I suspect that Friday's jobs report left a lot of money managers disappointed. They were disappointed that the data wasn't worse and that the market did not sell-off on the news. There is still a crowd of investors both big and small hoping for a correction so they can get in. The difference is that many fund managers only have until the end of October to book their gains. That puts them at a severe disadvantage.

Friday's non-farm payrolls data was mixed. Economists were expecting the job growth to come in at -225,000 to -230,000. The Labor Department reported -216,000 but revised the previous two months to an additional -49,000. Those same economists were expecting the unemployment rate to tick up from 9.4% to 9.5% in August. Surprise! The unemployment rate hit 9.7%. Yet the markets chose to focus on the -216,000 number, which was the good news instead of the 9.7% unemployment, which is the bad news. Does that sound familiar? It wasn't that long ago that the U.S. stock market only responded to good news or found some way to spin the bad news into a bullish bias. Investors could have sold the jobs data if they wanted to and they did not.

It's hard to put a lot of emphasis on last week's trading due to the lack of volume. It was the last unofficial week of summer and investors were probably more focused on their three-day holiday weekend plans. Volume is supposed to come back this week. Now traditionally September is the worst month of the year for stocks. However, I don't believe the normal seasonal trends will apply. Again, too many funds are under invested and want to try and catch up to their peers before the clock runs out. This is why corrections should remain shallow.

Short-term my outlook is bullish. The S&P 500 should continue to find support at 990 or 980. Now it is worth noting that if the current bounce rolls over in the 1020-1030 zone it will start to look like another bearish head-and-shoulders pattern. Yet even if it does produce an H&S pattern it would only forecast a drop toward 940. The 950-940 zone should be strong support anyway. You could say I'm cautiously bullish and even if the market does sell-off I doubt it gets very far. Just be patient and pick your entry points although in the current environment I'm starting to see more breakout entry points than dip entry points. Consider scaling into positions 1/3 or 1/2 at a time. If a stock or ETF hits your entry only buy a partial position and wait.


My long-term outlook has not changed. You can review it here. It's the second half of my "Two Months Left" commentary labeled "long-term outlook".

~ James Brown