Although there is some good news on the geopolitical front (Ukraine says they have laid the groundwork for a ceasefire) all eyes are on the jobs report and what it means for Fed policy. Yesterday's reversal in stocks was triggered in part by the stronger-than expected economic data. The concern is that with the Fed saying they will be data dependent going forward, data showing that the economy may be improving faster than expected could bring interest rate increases before June 2015 – the general consensus for the first rate hike. However, this morning's jobs report came in well below expectations, suggesting that there is no reason for the Fed to deviate from the current course. Finally, it is worth noting that our market models are starting to weaken a bit in response to the waning upside momentum seen over the past 7 sessions.
Looking At The Charts
For much of yesterday morning, it appeared that stocks were finally to break out of the tight trading range that had been in place for the past week and a half. However, as has been the trend lately, the new intraday highs triggered sell algos. And this time, the buyers decided to sit on their hands. As such, the selling accelerated in the afternoon. Yet the key takeaway at this stage is that the market remains range bound and a meaningful break of the range on a closing basis will likely dictate the next near-term trend. It is also worth noting that stocks remain overbought from a short-term perspective which means that further downside testing is possible.
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David Moenning is Chief Investment Officer at Heritage Capital Management, a Chicago-based registered investment advisory firm. Mr. Moenning began his investment career in 1980 and formed Heritage Capital in 1989. Dave’s firm focuses on “active management” and focuses on managing market risk on a daily basis. Dave is also the proprietor of StateoftheMarkets.com, which provides free and subscription-based portfolio services. Mr. Moenning is the 2013-14 President of NAAIM (National Association of Active Investment Managers) an organization dedicated to active management strategies. Follow Dave on Twitter at @StateDave.