Last week, the NFP missed expectations for a second time in a row and the previous numbers were all revised lower. This was seen as a disappointment as the labour market seems to be a touch weaker than previously expected. Nonetheless, the unemployment rate fell once again and lessened the disappointment from the miss in the payrolls number. The worse part for the Fed is that the average hourly earnings beat expectations, and such high wage growth is not consistent with a sustainable return to the 2% target. It’s worth reminding though, that the Fed will see another NFP report before the September meeting, so this NFP doesn’t change much, but the data leading into the meeting can still weigh on sentiment.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq Composite couldn’t extend the rally all the way into the key 14649 resistance. In fact, we can see that we had a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. The price is now at a previous resistance turned support where we should expect the buyers stepping in with a defined risk below the level to target the 14649 high.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the support around the 13865 level where we can also find the 50% Fibonacci retracement level for confluence. The buyers are likely to enter here, but the sellers will want to wait for a break below the level to pile in even more aggressively and extend the fall into the trendline or the 13174 support.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have two key levels now:
· The support at 13865 where a break below it should give the sellers control.
· The resistance at 14115 where a break above it should give the buyers control.
The best strategy would be to wait for a break on either side and then join the wave.
Upcoming Events
This week the main event will be the US CPI report on Thursday. The market has been loving the disinflationary trend seen in the past months, so an upside surprise is likely to weigh on risk sentiment and push the market lower. On the other hand, another miss in the data should provide some relief and lead to a rally. After the US CPI we will also see the latest US Jobless Claims report, which is less likely to move the market since it’s released at the same time of the CPI, but big surprises should have an effect, nonetheless. Finally, we conclude the week with the University of Michigan Consumer Sentiment report on Friday where the market is likely to focus more on the inflation expectations figures.