Daily Commentary: July 05, 2024

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Jobs Report Won’t Impact the Market

Posted by Pete Stolcers on July 05

Many traders are making this a 4-day weekend and we needed a big “beat” or “miss”.

PRE-OPEN MARKET COMMENTS FRIDAY – The market has been in a gradual drift higher the last week and it is resting at the all-time high. The economic data has been a little soft this week, but the Fed has plenty of breathing room to cut rates if needed. That is keeping buyers engaged.

We learned that 206K jobs were created in June and that was in line with expectations. Hourly wages increased .3% and that was also in line. Employment for the previous two months was revised lower by 110K jobs.

The bigger issue today is the 4th of July holiday that bisected the trading week. Many traders took Friday off to make this a very long holiday weekend. They were prepared to trade the first couple of hours remotely if the release produced a big move. The reaction has been muted and the S&P 500 futures are flat.

The market staged a nice breakout Wednesday to a new all-time high. Today we will see if the market can add to those gains. Bulls would like to see a doji today. That would be a sign that buyers are still supporting all of the gains from Wednesday. Next week, bulls want to see the market add to the gains.

Bears will be looking for any signs that the move Wednesday was all program driven (“fluff”). They would like to see a nice round of profit taking that strips away the gains from Wednesday. The open from Wednesday was SPY $548.70. If that level fails in the next few days, there is a good chance that we will see follow through selling.

I have been keeping my swing trades to a bare minimum. I am not going to chase a light volume rally at this stage. The risk of a reversal from these levels is elevated. I have a handful of weak stocks that I will short on market weakness, but I am going to keep my size small. I need technical confirmation of heavy profit taking before I take those positions. Light volume rallies can continue for a long time and you do not want to be early. When we do get the dip, I will be evaluating the quality of the move. If it comes on light volume and the candles are mixed and overlapping, I know that the drop will be brief and shallow and that a buy will set up quickly. If the move is deep and prolonged, I know I have to patiently wait for support. Once support is established, a good buying opportunity will set up. Based on the price action to this point, I believe that any dip will be brief and shallow and that a good buy will set up in the next few weeks.

From a day trading standpoint, you can trade either side as long as you have a stock with heavy volume. You also need a technical breakout/breakdown to fuel a directional move. Without these two elements, most stocks will be dead in the water today. They might look like they are making nice moves, but as soon as the momentum wanes, they will reverse. Know that most traders are taking the day off and that the volume will be very light. The reaction to the jobs report has been muted so far and our best chance for good conditions today would have come off of a big overnight move. Keep it very light today.

Support is at the low from Wednesday and resistance is the all-time high.

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