03 Oct Waiting for Job Report
After the DOW lost more than 850 points in two days of trading, stocks are moving higher so far this morning. With the 100-day moving average now in place as the next ceiling of resistance, it will be interesting to see if stocks are able to overcome this resistance level. My guess is that the 100 DMA will prevent stocks from making significant improvements, at least for today. With tomorrow’s Bureau of Labor Statistics (BLS) report coming, many investors will sit on the sidelines until after the report is released. For this reason, I don’t have much hope that stocks will be have the strength to make too large of a move.
Looking at tomorrow’s BLS report, I see a greater likelihood of a weak report vs a blockbuster number of new hires being reported. The trend for 2019 is well below the levels of job gains we saw in 2018. This is a sign that employers are not as optimistic as they have been over the past couple of years. A slowdown in new hires is usually the first sign of trouble, which is then followed by a slowing number of average hours worked. So, it will be interesting to see if the average work week figure is below the prior month’s report. If this number is lower than it has been, the next step will be to see the unemployment rate move higher. Since existing staff cuts happen after a slowdown in the average weekly working hours figure, I don’t expect to see much of a move in the unemployment rate.
Since I see a greater likelihood of a weak report, I believe that risk takers should consider floating into the report. However, since it certainly is a risk, only float if you are comfortable if the prediction is wrong and rates move higher after the report.