On the heels of a negative jobs report, the S&P broke the 1300.00 level early Friday morning. The unemployment rate was announced at 4.8% for February, compared to 4.9% in Jan. Employers cut 63,000 jobs (nonfarm payroll) in February, the highest number since 2003. This weakness in the labor should spark continued selling in the financial stocks, including the S&P E-mini.

To add insult to injury, the January unemployment number was revised from 17,000 down to 17,000. Home foreclosures are at record highs and continue to increase. Consumer confidence is at its lowest point on record.

As I have mentioned the last 4 weeks, the overwhelming amount of negative information prevalent in everyday finance can be a daunting factor for investors. I am having a very difficult time buying/going long any of the indices at this point. Lost in the shuffle of the news emphasis on rallying commodities is the $181 billion in write-downs and credit losses due to the collapse of subprime mortgages.  

If the technical indicators I follow (price, volume, CCI, & 20 bar MA) signal a potential buy signal, I won’t hesitate to take the position but I am always cognizant of the largely negative bias in these markets. As I’ve said numerous times – I am anticipating more declines in the stock market and am always mindful of the ability of the market to drop (and rally) at a rapid pace.

Today’s weak unemployment report should continue to hammer financial stocks and the E-Mini S&P based on recession fears. Gold is still hovering near all-time highs at $990/ounce and Crude Oil is at all time highs at $105.52 in the April contract. Demand rallies in the grains continue to play a large role in the bullish trend of commodities.

In the past 10 days, we have seen an immense shift in focus on the weakness of the U.S. Dollar. The dollar is at all time lows against the Euro and near all-time lows against almost every other major currency. Speculation that the Federal Reserve will cut interest rates by as much as 100 basis points continues to hammer the US Dollar Index, which traded as low as 72.455 early Friday morning. Weakness in the dollar should continue to boost rallies in metals and crude, as a hedge for inflation and the falling dollar.

Making sense of all of this data can be mentally exhausting. One of the themes of this weekly commentary has been the excess of economic data, breaking news, and media influences on neophyte investors. Sensationalistic news continues to play a role in the opinions and sentiments for all types of investors. Breaking down what is important and what should have a role in your everyday trading continues to be an ongoing and perpetual learning process.

Speaking of sensationalistic rumor mongering – did you hear the one about the surprise rate cut over the weekend or Monday?

Any rallies on Friday makes the early interest rate cut less likely. An early cut will provide short-term relief to the stock market but also give more support to Gold & Crude oil record rallies and subsequent inflationary concerns.

In a back and forth week, we opened on Monday at 1329.50 in the ES, March contract. The next two weeks are considered “rollover” to the June contract, so volume is traditionally down and the markets aren’t nearly as exciting. However, we have seen some large moves this week and at 8:45 a.m. Friday morning, the ESH was trading at 1295.00, just off the lows of 1288.

That low of 1288 looks to be a relatively firm line of support, and I expect to see a little pop if we don’t make new lows on Friday morning. That jobs number is a fickle beast – nonfarm jobs cut was up to 63,000 but we actually saw a lower unemployment number at 4.8%. Retail sales saw some general improvements in February as well.

Some key levels to look at when trading this week:

Support: Short term I’m looking at 1285 as a low of this move. The S&P market is vulnerable to more selling with possible relief in the form of the FOMC meeting on March 18th. Watch for long-term support at the 1257.00 levels.

Resistance: 1330.00 in the March contract is the first level of resistance I see on my charts. We opened the week at 1329.50 and the weekly high was 1345.00 so keep an eye on those levels.

For specific trade recommendations or analysis, please contact me directly.

Josh Russo graduated from the University of Iowa in 2004 and has been in the futures industry since. His specialization is in day-trading the E-Mini S&P and alternative investments, including Managed Futures and Commodity Funds. In his free time, he enjoys outdoor activities, traveling and sports.