The latest NFP report, released on Friday, once again surpassed expectations, maintaining an impressive streak of 14 consecutive beats on the headline number. However, a closer analysis of the report's specifics unveils a less remarkable scenario. The unemployment rate witnessed a notable surge, jumping from 3.4% to 3.7%, marking the largest month-over-month increase since the onset of the pandemic. Additionally, there was a slight decrease in average workweek hours, often seen as an indication of employers scaling back hours before initiating layoffs.
Taking all aspects into consideration, this report provided food for diverse perspectives. Optimists derived a positive outlook from the robust jobs growth, while the higher unemployment rate and soft average hourly earnings hinted at reduced labour market tightness, potentially alleviating inflationary pressures. Some individuals may interpret the lower average weekly hours worked as a return to the pre-pandemic.
Conversely, the pessimists paid greater attention to the report's details rather than solely focusing on the headline number, acknowledging the paramount importance of identifying trends over absolute figures.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, the Nasdaq Composite struggled to extend the rally past the key 13174 swing high after the NFP report. This is a curious divergence from the other major indices considering that the tech stocks are the current market hype. Maybe, the market went too high too fast? Anyway, the sellers are likely to pile in here targeting the upward trendline first and a break lower next. From a risk management perspective, the buyers may be better off waiting for a pullback into the trendline before considering new long positions.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the support zone at the 12660 level where we can find the confluence of the 61.8% Fibonacci retracement level, the trendline and the daily 21 moving average. On the upside, if the bullish momentum remains strong, the buyers may even lean on the minor upward trendline. The sellers, on the other hand, will pile in even more aggressively if the Nasdaq Composite breaks through that minor trendline.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can notice that the Nasdaq Composite is diverging with the MACD right at the key swing high resistance. This raises the odds of a pullback and might even turn into a complete reversal marking the 13174 level as the top. The first line of defence for the buyers is the 38.2% Fibonacci retracement level and the minor trendline. A break below the trendline would see more sellers piling in and extending the fall towards the 12660 support area.
Today, the spotlight in the market is likely to be on the US ISM Services PMI report:
- Considering the impressive performance of the S&P Global Services PMI in the previous month, there might be an expectation for a positive outcome in the ISM report. Should the data exceed expectations, particularly if the prices paid sub-index indicates a lower value, we could potentially witness a rally in the Russell 2000 as market participants may trade on the soft landing scenario.
- Conversely, if the data falls short of expectations, it could trigger some market weakness, potentially leading to the aforementioned pullback or even a complete reversal.