The U.S. job market at the end of 2008 was dismal to say the least, according to the ADP U.S. private sector survey for December. The survey released yesterday had 693,000 jobs lost last month, which was well above the 515,000 job loss expected by traders. Though the figure was much worse than expected, it should be noted that this survey was done using a new methodology, that its designers hoped would better reflect the figures released by the Bureau of Labor Statistics. The ADP employment figures have been notorious for undercounting the number of jobs lost in the past, so analysts will be eager to see if the changes made by ADP will provide a better estimate of the Non-Farm Payrolls (NFP) figures which also includes government jobs. Yesterday's report has led many to revise downward the estimate for Friday's NFP release to a loss of between 600 and 700 thousand jobs in December, opposed to the 500,000 loss before the report was released. This will be the 12th consecutive month that payrolls were cut, with a total of well over 2 million jobs lost in 2008. All this gloom and doom has put a halt to the recent rally in the stock index futures markets, with the March E-mini S&P 550 futures winning streak having ended at 8 consecutive sessions. Stocks have recovered a bit to start the year, as optimistic investors have put some money back into stocks in hopes of an economic rebound in 2009, spurred by a renewed economic stimulus package proposed by the incoming Obama administration that is hoped will create 3 million new jobs. However, that optimism may be short-lived if the Labor Department reports a larger-than-expected job loss and traders start to believe that corporate earnings reports will be dismal in the coming months, despite the efforts coming out of Washington.
Looking at the daily chart for the March E-mini S&P 500 futures, we notice that the recent rally was stalled less than 30 points below the near term highs made back on November 10th at 959.50. Since that time, prices have consolidated, with the brief exception of a two-day sell-off back in late November. Volume has been lighter than average during the recent rally, which put into question the sustainability of the up-move. Though prices remain above the 20-day moving average, there looks to be formidable resistance at 959.50 and again at 1006.25, highlighted on the included chart. Should prices fall below support at the 20-day moving average currently at 889.50, a test of the low end of the consolidation near the 803.00 level is possible.
Mike Zarembski, Senior Commodity Analyst