Futures Surge as Economy Adds 200,000 Jobs

S&P futures are up 6 handles Friday morning following a better-than-expected jobs report. The US economy added 200,000 jobs and the unemployment rate fell to 8.5%, while analysts expected gains of 150,000 jobs and unemployment of 8.7%. Futures initially spiked hard after the announcement but fell swiftly. The economy has now produced more than 100,000 jobs in each of the last six months, which had not happened since April 2006.

The strong jobs report to start 2012 continues a trend towards improving economic data that we have seen over the past few months. The market finds itself in a tug of war between negative headlines from Europe and encouraging data in the US, and over the past few weeks optimism has won the day.

The Euro is again hitting lows overnight as the situation continues to deteriorate in Europe. Italy’s 10-year yield is back above 7% and borrowing costs are rising across the continent, with banks shares particularly under pressure. This morning, though, European markets are being buoyed by the US data and tracking higher. How long will that last, and could this turn into an exhaustion gap following the recent rally?

During the latter half of 2011 we saw range bound trading, albeit extreme ranges. Traders and investors were willing to buy dips, but proved unwilling to chase stocks at new highs. A healthy bull markets sees leading stocks break out, and that is what bulls will be hoping to see over the coming weeks.

There are a lot of nice looking technical patterns across the board, many of which we listed in last night’s Off the Charts newsletter. The October high in the S&P is 1292 and the high for the SPY’s are $129.42. A close above this level would open the door for 1320-1340 for the First Quarter of this year. On the support side- 1260-1264 has been acting like a nice floor for the market.

US Banks lead the charge yesterday and could use a rest. The oil service ETF (OIH) and Energy ETF (XLE) look like they are going to tack on gains. The technical level for OIH to continue would be a close above $119.50ish. In the XLE, the level should be $71.40.

Tech is mixed with some various set-ups across the board. The QQQ’s led the charge yesterday off the lows and the next level is $58.36 then $59.20.

It’s been a nice methodical trade since the December 20th gap and go with a lot of great sector action. The market is ignoring the Euro decline the last few days, which is a good thing. Let’s see if that continues.

By John Darsie

Disclosures: Scott Redler is long SPY, OIH, AAPL, CSCO, HAUP, GS, JPM, COH.

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