Waiting on the Jobs Report

Reaction to Friday's nonfarm payrolls number should dictate the course for prices for the next couple of trading days

By Paul Cherney

Note: This is a special column filed during Paul's vacation. His regular column will return on Sept. 7.

Daily (short-term) measures of buying demand versus selling pressure are in neutral readings that can break in either direction. This is true for both the Nasdaq and the NYSE. These kinds of readings occur very frequently on the eve of the monthly employment reports. Sorry, but that's the way it is.

I think there is an underlying willingness to buy, but I know from experience that the August employment report will dictate price action. Reaction to the nonfarm payroll number should dictate the course for prices for the next couple of trading days. Certainly, on a technical basis, there is the potential for higher prices, but the markets need a catalyst.

Price Points Of Interest: For the Nasdaq, I think it would be a short-term positive if the index can close above 1,866.25. The more intermediate term price point that needs to be exceeded is the 1,896 level. I view recent price action (Monday August 30) as a short-term positive because intraday, the Nasdaq moved below 1,830.30 but was NOT able to close below the 1,830.30 level, but the influence of that kind of drop and pop is only short-term and the market is at the end of that short-term positive influence. Please note: I still think it would probably be a negative with some sloppy followthrough lower if the Nasdaq closed below the 1,830.30 level. Downside concerns would increase if the index undercut 1,811.68, next support 1,792-1,774.

Due to the nature of the recent weakness (since the end of June this year) there are multiple levels of resistance directly above current prices which makes it unlikely that prices can just put back to back to back big gains on the chart. The next area of chart resistance for the Nasdaq (above the 1,866.25) becomes organized with prints of 1,876-1,896.

As for the S&P 500, I think a close above 1,108.60 would be a short-term positive, but just as with the Nasdaq, due to the nature of the weakness from the end of June to the middle of August, there are multiple layers of resistance. There is a thin shelf of resistance 1,111-1118, but the bigger resistance does not occur until 1,122-1,146.34, with a focus at 1,130-1,140.84. I would be concerned about price weakness and a search for buying interest at lower prices if the index closed under the 1,092.00 level.

I offer this psychological read: As long as the rest of the convention is free from extraordinary events, then, any sort of a non-farm payroll number higher than +130,000 could easily force some buying on Friday. The street expects +150,000 in August non-farm payrolls but the markets will probably be satisfied with less than that as long as the convention is adverse event-free.

Historical Price Performances for S&P 500 Prices During September:

If you looked at all Septembers since 1960, (1960 through to 2003 inclusive), there were 44 Septembers, 27 of those Septembers saw the S&P 500 close lower or unchanged (see ). 27 losers out of 44 occurrences is 61%. 61% of the time since 1960, September has been a losing month. The average of ALL September performances since 1960 has been a loss of 0.93%.

But, this is an election year and that does make a difference. If we looked at just Septembers during election years, there have been 11, the S&P 500 has closed election years Septembers lower only 4 times, 4 out of 11 is 36% of the time. Conversely, that means that the S&P 500 has risen during election year Septembers 64% of the time. The average performance for all election year Septembers for the S&P 500 was +0.87%. Here is a list including the date of the last trading day of September and the monthly percent change during the election years:

9/30/1960 -6.04%
9/30/1964 +2.87%
9/30/1968 +3.85%
9/29/1972 -0.49%
9/30/1976 +2.26%
9/30/1980 +2.52%
9/28/1984 -0.35%
9/30/1988 +3.97%
9/30/1992 +0.91%
9/30/1996 +5.42%
9/29/2000 -5.35%

Additionally, I took the time to look at all non-election year Septembers since 1961 (in other words, I eliminated election year Septembers from the list of all Septembers. Since 1961, there have been 33 non-election year Septembers, and there have been 23 losers out of 33 years. Around 70% of the time, Septembers in non-election years are losers with an average loss of 1.53%.

Good luck in the markets.

Note: In 1979, the S&P 500 closed August at the same price level, unchanged for the month of September. This number was treated as a non-advance, or losing month in the statistics above.

Cherney is chief market analyst for Standard & Poor's

Before it's here, it's on the Bloomberg Terminal.