Cross Market Chart Reference Levels Ahead of the Jobs Report

Aug 4, 2011: 9:56 PM CST

As we await the Friday Non-Farm Payroll “Jobs” Report, let’s take a quick check-up of the main reference levels to watch in the cross-market landscape at the moment.

Let’s draw our attention to the S&P 500 and then see how the intermarket environment rests currently:

Instead of spending a great deal of time on the nuances of the current market structure and sell-off/breakdown, let’s focus on two facts:

  • The 1,250 level was an important/critical support level, and once it broke this week, a feedback loop of selling pushed the index understandably lower – down to the 1,200 level.
  • Right now, the market is at an inflection support zone from 1,180 (the November 2010 swing low) to 1,200 (round number reference).

A failure for buyers to hold the 1,180/1,175 support could result in another feedback loop of selling (bulls liquidating; bears entering short) down to the 1,040 inflection from 2010.

In addition to the other indicators you’re watching, be sure to observe the market performance (buying/selling) at the 1,180 to 1,200 inflection level.

Next, on to the Ten-Year Treasury  Yield:

I recently posted about the breakdown in the 10-Year Treasury Yield and Stocks – the 10-Year Yield Breakdown (and prior weakness in 2011) in part forecast weakness in stocks.

The main level to watch in the 10-Year Yield is the 2.4% Yield level (24 on the chart above).

We could easily see an inflection off the 2.4% level (see late 2010) but if not, then that opens the door for a continued fall to the late 2008 low of 2.1%

Let me put that in context – the 10-Year Treasury Yield at the moment is not far from the low yield experienced during the heart of the global financial panic of late 2008.

Moving on, Gold is at record highs so there’s no past reference level to watch:

Gold continues to be a safe haven in just about all cases, except for a major global economic downturn, at which time gold would likely be sold (as it was in late 2008) to compensate for major losses in other markets.

Anyway, $1,600 is the near support zone (round number plus 20d EMA) to watch, then $1,550 (breakout high).  Otherwise, there is no upside ceiling to reference, leaving open air to the upside.

The current candle formation is a caution, being an evening star/doji/bearish engulfing sort of caution sign, so do take that into account.

Finally, let’s peek at the US Dollar Index consolidation:

It’s strange how “The more things change, the more things stay the same.”

That’s been true in the US Dollar Index as it has consolidated/compressed in a Rectangle Pattern from May to present.

That leaves the Bull/Bear reference levels easy to spot – 76.50 on the upside (200d SMA and resistance high) and 73.50 on the downside (then 72.50 – the 2011 low).

Further economic weakness (bad future economic reports/further breakdowns in commodities/stocks) is likely to send the Dollar breaking to the upside to the 81.50 level, but the mere announcement – or even hint – of a Third Round of Quantitative Easing is likely to send the Index to new lifetime lows under 71.

For now, keep focused on the 76.50 and 73.50/72.50 levels.

I’ll go into more detail on higher timeframes and additional analysis in this week’s Intermarket Report for members, but keep these simple reference levels in mind as we see the reaction to the Jobs Report and how these markets close – relative to their reference levels – for the weekend.

Corey Rosenbloom, CMT
Afraid to

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6 Responses to “Cross Market Chart Reference Levels Ahead of the Jobs Report”

  1. Friday links: due diligence days | Abnormal Returns Says:

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  2. German Says:

    Corey, great article. So easy to understand for us, the newbies, and so powerful because it's backed by evidence at the same time.

    I've got one off-topic question if you don't mind.

    Why do you use 20 and 50 EMA but 200 SMA in your charts? Could you please explain to me what should be the criteria to use either EMAs or SMAs?

    Thank you for your post and thank you for your time.


    ps: I read your article first in greenfaucet and then after reading your bio I found your website. Sorry for duplicating the comment but I think you can read it here sooner. Thanks.

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