Yesterday was a disappointing session that saw all the major indices lower after a halfhearted midday rebound attempt that was fated to fail.

• S&P 500 (SPX) -1.06%
• Nasdaq Composite (IXIC) -1.75%
• Dow Jones Industrial (DJI) -0.46%

The S&P 500 has now retraced 50% of that rally off the October low. So, if it can hold here, it would be a good signal.

Heat Map

Looking closely at the session, it wasn’t as disappointing or lackluster as it appeared. Five of eleven sectors were higher, but it was otherwise brutal for growth sectors.

There was, in fact, lots of green on the screen, but the largest squares took the heaviest pounding.

Not Afraid Anymore?

One month ago, the Fear & Greed Index was registering 23, which put it in the ‘extreme fear’ range and now its lingering in the ‘greed’ range.

For only the fourth time in history, the American Association of Individual Investors (AAII) bearishness level made back-to-back double-digit declines. Most of those folks shifted over to neutral, although bullishness got back over 30%. How much of this was a hunch about a dovish Fed pivot? And how much was a collective knowledge that has seen Individual Investor Sentiment ahead of the curve – not behind – all year long?

Watch List

Money is rotating into Industrials (XLI), especially funds coming out of Consumer Staples (XLP) – this is a sector to be overweight in.

I like the oil story a lot, but I must admit that it’s hard to find anyone that hasn’t jumped on the bandwagon lately. It’s true that there is enormous room higher based on the ground lost over the past two decades. But when I see record calls to puts on any investments, I pause; I am not closing open positions in the oil patch on this alone – but it’s something to be aware of.

Its all about the jobs numbers this morning – buckle up.

Portfolio Approach

This morning, we are adding a new position in Industrials in our Hotline Model Portfolio.

Today’s Session

The jobs report came in higher than consensus, which triggered a knee jerk move lower in stocks. But the fact is, the trend is decidedly to the downside.

Come on In, The Water’s Fine

The bigger news is more people left the labor force sending the participation rate lower but the U3 unemployment rate edged higher to 3.7% from 3.5%.

The stock market is focusing on the U3 unemployment rate, which Jay Powell wants to see move higher.

There are some great mysteries around the jobs market, like how can people afford not to work. We can add the VIX to the list as well.  It’s doing things visa-vie the stock market never seen before (both closed below 10-day moving average for only fourth time in history), and now it’s moving even lower. 

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