It is interesting to see if this is only a 3 wave move down with current consolidation or one more drop. Time wise, based on the slope of the drop, suggests to me we might have another week to go to find the bottom. Tomorrow and Friday we get JOBS numbers. that has in the past been a driver of velocity in the market.
Today as expected we are showing slow movement with a bias downward. If tomorrow shows strength, especially at the close, I would expect Friday to spike much higher. If however we don't get much movement tomorrow than we could fall another leg down.
Based on the economic picture we should find a base soon. The muddling along has been the theme these past 4 years. Housing, specifically purchase applications, are down 14 percent year over year which indicates future single family homes and construction to be weak. Not surprising given the big move up in bond yields. It has to stabilize soon or that could cause major problems. With the recent drop in these yields it should result in a marked improvement going forward. The peak at jobs from ADP is also in a range that was expected although at the lower range, nothing to cause a major drop in markets. The bright spot is the Gallop US jobs creation index. Shows a continued steady progress in job hiring as opposed to firing. Finally we just had the ISM non-farm manufacturing Index move slightly up. that suggests we are not falling back down.
All this tells me the path to recovery is still going on. The big question is earnings going forward. Recent indicators showing productivity falling as costs are rising. If that continues we will have the much needed bear cycle.
Productivity, costs, housing, and rates on 10 year note. These are my current indicators for domestic health. With earning season gone, and inflow of liquidity in the market, the possibility of another new high is good.
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