This past week we have had two major news announcements here in the U.S. The first was the release of the FOMC statement and press conference on Wednesday. This is where the Federal Open Market Committee determines the best route for financial growth in our economy. It will look specifically at what the fed funds rate should be to best serve the stability and continue the progress of the economy. In this meeting it was determined that no changes to the current rate should happen. Then on Friday, the Nonfarm Employment numbers were released. This tells us the change in the number of employed workers for the prior month (not including farming). The number was expected to come in around 165,000 but exceeded that and came in around 304,000. On the other hand, the unemployment rate which was expected to stay at 3.9% came in at 4.0%. It is important to be aware of these types of reports as they can cause the market to increase in volatility.
In closing out the month of January, we saw the markets recover a large majority of what they lost in the month of December. In fact, the DJ-30 dropped 2,425.11 points in the month of December only to move up by 1,941.06 points in the month of January. These movements were similar as we looked at the S&P 500 and the NASDAQ.
Now as we move into the month of February, we will see if the markets continue to be volatile or if we can finally put the end of year trading behind us and begin trading in a more deliberate fashion. In either case, make sure you are using the proper position size for the trades you are taking.
Let’s take a look at how the markets performed this last week.
On the weekly chart of the SP-500, you can see a similar pattern to what we saw on the DJ-30. With price still sitting near the resistance areas on the chart, we could see the bears try to push prices back down. Also notice that the price has not yet broken above the 50-period simple moving average. Until this happens, we need to watch for a price reversal that could push prices back down once again.
While this next week doesn’t have as many significant news events, we are still in a time where even small news can have a big impact on market direction. While it is nice to see such a strong move higher, we can expect to see prices pull back at some point, even if only temporarily.
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