work of the $700 billion financial bail-out plan, or what’s left of it. Geithner hired another Goldman Sachs employee as his assistant, raising the ire of many traders.

The long Treasury Bond ($USB +0.21% to 126.91) almost regained what it lost on Wednesday. Yields on the 30-, 10-, and 5-year Treasuries ended the session at 3.634, 2.900, and 1.885 percent, respectively.

The US Dollar (+0.34% to 85.94) lifted, strongest against the Yen (-1.86% to 109.78), and also the Euro (-0.50% to 127.86) as central bankers appear to be trying to hold back the price of gold as they ratchet down rates, one after the other. The Pound gained +1.11% to 146.20, but the Cdn Loonie was flat against the USD.

Yesterday the $GOLD contracts lifted +$12.00/oz, which follows the previous day’s gain of $9.70/oz, closing yesterday at 914.20, poised to attack the 930 resistance again.

Earlier today (7:40am ET), the spot price of gold, palladium, platinum and silver was on the rise again although gold is being restrained for now), compared to Wed and Tuesday morning at this time, in brackets: 917 (917.00) (898.50); 210 (201) (189); 983.5 (982) (962); and 12.96 (12.77) (12.38), respectively.

This morning at 7:40am ET (compared to yesterday at 7:59am), the $USD is higher at 86.46 (86.06) and the Euro lower at 127.93 (128.34). But precious metal prices appeal to be decoupling from the $USD trade.

We await the US Jobs Report, shortly. Traders are expecting a brief counter-move, followed by a burst of strength or weakness for the balance of the morning. The hours in NY following the close in Europe, however, is the most important.

Beneath the surface managers are busy positioning their portfolios for profitability, relying on analyst stock recommendations to boost returns. CTAB uses a combination of fundamental, technical, and quantitative analysis to determine what sectors to buy and when to buy them. Every nickel or dime we can save you goes right to your bottom line and increases your rate of return significantly over time. Does your financial adviser pay attention your execution costs/slippage in this manner?

We closed many our put positions opened just a few short days ago. Profits were booked in POT, WMT, GG, and AAPL. Risk management is our prime focus so when we are able to book 60-75% profits in a few days-especially before an economic release certain to increase volatility-we take the trade off. Our clients side step potential steep losses if a large sell off materializes, and importantly we can take advantage of this volatility to reposition our portfolio at advantageous prices.

We are ready to board the train if it is ready to leave the station. Do not be shocked if a few head fakes are thrown at you from Mr. Market today. The first move out of the triangle formation might not be the real move. We expect to be very active, ready to aggressively play the long anticipated move. We expect higher prices, but will be using tight stops to limit risk.

Good trading to all.

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