Falling Bond Yields Boost Stocks Ahead of the Fed and Payroll Numbers

Update on New Trade with Bullish Setup and Room to Rise

As I’ve been expecting, a tradeable bottom continues to flourish, as a very oversold market is bouncing off its recent bottom.  Until proven otherwise, the bottom is more likely than not already in place.

That said, there is plenty of data this week which could upset the apple cart.  Of course, the first big thing is the Fed. But in reality, what could the Fed do to make things worse?  It’s not going to raise interest rates, which is bullish over the longer term.

On the other hand, Mr. Powell’s press conference could increase the market’s volatility. Still, given his recent performance during the Fed announcement post-mortems, Powell is likely to attempt to sound tough to calm the bond market, but not so tough that stocks crash.

The employment data could make trading more interesting than the Fed.  The ADP and JOLTS numbers will be out ahead of the official NFP numbers on Friday.  So, we’ll see how things work out. ADP’s data series has been volatile of late. Moreover, it has, so far, been of little help in sorting out what NFP may or may not do.

The JOLTS data is full of seasonal adjustments, which makes the numbers tough to interpret as well.

Anecdotal and PMI data, of which there will be more this week, has suggested that the labor market has slowed.  Tech companies continue to lay off workers; Tesla (TSLA) is the latest with big cuts in California and Texas.  Yet, the monthly NFP data, at least the headlines, continue to show a “strong” labor market.

Thus, it will be interesting to see if this month’s NFP data will come closer to the anecdotal and private market data.  Don’t hold your breath.

Bond yields, thankfully, failed to break above 4.7% in the last few days.  This morning they are moving lower and may eventually test the 4.5% area.  What’s important, however, is what bonds do on Friday after the NFP numbers.

My favorite indicator, the NYSE Advance Decline line is back in bullish territory, rising above its 50-day moving average and heading for what could be another test of its recent high.  A new high on NYAD would be a full confirmation that the bottom in stocks is in.

I have plenty of stocks which are on the verge of entering their BUY Zone.  But, they’re not quite there yet.  So this week, I’m updating a trade that went live last week which is on the verge of a breakout. If you haven’t put the trade on, you still have time.

As usual, when trades hit their sweet spot, I will post an update. So, for now, get on board with the existing trade and stay tune for the next one, which could trip its BUY point any time.