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Morning Cup of Jo: Post Labor Day Trading


The post Labor Day trading has lacked the spunk initially expected and has been a prolongation of the late summer doldrums.


"Without the spur of competition we'd loaf out our life."
(Arnold Glasow)

Key Points:

  • Post holiday trading has lacked spunk.
  • Inflationary fears resume with new data.
  • Regional banks seemed to be the only green on yesterday's tape.
  • Chevron's (CVX) new find sinks Crude prices and puts a question on the technical condition of related equities (OIH).
  • TAM's new website getting ready to launch.
  • Wiley book Master Traders to soon be released involving chapters penned by Kevin Tuttle and Greg Collins.

Market Commentary:

The post Labor Day trading has lacked the spunk initially expected and has been a prolongation of the late summer doldrums. Tuesday's advance was led by the NDX and Russell as the high beta stocks fell into favor. However, this only lasted a day as the NDX and Russell still remain underwater from their early summer highs.

Yesterday's release of the unit labor cost data reignited Wall Street's inflationary fears as the data came in much hotter than expected (4.9% vs. a consensus estimate of 3.8%). This was the largest increase since 1990. To exacerbate the problem, productivity levels dipped below estimates. The contention is now for further pressure on corporate profits as lower productivity and higher wages peak their ugly head. Treasuries sold off causing the Ten-year yield to rise to 4.83% from 4.78%. The resurgence of wage inflation fears will be monitored in the coming weeks as the Fed continues to digest the data.

The only issues holding up in yesterday's market were some of the financials – most of which were regional banks. The A/D lines for the NYSE and NASDAQ were absolutely horrid at (1:3 and 1:4) as volume seemed to pick up a bit. The NDX and RUS were both down about 2%, the SPX lost about 1% and the DJIA held up the best with only a 0.55% loss.

Looking at the SPX we can plainly see the combined horizontal resistance and the upward sloping floors & ceilings resistance. If the markets can have an unruffled consolidation here and breakout with volume it could be a banner last quarter.

(Click chart for larger image)

Looking at the commodity picture, the OIH lost over 3.5% yesterday as it approaches an intermediate-term horizontal support and creates a descending triangle.

(Click chart for larger image)

This occurs just as the underlying commodity (Light sweet crude) has come down to converging horizontal support and its long-term upward trend – which coincide with its 200-DMA. All of this due to this week's announcement from Chevron (CVX) of a promising new find in the Gulf of Mexico.

(Click chart for larger image)

Breaking the long-term upward trend in Crude could be good for the overall economy but the important determinant of market direction will be monitoring all the sisters to see if they can follow through with conviction (volume) through the topside of their next resistance level. However, this could prove difficult in the coming weeks given the historical troubles of September.

On a side note:

Over the next month there are many exciting developments coming to fruition for Tuttle Asset Mangement, LLC. First of all, Greg Collins, our new COO, has almost completed our new website build and should provide a great deal of benefits to all our clients and readers along with greater transparency to all the products we offer. Secondly, the book published by Wiley called...

Master Traders: Strategies for Superior Returns from Today's Top Traders

….should be launched and available through our new website within 30 days.

Greg Collins and I, along with eleven other top financial professionals, have each contributed a chapter to this book and we expect great response from the financial publishing industry. For a preview of the book you can log onto our current website.

Stay tuned & good luck!

Until next time…


No positions in stocks mentioned.

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