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Stocks Backtrack After Strong NFP

Posted Friday, July 5, 2019 by
Shain Vernier • 2 min read

During the pre-Wall Street open, the much-anticipated U.S. Non-Farm Payrolls report for June hit newswires. NFP came in exceedingly strong at 224,000, beating both expectations (160K) and May’s numbers (72K). Although a good sign for the American economy, the robust NFP figure has not led to gains for U.S. stocks. Through the first half-hour of trade, the DJIA DOW, S&P 500 SPX, and NASDAQ have lagged.

In addition to NFP, several other reports were released to the public this morning. Here is a quick look at the highlights:

Event                                                        Actual       Projected     Previous

Unemployment Rate (June)                      3.7%            3.6%               3.6%

Average Hourly Earnings (YoY, June)      3.1%             3.2%               3.1%

In short, the U.S. labor market remained stable in June, with sub-4% unemployment and relatively static wages. The next key economic event is due up at 11:00 AM EST, with the FED’s semi-annual Monetary Policy Report.

U.S. Stocks Pull Back Following Solid NFP Report

Thus far, stocks are on the bear following the stronger-than-expected jobs report. The price action is being credited to new doubts surrounding a potential FED rate cut in July. Given the strong employment situation, traders are considering that the FED may hold rates firm in light of the new information.

September E-mini S&P 500 (ES), Daily Chart
September E-mini S&P 500 (ES), Daily Chart

September E-mini S&P 500 futures are in the process of retracing from this week’s fresh all-time highs. Here are the levels to watch for the remainder of the session:

  • Resistance(1): All-Time High, 3006.00
  • Support(1): 38% Current Wave Retracement, 2971.00
  • Support(2): Bollinger MP, 2929.25

Bottom Line: Buying dips has been a profitable strategy throughout 2019. If we see continued weakness in stocks following today’s NFP report, going long from the 38% Current Wave Retracement (2971.00) isn’t a bad way to play the action.

Until elected, I will have buy orders in queue from 2972.75 in the September E-mini S&P 500. With an initial stop at 2967.75, this trade produces 20 ticks on a 1:1 risk vs reward management plan.

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