Nonfarm Friday | Morning Express
It is Jobs Friday and Nonfarm Payrolls are due at 7:30 am CT. Analysts are looking for about 700,000 jobs to have been created in June, but we believe the market will digest a number within the range of 600,000 to 800,000 as meeting expectations. Job growth that is near or exceeds 1 million would get hairy, meaning it brings credence to the taper conversation. Just yesterday, Fed Governor Waller said the bank may need to start trimming asset purchases this year. He added the Fed would need to seriously consider a rate hike next year if the unemployment rate continued to drop and inflation rose steadily. Waller was the Research Director at the St. Louis Fed before taking the Fed Governor role in December. His colleague, St. Louis Fed President Bullard, has struck an even more hawkish tone, one that is in line with Philadelphia Fed President Harker who also spoke yesterday, saying tapering should essentially begin now. Still, Bullard does not vote until next year and Harker not until 2023. The Fed has done a terrific job in playing that Jekyll and Hyde role, probing the market’s resolve, but strategically as those who appear most hawkish do not vote this year. What would speed up such a timeline is hot job growth today. This would be a snap back from disappointing data in April and May, remember, those came on the heels of exceptional growth in March. Still, there must be a trend and two great reads broken by two poor reads is not enough to force the Fed’s hand alone, it will simply pressure the conversation and markets will react.
If June’s job growth is within the aforementioned 600,000 to 800,000 range or just below, we believe this will be viewed as another Goldilocks report and the party continues. Ultimately, the has S&P acted favorably to each type of result on jobs Friday. It gained about 1% after March’s blowout, April’s whiff and May’s lukewarm reads. However, April’s initial read of 266,000 (versus 978,000 expected) was digested poorly the week following. Traders must keep this in mind in the case of a big miss below 450,000 or so.
As for Treasuries, we pointed to a big counterintuitive trade in yesterday daily Midday Market Minute. In the case of such lukewarm data similar to that for May, fade a spike in the Treasury prices. Logic tells you Treasuries would bid as a safe haven in the wake of poor data. However, lukewarm job growth will keep the Fed patient, thus stoking inflation.
The metals complex is working through a bottoming process. There is a massive trail of damage that came from the post-FOMC bloodbath due not only to their slight hawkish turn, but as banks and hedge funds stepped on vulnerable longs after a technical breakdown. Given our Treasury synopsis, we believe the metals will be more acute to the U.S. Dollar. Does the Dollar weaken after Nonfarm Payroll? Such should support precious metals and the vice versa in the wake of a strengthening Dollar.
Now, Crude Oil is working through its own news flow due to the extended OPEC+ meeting. Yesterday, a deal to bring back about 400,000 bpd from August to December, totaling around 2 mbpd, was blocked by the UAE at the last minute. The meeting is ongoing and a failure to reach a deal could leave the market with no added production with the next official meeting not scheduled until April 2022. Although OPEC+ would likely keep talks ongoing, such would underpin prices. However, traders must not ignore the broader market’s reaction to today’s Nonfarm Payroll report.
E-mini S&P (September)/ NQ (September)
S&P, yesterday’s close: Settled at 4310.75, up 22.25
NQ, yesterday’s close: Settled at 14,548.50, down 0.50
Bulls are in the driver’s seat across all timeframes and the tape is extremely bullish while out above 4307-4308.50. However, we do not have major three-star support in the S&P until 4258-4260 and given the mounting run, a pullback would not be surprising, although such would also present a buy opportunity.
Resistance: 4324**, 4339.50**, 4389.75***
Support: 4307-4308.50**, 4286-4289.25**, 4276.50**, 4269.25-4271.25**, 4258.25-4260***
Resistance: 14,622***, 14,757**
Support: 14,520-14,540**, 14,451-14,487***, 14,390**, 14,339**, 14,230-14,286***
Crude Oil (August)
Yesterday’s close: Settled at 75.23, up 1.76
Price action is dipping below our momentum indicator at 75.10 this morning and this begins to exude some near-term exhaustion. Still, there is a trendline from the May 21st low coming in at 73.25 today and a significant level of major three-star support below at 72.57-72.82; the bulls are clearly in the driver’s seat while above here. However, a break below would encourage long liquidation.
Support: 73.85-74.05**, 73.25***, 72.57-72.82***
Gold (August) / Silver (Sept)
Gold, yesterday’s close: Settled at 1776.8, up 5.2
Silver, yesterday’s close: Settled at 26.10, down 0.094
Added buying has kicked in on Gold as we expected upon a move above 1775. Still, overhead resistance is real, such that Silver failed yesterday. Price action will hinge on today’s jobs data and the precious metals space will react. However, they are trying to solidify a bottom and such favorable data will bring strong bullish technical tailwinds that should pin Gold out above 1800.
Resistance: 1785.9-1787.8**, 1791**, 1799.3-1800***, 1812-1815***, 1828-1835***
Support: 1765.9-1767.5**, 1756.8***, 1750**, 1736.8-1738.2**, 1725***
Resistance: 26.40-26.55**, 26.94-27.09**, 27.32-27.36***
Support: 26.05**, 25.74***, 25.40**, 24.80***
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