Weak Economic Reports Bring Choppy Action To U.S. Indices

Posted Thursday, June 25, 2020 by
Shain Vernier • 2 min read

This morning’s pre-market hours brought another collection of sub-par economic reports. The result has been choppy action for the U.S. indices as investors attempt to interpret the data. At the halfway point of the Wall Street session, the DJIA DOW (+65), S&P 500 SPX (+7), and NASDAQ (33) have traded in both positive and negative territory. 

Following Wednesday’s close, reports that the E.U. was considering imposing a travel ban on U.S. citizens gained steam. The news unhinged markets a bit, but didn’t do much to U.S. index futures during the European session. Now, it appears these concerns are on the back burner. Today’s pre-market economic releases are dominating the news cycle and sentiment. Here are a few that have grabbed headlines:

Event                                                           Actual           Projected      Previous

Continuing Jobless Claims (June 12)      19.522M       19.968M       20.289M

GDP Annualized (Q1)                                -5%                 -5%              -5%

Goods Trade Balance (May)                     $-74.34B         NA              $-70.73B

Initial Jobless Claims (June 19)                1.480M           1.300M         1.540M

Once again, the highlight of this group is the larger-than-expected Initial Jobless Claims (June 19) figure. 1.480 million claims were reported, in comparison to consensus estimates of 1.300 million. Growing jobless claims have been the norm since March as COVID-19 has brought on a major shift in the U.S. labor market. And, this trend is likely to continue until at least July 31 and the expiration of coronavirus-enhanced unemployment benefits. 

On a solid note, there were no revisions to Q1 GDP. Although most analysts expect Q2 to be worse, we may have seen the max pullback in economic growth. If the COVID-19 restart rolls on without another shutdown, Q2 figures may bring a positive surprise later this summer.

Economic Reports Lag, U.S. Indices Chop Sideways

The weekly chart below gives us a look at September E-mini DOW futures as of Wednesday’s close. As you can see, the three-session range has been tight. Going into the final trading days of June, it appears that most market participants are taking a wait-and-see approach to U.S. large caps.

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

Here are the numbers to watch in this market for the remainder of June:

  • Resistance(1): June High, 27,466
  • Support(1): Psyche Level, 25,000
  • Support(2): Weekly SMA, 24,438

Bottom Line: In the event we see the September E-mini DOW fall in response to the negative economic data, a buying opportunity may develop. For the remainder of June, I’ll have buy orders in queue from 24,515. With an initial stop loss at 24,435, this trade produces 160 ticks on a 1:2 risk vs reward ratio.

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