Friday: Jobs Day Move the Market; Chart Time
Lede
The United States non-farm payrolls (NFP) report is due out tomorrow (Friday, 10-7-2022). So, today, we look at the indices.
Indices (SPX, NDX)
On impactful economic data days, we will do less stock by stock screening and charting and instead look to indices.
Let’s start with the SPX and a 3-yr time frame.
(For current Pattern Finder beta tester, we note that the updated algorithm for trend lines pictured here is not yet in the product you are using.)
Pattern Finder starts trend support at that COVID low and has it pass through the most recent lower low, while disallowing the most recent 10-trading days to act as an anchor point.
This chart shows SPX already below support (red line) and below the 50-day SMA (blue line).
A poor reaction to the NFP data could expose the SPX to a lot of downside, and we would likely have to turn to Fibonacci to draw new support. There’s a long way to fall.
A (very) strong reaction to the economic data could push the index back to trend support and fully 8% - 10% higher over the few days to follow.
A shorter term trend support looks like this:
It’s a different picture than the failed support on the 3-year chart, but most chartists would agree that long-term support (or resistance) is stronger than short-term.
Our takeaway is that it’s virtually impossible to make a cogent prediction, but we can note that the index is in technical failure using a longer-term support trend.
Bulls would hope for weak(ish) economic data that is enough to get the doves into the buy zone: lower NFPs, higher labor participation rate, higher unemployment rate.
We can turn to the NDX as well.
This is virtually the same chart as the SPX and we have the same conclusion.
We can turn to the economic data leading up to the report on Friday.
Economic Data
The NFP is described as the following:
Nonfarm payrolls is an employment report released monthly, usually on the first Friday of every month, and heavily affects the US dollar, the bond market and the stock market. Current Employment Statistics (CES) program from the U.S. Department of Labor Bureau of Labor Statistics, surveys about 141,000 businesses and government agencies, representing approximately 486,000 individual work sites, in order to provide detailed industry data on employment, hours, and earnings of workers on nonfarm payrolls.
The unemployment rate will also be released tomorrow within the NFP report.
The Fed wants the unemployment rate higher, the labor participation rate higher, and NFPs lower, all in an effort to bring disinflationary wage pressure.
The latest round of data in this regard has been promising if the Fed’s goal is to be met.
First, this is the NFP data as of last month (the new data comes out in less than 24 hours).
A down trend has started, for now.
Equally, job openings have begun to roll over:
At the same time, the number of job cuts in September as shared in the Challenger report appears to be in an uptrend.
Slower job growth (NFPs), fewer job openings, and more job cuts hypothetically make for the magic elixir to bringing down wage inflation. If we add a stronger labor participation rate, it’s virtually impossible for the disinflation pressure not appear (eventually). That’s a lot of “ifs.”
Here is the labor force participation rate as of last month (to be updated on Friday).
All of this data is either a trend that will be reinforced or… not.
For now, the major market indices look weak and for strength to emerge, the job numbers will have to come in to the Fed’s liking, at the every least.
What’s Next
We will continue to share charts, screens, and short discussions over the next few weeks before the CML Pattern Finder product becomes available in late October.
The product will have everything IBD MarketSmith® has, a lot more, like algorithmically drawn support and resistance trend lines, built with better, faster, more flexible, and more responsive technology.
It allows for additional technical signals beyond just those offered by the CANSLIM methodology, far richer fundamental screening data, but…
… it will cost 70% less. Yes, 70% less.
Stay tuned to this channel.
Thanks for reading CML Pattern Finder.