Good Job Report is Bad News for Market as Taper Talk Resumes

Yesterday the market performed a little bit of sleight of hand. While everyone was supposed to be watching the Twitter (TWTR) IPO, the real action came to the downside in several indices and momentum stocks.

The Nasdaq and Russell led the decline yesterday, as several European markets also got hit hard. Earlier in the week we had noted some divergences in the market, but the indices had been able to hold higher. The Russell flashed a warning sign on 10/30 and then the Nasdaq on 11/06. Many high beta tech names were lower Wednesday as the Dow notched new highs, and then yesterday the damage spread.   Lots of clues that some

The 8:30 jobs numbers are out and stronger than expected, which, in this twisted environment, is bad news. Yesterday, good news about GDP also contributed to the down move as taper talk was reignited. Today’s strong jobs report will only make that talk grow louder, combined with a surging dollar thanks to the ECB rate cut. S&P futures are currently down 7-8 handles.

The headlines are funny about Twitter – “Twitter Soars 70+% in First Day.” The reality is, it opened at $45.10 and closed at $44.90. I guess it soared for buy side guys, but there was no meat left on the bone for the retail crowd.

Yesterday the futures were above the 1775 highs and closed on the lows creating a very nasty engulfing candle that could lead to lower prices. Yesterday’s low is 1746 with the 21-day at 1743 and the prior high at 1729 (if the market tries to bounce). If the bears want to stay in control they shouldn’t let the bulls reclaim 1758-1762.

Earlier this week I went into tactical mode due to the divergences we had been noting, and I will remain that way for a bit. I will use yesterday’s lows in most key stocks as an action area for both longs and shorts.

It’s been a long week. Remember, cash is a position.

Disclosure: Scott Redler is short SPY, BBY, short GOOG 1040 calls

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