The unemployment data from last Friday can only be looked at as positive as the US added 216,000 jobs and the unemployment rate dropped to its lowest level in 2 years falling to 8.8%. Of course if you look deeper, you will see that this number is not entirely accurate; government statistics do not count folks who are no longer looking for work. To get a better idea of what that number represents, there have been over 8 million jobs lost since the recession began and those jobs have yet to be replenished.
Regardless of the underlying data, the reported employment situation is positive and that is what is most important in the short-term.
Current Price-Point of US Equities
We have reached critical retracement levels since the market reversed over two weeks ago and no selling has returned. Amidst a world of uncertainty as well as a return to rising oil prices, sellers have yet to step up to the table. Considering this information, I have to favor an outlook of further upside before anticipating that another sell-off is likely. Barring any new cataclysmic news, I will be looking to buy any dips into support.
The Dollar
It will be interesting to watch the US dollar going forward. So many people express fearful views that the US dollar will continue to depress further. And, hey, deservedly so. However, its all about timing with the decline of the dollar and its not going to happen overnight. Perhaps it will one day be worthless, sure, but right now, I see a likely rebound coming, at least in the short-term. Technically, it is oversold and fundamentally we are seeing positive economic data flow out of the US. That combination can only suggest a rebound in the dollar is likely. The ISM Non-Mfg Index will be reported this Tuesday at 10:00AM EST. A positive announcement should only help the dollar. Also to watch, FOMC Minutes Tuesday at 2:00pm EST and Jobless Claims on Thursday at 8:30am EST.
The dollar and the stock market don't exactly share a perfect inverse relationship, but looking back to the summer of 2010, you can see that the dollar has been consistently declining while the stock market has been on the rise. In that regard, it will be interesting to see if the equities markets turn down in reaction to a rise in the dollar, if that rise does happen.
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As ES trades down intra-day, I will consider a long entry around 1322-1323 assuming support holds there. That should be good for at least a scalp. If ES ends up trading lower, the next support I like for a long entry is 1310-1312. I don't expect ES to trade that low today, but regardless, it is the next level of support that I like below the low 1320s.
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