Jobs data was perceived as bullish this morning as May added more jobs than expected although last month was revised lower by 10K. Unemployment also ticked up to 4% for the first time in two years with a slight increase in wages. Higher wages may also indicate that we could be looking at higher inflation in next week's CPI report. There is almost no fear in the market right now even with many metrics indicating an economic slowdown. The hype around an interest rate cut is still in play.
The S&P broke out of a falling wedge and is now at all time highs. It's hard to say how much further the market will move, and every dip continues to get bought back up. Sellers have not appropriately stepped in yet, so we may continue to see dip buying opportunities in the near future. -Frank
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As the market sits at all time highs, investors may start to question whether the rally is sustainable or not. Regardless of jobs numbers this week, it seems that NVDA is a key factor in the S&P's strength which is now a $3 trillion market cap and is the second biggest company in the world.
NVDA's bullish sentiment is revolved around the 10/1 stock split on Friday which could drive even more demand into the company. Although the stock won't become cheaper on a value basis, it will be less expensive for investors to participate in the trade. -Frank
Today's unemployment number came out higher than expected for the second week in a row. Wednesday's ADP NFP was softer as well indicating a slowdown in the private payrolls. Tomorrow is NFP, and analysts expect a higher number than last month. But the signs so far this week are pointing to a cooling jobs market.
Читать полностью…USOil
Oil prices dump as we start the month of June. An indication of crumbling oil prices could be due to a growing fear of recession as jobs slow again this month. ADP NFP came in lower than expected to 152K. Yields are already falling on the day after worse than expected jobs news. This year is also an election year which could be another reason why oil prices are dropping. There is not a strong reason for the Fed to cut rates unless we see something start to break. If jobs start cooling further, we could see a risk of recession, and the Fed may be prompted to cut. However, they also have to keep in mind that inflation still remains elevated. Until then, oil may continue to fall. -Frank
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Читать полностью…There has been a steady rise in unemployment, steady fall in job openings, and a mostly-lower NFP trend. With earnings season wrapping up, it looks like PMI and NFP are the only things that will affect the stock market. Now that we are nearing all time highs in the S&P, the question is whether it can justify being at this level with a weaker economic outlook. Friday's NFP may be the market's last line of defense this week for the bull market.
-Frank
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ISM Manufacturing PMI data came in lower than expected at 48.7 indicating another concern in the overall US economy. Events to strengthen the dollar would likely be a higher JOLTS number and a higher NFP from both the private and public sector.
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Retail is now long dollar by shorting AUDUSD, EURUSD, GBPUSD, NZDUSD. They are also long metals other than gold, long crypto, and long NAS100 and RUSSELL.
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One asset that is fit to hedge against the dollar better than others is gold. Gold has seen some remarkable upside this year, but that does not mean that the run is over. With yields turning lower, the metal bounces off support on the 1D timeframe and is looking to push higher.
If interest rates are capped at 5.5%, gold could start to see even more demand from investors as it is now the most longed asset on COT data. A weaker JOLTS, ADP NFP, and NFP could spark the next move higher for the metal. -Frank
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The NAS has now dipped below the previous all time highs on the 1D timeframe. With about 2 hours left in the trading day, the candle still has potential to recover this morning's drop. The past week has been a quiet decline to the downside indicating a lack of buyers in this market. There will likely be more volatility next week, but the direction has yet to be decided. -Frank
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Читать полностью…The NIKKEI is now the most shorted asset from institutions, and the yen is just behind it. Interest around US indices is not as strong as it was earlier in the year. Meanwhile, NZD, GBP, AUD and EUR are the top buys from COT.
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Retail is now 90% long USOil which is due to its heavy drop in price this week. Falling oil prices could be a result of it being an election year, so I would not bank on oil seeing heavy upside this year. The indices are majority shorted by retail which is another sign for bullishness in stocks for now.
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The dollar remains weaker against the euro as rates seem capped and a rate cut could be the next move from the Fed. EURUSD is now a +10 which up 2 points from yesterday. Regardless of the reason for the cut, this means dollar weakness.
The Fed would like the luxury of cutting as in the economy shows signs of health. However, the signs of a cooling jobs market is not what the Fed wants. And if NFP comes in lower, it's going to look even more bearish for the dollar. This could cause more demand to the bullish side on EU. -Frank
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Gold is still our best bullish reading on the EdgeFinder at +11. The reason behind the metal's bullishness is coupled with the fact that we're seeing a cooling jobs market. Obviously, NFP could change the narrative on Friday, but for now it looks like the economy is not as healthy as analysts hoped.
Investors want signs of a rate cut which coincides with a softer NFP, but it might not be for bullish reasons in the stock market. If the Fed feels forced to cut because of a worse economy, that is not a healthy reason for stocks. But it is for gold which trades as a hedge against the dollar and yields which continue to fall. -Frank
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We got softer private payroll numbers and a much higher Services PMI report this morning. This PMI number was the highest reported since last October 2023. There is surely mixed economic figures coming out as the stock market chugs on to all time highs in the NASDAQ. Friday's NFP is expected to come in higher than last month, but a miss could signify an overall cooling jobs market. Stocks may be able to keep running if there is no clear sign of a jobs decline. If NFP does come in higher, gold might get weaker and stocks may move higher.
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USD/CHF
One reason why the market may be holding up for now is the lack of bullish sentiment around the dollar. And investors want to look for an alternative to where they should put their money. The fact that US interest rates might be capped at 5.5% means that demand in bond yields and dollar are not as strong as they used to be.
The SPX500 has still not gave in to added pressure from a broader decline in economic outlook. With earnings season coming to a close, the only things left standing in its way for the week are JOLTS, Services PMI and NFP. Although we have seen pessimism in the US economy in the past, the market is quick to recover the losses it incurs from bad news.
-Frank
Gold
Gold is now the top bullish setup on the EdgeFinder at +11. With weaker ISM PMI on Monday, the US is expecting a lower JOLTS report this morning which would mark the fourth straight month of falling job openings. If JOLTS misses, we could see more demand in the gold market. Right now, price is resting on a key support level on the 1D timeframe around a rising trend line. -Frank
COT is now short NAS and US30, long GBP, EUR, AUD and gold. Seeing this sentiment diverge with retail is a significant indicator that the dollar is weaker. USD saw little to no interest this week again.
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What we are seeing in the bond market also depicts a fall in bond yields. As bond prices get higher, yields move lower. Right now, bonds are one of the top bullish scores on the EdgeFinder. Smart money is over 60% long on bond prices as they are betting on lower yields in the future.
The longer inflation remains elevated, the Fed won't cut. But they are also adamant about staying where they're at. So in a way, yields are capped in the eyes of investors. This means that it's only a matter of time before interest rates begin to drop. That's why COT is buying bonds.
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EURUSD is now a +13 on the EdgeFinder as most metrics point towards a weaker dollar and stronger euro. Sentiment shows COT buying EUR last week and an overall long position on the currency. ISM PMI has already come out at the time of writing this which was lower than expected.
The narrative for the dollar now could be that strength is limited. This is because the US has a Fed that doesn't want to raise interest rates any more, economic figures are not impressive and inflation is still stubborn. It seems like the Fed is more likely to cut rates than they are to raise them.
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Gold is still stubborn on the 1D timeframe after today's lower than expected PCE number. The stock market has been quietly retreating from the highs after falling consumer sentiment last Friday. PCE is a key gauge of inflation, so lower PCE is making the dollar seem weaker (bullish gold). Next week is going to be a heavy news week for gold and the USD. Investors are eyeing the potential slowdown in economic activity. -Frank
Читать полностью…GDP growth is a main concern among investors right now. This morning, numbers came out better than expected. However, we have seen a stark decline in growth since March. From 3.4% to now a mere 1.3%. This is not a good sign for the US economy despite how many forecasts we beat. As long as the trend continues downward, the dollar will likely weaken and it could take a toll on US stocks too.
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Retail is majority short on GER30, USDCAD, SPX and UK100. They still remain mostly long on metals, crypto, and the NASDAQ.
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EURUSD is now our strongest bullish thesis on the EdgeFinder. There is a lot of mixed sentiment around the markets right now, but one thing seems to be common: dollar bearishness. Even if the Fed decides to hold rates steady, it's still not great for dollar sentiment.
This is because there are almost no expectations of another hike. So, stubborn inflation and lower growth is just going to look weak on the dollar's front. -Frank
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