10-YEAR TREASURY YIELD SURGES ON POSITIVE JOBS REPORT -- 7-10 YR TREASURY BOND ETF TESTS MAJOR SUPPORT LINE -- NON-FARM PAYROLLS EXCEED 200,000 FOR THIRD TIME IN FOUR MONTHS -- SPOT LIGHT CRUDE HITS KEY RETRACEMENT

10-YEAR TREASURY YIELD SURGES ON POSITIVE JOBS REPORT... Link for todays video. Treasury bonds got hammered and treasury yields surged on the heels of today's employment report. The February surge in non-farm payrolls takes some pressure off the Fed for quantitative easing because the unemployment rate fell to 7.7%. There is still a ways to go, but the markets are forward looking beasts and the treasury market often front-runs the Fed. Chart 1 shows the 10-year Treasury Yield ($TNX) testing its breakout with a plunge last week and then moving above the February highs this week. This puts the 10-year Treasury Yield at levels not seen since March 2012. The trend since mid July is up with the resistance line at 24 (2.4%) marking the next target. With stocks and treasury yields positively correlated, today's new high is a positive for the stock market. Chart 2 shows the 30-year Treasury Yield moving above 3.2% (32) this week.

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Chart 1

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Chart 2

7-10 YR TREASURY BOND ETF TESTS MAJOR SUPPORT LINE... With yields rising, the 7-10 YR Treasury Bond ETF (IEF) fell sharply this week and is poised to break support extending back to August. Chart 3 shows IEF consolidating from June 2012 until March 2013, some nine months. This looks like a rectangle top as buying and selling pressure equalized during the consolidation. A break from this consolidation is needed for the next directional clue and a support break would target a move to the next support zone around 99-100. Support here stems from broken supports and the 38-50% retracement zone. Chart 4 shows the 20+ Year T-Bond ETF (TLT) with next support in the 105-107 area.

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Chart 3

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Chart 4

NON-FARM PAYROLLS EXCEED 200,000 FOR THIRD TIME IN FOUR MONTHS... Even though employment data falls under the realm of fundamental analysis, we can plot the data on a chart to give it a technical flavor. Chart 5 shows monthly non-farm payrolls over the last ten years. This chart is pretty easy to decipher. The economy is moving in the right direction when non-farm payrolls are positive (growing), and in the wrong direction when negative. Non-farm payrolls have been positive for well over two years and the 12 month average is 150,000. It is, however, worth noting that non-farm payrolls exceeded 200,000 for three of the last four months. We have yet to see non-farm payrolls exceed 300K, but the cup is half full right now and remains so as long as payroll growth does to plunge back below 100K, which happened in May 2012 and June 2011. Chart 6 shows initial jobless claims moving lower in 2013 with the four week average hitting its lowest level since early 2008.

Chart 5

Chart 6

Note that these charts were created using a Pro account at Stockcharts.com. PRO accounts allow users to upload data and create up to 10 custom securities. Unfortunately, this chart is a static image and cannot be shared. Despite this drawback, I think the chart and analysis add value to the market message. This data is available for free at the St Louis Fed website(https://research.stlouisfed.org/fred2/).

SPOT LIGHT CRUDE HITS KEY RETRACEMENT... Oil used to enjoy a positive correlation with the stock market because it was viewed as a risk-on asset. Oil also benefitted when the Euro was viewed as a risk-on asset and the Dollar as a risk-off asset (safe haven). Back in the day, oil would surge along with the Euro and stock market. The relationship between oil and the stock market changed when the Dollar reneged on the deal and became positively correlated with the stock market over the last five weeks. Oil retained its negative correlation with the Dollar and suffered. In fact, there has been a strong negative correlation between oil and the Dollar since May 2012. The indicator window on chart 7 shows Spot Light Crude ($WTIC) in black and the US Dollar Index ($USD) in green. These two have bee mirror images since May (blue arrow). This means the recent breakout and uptrend in the Dollar are negative for oil. Despite this negative overhang, notice that Spot Light Crude is trading near trend line support and at the 62% retracement. This puts oil at a rather interesting juncture, especially with the stock market so strong and the employment picture improving. Overall Crude has gone nowhere since May 2012 as a large triangle takes shape. The blue dotted line marks the mid point of this triangle and $WTIC is trading just above this midpoint.

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Chart 7

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Chart 8

Chart 8 shows candlesticks over the last six months for a little more granularity. In addition to the 62% retracement, notice that broken resistance turns into support around 90 and oil firmed the last four days. $WTIC is up a few cents on Friday and currently trading near 91.60. The indicator window shows the Percent Price Oscillator (PPO) below its signal line. An upturn and signal line cross is needed to suggest that price momentum is turning up again. Chart 9 shows the US Oil Fund (USO) for reference.

US DOLLAR INDEX HITS HIGH FOR THE WEEK... The US Dollar Index ($USD) surged on the heels of today's non-farm payroll report. Money is moving into Dollars for several reasons. First, economic growth differentials favor the US over Europe and Japan. Second, the 10-year Treasury Yields are rising and this makes Dollar denominated bonds more attractive. Third, Fed Chairman Bernanke may talk dove, but the Fed is probably the closest of all central banks to an exit from quantitative easing. Regardless of the funnymentals, chart 10 shows a clear breakout around 81 and an uptrend since May 2011. Yes, the Dollar has been in an uptrend for well over a year. The index is trading around 82.75 on Friday afternoon and this marks the high for the week. It would take a move below 80.50 to negate this breakout and call for a reassessment. Chart 11 shows the Dollar Bullish ETF (UUP) breaking above its 200-day moving average and broken resistance levels turning into a support zone.

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Chart 9

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Chart 10

COMMODITY FUND ETF CORRECTS WITH FALLING WEDGE... The DB Commodities Trading Fund (DBC) attempted a big channel breakout in September, but fell back with a falling wedge over the last six months. This wedge could turn out to be a correction of the prior advance. Chart 12 shows this wedge retracing 50-62% of the prior surge and forming a falling wedge. Both the pattern and the retracement are typical for corrections. DBC firmed around 27 this week but has yet to bounce. A move above the 2013 high is needed to fully reverse the wedge and signal a continuation higher. The indicator window shows MACD trading around the zero line. A break above the February high would turn momentum bullish again.

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Chart 11

URANIUM-NUCLEAR ENERGY ETF TRACES OUT BULLISH REVERSAL PATTERN... Uranium and nuclear energy have been in the doldrums since March 2011, which is when the Fukushima nuclear disaster occurred, but the worst may be over as the Uranium-Nuclear Energy ETF (NLR) forms a bullish double bottom. Chart 13 shows NLR hitting support in the 12 area twice in 2012. In fact, it looks like a reverse Adam and Eve double bottom. Coined by Thomas Bulkowski (thepatternsite.com), the Adam low forms first and is "V" shaped. The Eve bottom forms second and is more rounded in nature. The May-June low is rounded on this pattern, while the November low is "V" shaped. In any case, a clear double bottom is taking shade with the September high marking resistance.

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Chart 12

I don't use moving averages that often, but could not help pointing out how effective the 50-week moving average (pink) has been on this chart. After marking resistance three times, NLR broke above this moving average and it is now turning into support. A falling flag formed over the last two months and a breakout at 14.50 would provide the first bullish trigger here.