2016/08/05 Quick Alert: US Employment Trigger

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Quick Alert: Friday, August 5, 2016 (early)

US Employment Trigger

Of course the US Employment report can always be a ‘trigger’ for aggressive price movement. Or sometimes not so much sheer price volatility as a trend decision. And that is as important as ever this morning. It is also typical that the headline US Nonfarm Payrolls number is the obvious price activity driver, where the estimate is now for 180,000 July job gains. Yet there is also the key Hourly Earnings figures that relate to the quality of jobs created. That is very important after the monthly change dropped back to just 0.10% in June. This relates to the debate about whether recouping all of the jobs lost in the 2008-2009 recession that the Obama administration is always presenting as a great success really is as positive as it seems. The negative aspect is that US household median income has slipped 4.0% since the recession, belying upbeat claims.

Yet this morning we are more concerned about the market reaction, and the activity earlier this week set up the telling near-term trend decision fully articulated in Wednesday evening’s Commentary: The End Is Nigh? post. In brief, Monday’s September S&P 500 future gap higher to a 2,177.75 new all-time trading high (above the July 25^th 2,172.50) quickly failing left a negative tone The question became whether this means there was an UP Break failure turning into a topping indication? Or was it just the next bear trap like so many others that have occurred across the long up trend?

As the 2,151.25 low violated on Tuesday’s selloff was the Tolerance of the 2,160-55 congestion range, it is important to see whether it can sustain a recovery above 2,160-55 to re-establish it as support… especially after Thursday morning’s Bank of England rate cut and QE expansion. With the market already back above that area in overnight trading, the burden of proof is definitely on the bears once again. Yet, even if it should fail, all of the lower violated resistances remain supports. Those include the interim support at the 2,132 May 2015 all-time high, and the more prominent Friday June 24th (pre-Brexit) 2,120 high and historic congestion along with the heftier 2,105 congestion.

As important is the impact on the other equities that are up into resistance levels (like FTSE 6,750) as well as other asset classes. Govvies were reacting negatively to the Japanese stimulus jettisoning fiscal restraint on Tuesday until the equities weakened. While govvies have remained firm in the wake of the BoE action, any strong economic data and return to equities strength could pressure them once again; and vice versa.

The same goes for foreign exchange where the US Dollar Index that has held .9550-00 support would likely benefit from a return to stronger US data after last Friday’s abysmal first look at Q2 GDP, and vice versa.

And that’s it. The evolutionary Trend View remains very consistent with the Market Observations in Wednesday evening’s Commentary: The End Is Nigh? post. Please refer to that pre-Bank of England assessment, which also anticipated its return to QE as well.

Thanks for your interest.