It’s
increasingly evident that the market is taking the weaker labour market data as
good news for inflation and the soft-landing scenario. In fact, last week we
got many big misses heading into the NFP report, but the US Jobless Claims
showed that the labour market is still fine and the NFP beat
expectations. We have also got a jump in the unemployment rate, but it was
accompanied by a rise in the participation rate and the average hourly earnings
surprised to the downside, which is another good news for inflation. The market
doesn’t expect the Fed to hike anymore, so the next stop might be the rate
cuts. Historically though, the market falls when the Fed starts to cut rates
because those generally come in response to a recession.
Dow Jones Technical
Analysis – Daily Timeframe
Dow Jones Daily
On the daily chart, we can see that the Dow Jones
has rallied all the way back to the support turned resistance around
the 35000 level. The price is now struggling to break through as the sellers
are piling in more aggressively with a defined risk above the resistance to
target the 33805 level. The buyers will need the price to take out the
resistance to start targeting the all-time high.
Dow Jones Technical
Analysis – 4 hour Timeframe
Dow Jones 4 hour
On the 4 hour chart, we can see that the rejection
from the 61.8% Fibonacci retracement level
made the price to print a lower low and the moving averages to cross
to the downside. This might be an early signal that the trend is indeed
changing, and new lows are coming. The price will need to break below the 34700
support though to confirm the reversal and give the sellers more conviction for
another selloff.
Dow Jones Technical
Analysis – 1 hour Timeframe
Dow Jones 1 hour
On the 1 hour chart, we can see that we
had a divergence with
the MACD right
around the resistance which is generally a sign of weakening momentum often
followed by pullbacks or reversals. The price may be forming a descending
triangle now and a break on either side of the pattern
generally leads to a big move. Therefore, it might be better to wait for a
breakout before taking new positions.
Upcoming Events
Today is the US Labor Day
so the markets will be closed. This week is pretty empty on the data front with just
the US ISM Services PMI scheduled for Wednesday and the US Jobless Claims on
Thursday. The market has shown strong resilience to weaker data in the past
weeks and it’s hard to tell how much bad the data needs to be to bring it down.
One thing that held pretty well is the US Jobless Claims, so much worse than
expected readings might trigger a selloff.