Technically Speaking Things Are Encouraging
By: Jeffrey A. Hirsch
April 04, 2019
With jobless claims hitting the lowest levels in almost 50 years today and the ADP report coming in light and below estimates we would not be surprised if the employment report tomorrow also came in light and below estimates. Historically this has often been the case with the April employment report. As you can see in the table here, the major market benchmarks have not performed well on April jobs day, reflecting disappointment in April’s non-farm payroll numbers.
[Performance (%) on Employment Report Date in April]
With the persistently super low unemployment rate and recent reports that there are more jobs than unemployed this suggests to us businesses are having a hard time finding skilled workers. We don’t think this indicates companies are being cautious due to a struggling economy, rather an economy in need of skilled workers. This could lead to more wage increases.
Part of the problem is that there are not enough skilled workers to fill the jobs that are available. Seems like an education gap. In light of the recent college admissions scandal, perhaps we should be focusing on what kinds of education folks need for the jobs that are out there instead of getting into a big name school. In the words of the controversial figure Malcom X, “Education is the passport to the future, for tomorrow belongs to those who prepare for it today.
But we are more focused on the technical picture for the market as well as market internals like the new high in the rising NYSE A/D line. Technically speaking things look rather encouraging. The major averages are once again flirting with higher resistance levels. 
As the accompanying chart illustrates S&P 500 is now flirting with 2875 resistance, which runs through several important points from the top of last October’s waterfall decline back to the old January 2018 high with the August gap and September consolidation in between. 
After battling with resistance at 2815 since mid-October that now becomes support. Below that is 2775. Tomorrow’s non-farm payroll number is less important to us than the market’s reaction to it and the rest of the economic and earnings data out this month. As long as any selling or corrections hold these levels that will be encouraging.
In the bottom pane you can see how the broad-based New York Stock Exchange (NYSE) cumulative Advance/Decline (A/D) Line has been rising sharply and steadily since December and continuing to log new highs. This shows that many stocks, not just the big stocks and major indices are participating in this rally. S&P 500’s A/D Line matches the NYSE while NASDAQ and Russell 2000 are rising, but have not reached new highs yet.
NASDAQ and DJIA are also pushing on this new higher resistance while the Russell 2000 index of small caps is lagging, but it is normal historically for the Russell 2000 to trail large caps at this time of the year.
Finally, we have a new Dow Theory buy signal since both the DJIA and Dow Transports closed above their February 2019 highs, according to the Aden Forecast who took over Richard Russell’s Dow Theory Letters after he passed in 2015. We did not think the Dow Theory Sell Signal back in December when the DJIA and DJTA closed below the October lows was valid since the Dow Utility index did not confirm and the selling was so rampant. 
This was also when we ignored the flawed “Death Cross” that usually occurs near bottoms or low points. However, on the flipside the recent “Golden Crosses” in the S&P, DJIA and NASDAQ are bullish as we discussed on the blog last month. You can see the S&P’s Golden Cross in the chart with the pink 50-day moving average crossing above the red 200-DMA.
[S&P Chart] 
And of course there are the seasonals. April is the last of the Best Six Months so we are ready for our MACD Sell Signal that will begin our shift to seasonal defense. But let’s not forget the positive implications of our January Indicator Trifecta and bullish history of Pre-Election Year. Encouraging geopolitics and a dovish Fed should keep the rally rolling through April at least. And any constructive developments on a China trade deal or Brexit could easily vault the market to new highs.