No-News-Is-Good-News for DowJones
As is well known among traders, the monthly Non-Farm Payrolls (NPP) report is usually the most relevant release of the day and usually provides many clues as to the Fed's direction for interest rate adjustments, in this case possible cuts. NVidia has become an unusual focus of attention lately, even though short positions in AI giant have been increasing to generate a possible price adjustment, while the famous Meme-Stock GameStop continues to have especially high volatility since the famous youtuber “Roaring Kitty” posted that he would do a live session to trade it. Gamestop jumped 20% on Monday after the influencer posted a 116 million bet on the stock after a 3-year gap. We note this due to the fact that he was one of the key players in the 2021 spike where Reddit forum wallstreetbets made a massive long in favor of the firm literally rescuing it from assured bankruptcy. Shares were up nearly 50% yesterday and an additional 30% in “afterhours”.
NPP (Nonfarm Payrolls) in the West's largest economy is expected among analysts to add 180,000 jobs last month, up slightly from April's 175,000, which was the smallest increase in half a year. All this under the expectation of keeping the unemployment rate below 4% for the 28th consecutive month. Economic data reports have theoretically underpinned the easing of tightening labor market conditions that could surprise to the downside. This worries the Fed that an overly strong economy would prevent rate cuts, but this has not happened so far showing a slowdown in inflation and a cooling of the labor market, which is not particularly good in macro terms either.
If the employability report shows us that the US economy is losing steam and a slowdown in job creation continues, this would be expected, but if it surprises on the downside, this may generate some negative shock in the markets. A relatively ridiculous situation in macro terms, again because it would show that clearly the purchasing power of Americans is shrinking and there is a risk of a sharp reduction in domestic consumer demand, which only confirms the theoretical environment that the market would turn to a defensive environment in a very deterministic way.
Next week the Federal Open Market Committee (FOMC) meets next week, but a cut is not expected at the highly anticipated meeting. Markets are currently trading at 50 basis points heading into December, which is when the first rate cut will begin. As a good first Friday in June, futures started the market weak, awaiting the payrolls, the Dow Jones has started the session slightly higher, up 35 points (0.1%), the S&P500 up 3 points (0.1) and the Nasdaq 100 up 23 points (0.1%) respectively. If the session shows that the evidence of a slowdown is consistent, this may support the long-awaited cuts. Later in the day, the Fed will meet with the ECB to discuss their joint monetary policy due to the possibility of the first Eurozone rate cut since 2019.
If we look at the Dow (Ticker AT: USAIND) we see that from May 31 through yesterday's session it has recovered 923 points, or 2.43%. In order to reach the trading zone of the last week of May, it is necessary that the stocks of that market begin to behave with good profitability and the market does what is expected of it. At the moment, the RSI is in the middle zone and the POC is at 39,869 points with an unclear trading bell. That is to say, it does not seem that the market knows very well what can happen and it is precisely for that reason that “no-news-is-good-news” or what is the same, the absence of changes presents us with a bullish continuation without strength. So it would not be surprising if the price looks to head towards 39,500-39,750 points in the coming weeks before the start of the summer, especially in view of next week's meeting of the Fed and the ECB.
Ion Jauregui - ActivTrades Analyst
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
NPP (Nonfarm Payrolls) in the West's largest economy is expected among analysts to add 180,000 jobs last month, up slightly from April's 175,000, which was the smallest increase in half a year. All this under the expectation of keeping the unemployment rate below 4% for the 28th consecutive month. Economic data reports have theoretically underpinned the easing of tightening labor market conditions that could surprise to the downside. This worries the Fed that an overly strong economy would prevent rate cuts, but this has not happened so far showing a slowdown in inflation and a cooling of the labor market, which is not particularly good in macro terms either.
If the employability report shows us that the US economy is losing steam and a slowdown in job creation continues, this would be expected, but if it surprises on the downside, this may generate some negative shock in the markets. A relatively ridiculous situation in macro terms, again because it would show that clearly the purchasing power of Americans is shrinking and there is a risk of a sharp reduction in domestic consumer demand, which only confirms the theoretical environment that the market would turn to a defensive environment in a very deterministic way.
Next week the Federal Open Market Committee (FOMC) meets next week, but a cut is not expected at the highly anticipated meeting. Markets are currently trading at 50 basis points heading into December, which is when the first rate cut will begin. As a good first Friday in June, futures started the market weak, awaiting the payrolls, the Dow Jones has started the session slightly higher, up 35 points (0.1%), the S&P500 up 3 points (0.1) and the Nasdaq 100 up 23 points (0.1%) respectively. If the session shows that the evidence of a slowdown is consistent, this may support the long-awaited cuts. Later in the day, the Fed will meet with the ECB to discuss their joint monetary policy due to the possibility of the first Eurozone rate cut since 2019.
If we look at the Dow (Ticker AT: USAIND) we see that from May 31 through yesterday's session it has recovered 923 points, or 2.43%. In order to reach the trading zone of the last week of May, it is necessary that the stocks of that market begin to behave with good profitability and the market does what is expected of it. At the moment, the RSI is in the middle zone and the POC is at 39,869 points with an unclear trading bell. That is to say, it does not seem that the market knows very well what can happen and it is precisely for that reason that “no-news-is-good-news” or what is the same, the absence of changes presents us with a bullish continuation without strength. So it would not be surprising if the price looks to head towards 39,500-39,750 points in the coming weeks before the start of the summer, especially in view of next week's meeting of the Fed and the ECB.
Ion Jauregui - ActivTrades Analyst
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
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