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Weekly Market Recap

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Overview

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For the week ending 01/11/14, the Dow was again down while both the S&P and Nasdaq were up. After Janet Yellen's confirmation as the first Chairwoman on the Federal Reserve on Tuesday, the focus was on Friday's Employment Situation with high expectations after a strong ADP Employment Report on Wednesday.

The news on Friday was mixed, with a far lower-than-expected Jobs figure of 74k (expected 200k), and a far better-than-expected Unemployment figure 6.7% (expected 7.0%). This caused a temporary drop in the markets which reversed by mid-day.

Many pundits feel the low jobs number is an aberration and will be adjusted up next month; in the interim, it has reduced concerns of any further tapering in QE.

The unexpected drop in the unemployment rate is due largely to a sharp drop in the labor force: household employment rose 143k, but the labor force dropped 347k (due to increasing retirements and the usual reduction in persons actively searching).

The FOMC Minutes showed heightened debate in December over tapering, the consensus leading to a modest $10 billion reduction in monthly purchases evenly split between Treasuries and the toxic mortgage-backed securities. Also, most believe the impact of QE is declining, and the longer the program continues, the more difficult it will be to unwind. Finally, most FOMC participants still support very low fed funds rates for several years to come.

This past week the economic news was mixed, but mostly negative due to the Jobs Report and a sluggish ISM non-manufacturing indicator. The expectation is the Fed will be carefully weighing each important indicator till the January 28-29 policy meeting before determining the next taper move.

Earnings kicked-off this week with Retailers; the results were dismal (as expected). While stores were open longer and the discounts were deep, consumers were less enthusiastic about spending (not to mention the bad weather). We expect earnings to improve next week with the Banks reporting.

We also expect the markets to move higher over the next two weeks, breaking to new highs. This will largely be due to earnings, as the strongest companies report early in the season and that will attract buyers to the market.

Market Gauge

Year-to-date the markets are down or flat: Dow -0.8%; S&P500 -0.3%; Nasdaq 0.0%.

The Markets for the past week were: DJIA down -0.2%; S&P500 up 0.6%; Nasdaq COMP up 1.0%.

Commodities (ETFs) for the past week were: Gold (GLD) up 0.81%; Silver (SLV) down -0.21%; Oil (OIH) up 0.15%; Dollar (UUP) down -0.32%; 30-yr Bonds dropped 13 basis points to 3.80%.

The VIX this past week (a measure of market sentiment and volatility) dropped to 12.14 due to a poor jobs number lowering concerns over additional tapering.

Top Headlines

In the U.S., Fed could ignore jobs report; Fed's Bullard not focused on jobs report; consider the real unemployment rate; Ablin: why we should raise minimum wage; solving manufacturer's jobs dilemma; job growth weak, raising questions about Fed move; Obamacare slows spending - not economy, says Peter Orszag; jobless claims tumble, fan hopes for labor thaw; layoffs plunge to lowest level since 2000; retailers reporting weak profits, outlooks abound; record cold a $5B black hole for US economy; US consumer borrowing up $12.3B in November; private job creation is 'off and running' per ADP report; unemployment aid - what's at stake for the US economy; why inflation threat could lead to a 'panic taper'; Fed's Williams says: QE will likely end this year; Obama speaks of better days for economy, with asterisk; US trade gap hits 4-year low on exports, weak oil; minimum wage debate 'insane' says 'Mr. Wonderful' (venture capitalist Kevin O'Leary); and Senate approves Janet Yellen as Fed chair.

In Europe, at least ten injured in Ukraine clashes; US activists shop for Wm Morrison stake; Total joins UK's pursuit of shale boom; Hollande threatens to sue over affair claims; the Swedish snuff that's targeting the US; Europe's disinflation isn't a worry, says Eurogroup President; Draghi says, "too soon to declare euro zone victory"; Bank of England holds rates as pressure mounts; Standard Chartered shake-up: exec paid for quitting; US Lew flies to Portugal as periphery parties; back on track? Confidence returns to Europe; bleak Christmas for top UK supermarkets; all Norwegians become millionaires as oil fund balloons; China offers to finance and build British rail links to HS2 network; millionaires placing their bets on Europe; why foreign investors are buying into Ireland; euro zone jobless at record high as retail sales surge; UK house prices show first monthly fall in a year; Lew flies in to Germany export storm; Sainsbury's enjoys Christmas boost after tough quarter; and the best place to invest in real estate is London (the remaining top five were in the US).

In Asia, seven injured in Thai protest shooting; Australia's Telstra may sell Sensis for $2.7B; Indonesia braces for impact of mineral export ban; China outstrips US as world's biggest goods trader; India's economy is out of the woods, says ICICI CEO; Asia currencies in 2014: survival of the fittest; will Singapore roll back property curbs?; US-India spat: watch it, don't fret it; Thailand's 'Teflon' economy put to the test; risky China assets you may want to own; pirates steal video game riches in China; Indian envoy leaving US in deal to calm diplomatic row; China's toxic debt doctors prepare for surgery; five dead after explosion at Mitsubishi plant in Japan; China tycoon sets sights on Wall Street Journal; Singapore Air pick Airbus over Boeing in India venture; South Korea central bank held rates in unanimous vote; US energy secretary delays India trip; Indians develop taste for the Big Mac; is it Asia's turn for austerity?; China consumer inflation hits a seven-month low; first wave of Chinese IPOs gets underway; and India tells US to close embassy club in New Delhi.

Weekly Review

On Monday, with broad strength in Factory Orders being offset by the ISM Non-Mfg report, the Dow dropped -0.3% to 16,425.

On Tuesday, with a strong International Trade report and a decline in US demand for petroleum products, the Dow rose 0.6% to 16,530.

On Wednesday, despite little reaction to the FOMC Minutes and a strong ADP report, the Dow dropped -0.4% to 16,426. Oil was down $1 to $92.50.

On Thursday, with relatively good economic news, the Dow rose fractionally to 16,444.

On Friday, with a poor Jobs Report and unexpected decline in the Unemployment Rate (due mainly to a sharp drop in the labor force), the Dow dropped fractionally to 16,436. Gold rose $10 to $1,245.

Next Week's Calendar

The economic calendar for next week is full: on Monday – nothing; on Tuesday – Retail Sales, Import and Export Prices; on Wednesday – Producer Price Index, Empire State Mfg Survey, EIA Petroleum Status Report; on Thursday – Weekly Jobless Claims, Consumer Price Index, Treasury International Capital, Philadelphia Fed Survey, Housing Market Index; and Friday – Housing Starts, Industrial Production, Consumer Sentiment.

If the Markets move down, stay on the side lines or consider Contra ETFs. For Option players, selling premium is advised. To learn more about options and earning consistent weekly income, go to optionsannex.com.

To the Charts (see charts above)

The following ETFs (DIA, SPY, QQQ) provide a technical review of the Market (and are also excellent Option trading vehicles). Represented are the Dow Industrials (DIA), S&P500 (SPY), and Nasdaq 100 (QQQ).

The Charts for each include views for Monthly, Weekly (including Price Channels), and Daily (including monthly Pivot Points) with MACD and Stochastic indicators. The Pivots are: white for central pivot point; yellow for R1 and S1; magenta for R2 and S2; red for R3 and S3.

DIA

The Dow Industrials (DIA) closed down at 164.18. If the DIA drops, then the next level of support will be at 154.87 (weekly chart); the next level of major resistance is 165.51 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD positive but weakening, and the Stochastic moving down at the overbought area.

SPY

The S&P500 (SPY) closed up at 184.14. If the SPY drops, then the next level of support will be at 174.76 (weekly chart); the next level of major resistance is 184.69 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up at the overbought area.

QQQ

The Nasdaq 100 (QQQ) closed up at 87.30. If the QQQ drops, then the next level of support will be at 81.37 (weekly chart); the next level of major resistance is 87.96 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD positive and strengthening, and the Stochastic moving up toward the overbought area.

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