Major averages gapped lower on Friday's weaker than expected payrolls report, then climbed higher the rest of the day to finish strongly to the upside on increased volume. The majors, however, are still under critical moving averages and, as we have mentioned, investors should expect heightened levels of volatility. Thus Friday's positive action will not necessarily lead to a resumption of any uptrend as seemingly positive action following the Flash Crash in 2010 and the steep correction in mid-2011 resulted in retests of lows. However, within the context of an overall bearish consolidation following the "Capitulation Monday" lows of late August, a rally up towards the 50-day moving average in any of the indexes would not necessarily be surprising. As always, we let the stocks guide us in terms of how bullish or bearish we become.
CME FedWatch puts the odds of a rate hike when the Fed next meets on October 28 at just 7%. December 16 is not much better at 29%. Thus, it is probably safe to say that the Fed will not be hiking rates this year, despite what Chairperson Yellon said earlier. We must remember the Fed is tied to the government so anything they say is designed to soothe markets or talk them higher.
Futures are up on improving commodity prices. European markets are higher by more than 2%.
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