August nonfarm payrolls came in at 142k versus 165k expected while the unemployment rate ticked lower to 4.2%, underscoring the Fed’s assessment that the economy is slowing enough to justify a 25 bps rate cut later this month.
Futures rallied on the news and are slightly higher after tagging our next downside target overnight.
Just a reminder…I will be off next week but will post on an occasional basis if anything unexpected occurs in the markets.
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Futures are flat this morning following unemployment data that supports the widely held expectation of a rate cut when the FOMC meets Sep 17-18.
The algos are presently concerned with the yield curve, which continues to warn of further downside, tomorrow’s jobs report, and a pesky gap which refuses to be ignored.
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Lots of targets were tagged yesterday, beginning with SPX which nailed our 50-day moving average target.
There’s a reason, however, that futures are off even more this morning.
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Futures are off moderately following yesterday’s reversal, the 6th session in a row that ES failed to surpass its .886 Fib retracement.
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In a speech that was essentially a mashup of all his other recent speeches, Powell reiterated at Jackson Hole on Friday that the pandemic – not historically dovish monetary policy – caused the recent huge spike in inflation. In fact, the Fed should be congratulated for putting out the inflationary fire that they started.
He did mention by way of a little joke that the Fed’s assessment of inflation being transitory was wrong, but that the Fed had plenty of company. Essentially, no harm, no foul.
Now, the Fed is apparently ready to lower interest rates. This view will ideally be underscored by Friday’s core PCE print. The market expects it and, in fact, needs it. But, anything more than 50 bps could be seen as the Fed panicking and could unravel the current rally as it stumbles merrily along.
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In our last dedicated Update on Gold and Silver in April, we noted that gold had reached our Fibonacci target of 2466.50 but could have further to go.
GC is fairly straightforward. There’s a large IH&S pattern which completed around Mar 7 targeting 2557, a short distance above the white 1.618 at 2466.50.
GC reached 2557 this morning.
It’s interesting that it’s reaching overhead resistance at the same time as SPX and at the same time that DXY has reached our next downside target.
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Futures are off moderately after weaker than expected housing data and in anticipation of next week’s Jackson Hole Fedspeak.
ES reached our next upside target a little ahead of schedule, and is now backtesting the purple TL from recent lows.
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Futures are slightly higher in a week certain to be buffeted by a bevy of important economic data.
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Futures are up slightly as the FOMC begins its July meeting. But, it’s a continuation of the consolidation that began last week.
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A lot has happened for RUT in the past week. It was only 11 days ago that we updated its chart, suggesting RUT would reach 2282 by the end of the year.
RUT’s reversal at its .618 in April set up either a Gartley or Bat pattern, meaning a move to its .786 at 2282.27 or its .886 at 2364.78. If we extend the dashed red trend line to the right, we get an intersection with the .786 at the end of the year – a very common scenario. While the .786 in December is a logical next target, an equally compelling case can be made for the .886 in September or October.
Don’t look now, but RUT pushed past the red TL we discussed, allowing RUT to tag 2282 (well, 2278) late last week.
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