BarroMetrics Views: On the Cusp for the S&P?
Are we about to see an 18-day Swing (monthly trend) Change in Trend?
At first glance, Wed’s price action and volume would suggest this is the case. But as Figure 1 shows, we have seen it before. This time however the context is a little different; this time we have the possibility that we have a Diagonal Terminal Forecasting Pattern (see Nature of Trend) in the 5-day swing that broke down last night (Figure 2). If this is true, the 18-day Change in Trend has already occurred and tonight’s S&P reaction to the Non-Farm figure will confirm this.
So the question do we have any clues about a reaction to the figure?
Technically: there is the non-confirmation by Russell 2000 (I prefer this to the Dow Transports) of the low in the S&P (Figure 3). This is bullish.
The last time we saw a one-day reversal in the S&P of Wed’s magnitude was in Feb 2011 (label a) in Figure 3. Note that the Russel failed to confirm the S&P low.
Fundamentally: Historically the ADP is a poor forecaster of the Non-Farm. But the Poor Housing and PMI added to the poor ADP may have caused a possible shift in Sentiment to the extent that the Non-Farm number was reduced from a consensus 180k to around 140k to 150K. If we see the original estimate of 180k to 190k come in, we’ll have a good guide to the Sentiment by the S&P’s response. Right now I’d bet on a strong reaction up.
Fundamentally: Finally the FRED FIGURE (4) is not showing any signs of turning down. If the past is to be any guide then we should see a turn down in FRED before any turn down in the S&P.
So there are my thoughts – we’ll probably see 180k to 190k in the Non-Farm and we’ll probably see a strong move up in the S&P following that figure.
FIGURE 1 S&P Diagonal Terminal
FIGURE 2 S&P 81-minute
FIGURE 3 S&P & Russel 2000
FIGURE 4 FRED