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December is starting on a good note for risk-on trades. S&P500 confirms risk appetite, as it came roaring from the 1148.25 low established last week. Friday 12/2, NFP reported 120K additional jobs in November, while the October number was revised up from 80K to 100K. Also, the unemployment rate dipped 0.4% from 9.0% to 8.6%. The decline in unemployment did not come from a surge in hiring, but rather a dip in the participation rate.
At the release, the S&P500 was at 1260, kissing the 200 day simple moving average and 78.6% retracement of the 1228.75-1148.25 swing. This is a critical resistance. Although the market cracked a declining trendline, this 1260 level needs to be broken before risk-on can extend further.
Extension of risk-on will lead to USD and JPY weakness for December. The next resistance for S&P500 would be 1288.75-1290 area. Above 1300, we have the summer highs near 1350 as a target.
If the week ends with a risk-off, it will be interesting to see if the S&P 500 can be supported above the 200 SMA seen in the 4H chart near 1230. Ability to remain above is a bullish posture, and the the upside bias remains. Below, that we continue to consolidate, with bearish outlook strengthening if the market can break back below the 1200 clip. The post-reaction to today's NFP report will be important next week to decide the fate of the S&P500 as well as the direction of USD and JPY for the rest of 2011.