U.S. Indices Muted Following Strong Employment Numbers

Posted Friday, August 3, 2018 by
Shain Vernier • 2 min read

It has been a great Friday session for statistics buffs, but not necessarily for equities bulls. Following the release of an especially strong set of U.S. economic metrics, traders did an about-face on the Wall Street open. For the first hour of trade, both the DJIA and S&P 500 are up only moderately. My colleague Skerdian broke down the U.S. employment numbers in depth a bit earlier. Be sure to check out his synopsis here.

The evolving relationship between U.S. Unemployment and wage growth has been a topic of contention among the financial media. Critics of President Trump’s economic policies are quick to point out that even though unemployment is dropping, wages are not rising. This critique may soon be outdated, as today showed Average Hourly Earnings (MoM, July) increase to 0.3% and hold steady on a year-over-year basis.

In truth, there are a million ways for statisticians to skew these numbers to their liking. Nonetheless, the employment reports could not have been much better and it appears the market was expecting a strong performance for July.

September E-mini DOW Technicals

After a tumultuous Thursday session, September E-mini DOW futures have returned to bullish territory. There are buyers lurking in the weeds on seemingly every dip — it appears no one wants to miss out on the next trend day up.

September E-mini DOW Futures (YM), Daily Chart
September E-mini DOW Futures (YM), Daily Chart

Overview: Thursday’s action took price to a firm test of downside support at the Bollinger MP. Since that time, traders have quickly bid the September E-mini DOW above the Current Wave 38% Retracement (25320). This is an extremely bullish signal. A test of the Swing High (25572) is on the way very shortly.

Until we see a harsh signal of slowing U.S. economic growth, the indices are going to churn north. Be on the lookout for fresh all-time highs being made in both the DJIA and S&P 500 before the FED’s late-September meeting.

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