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.
Russell 2000 Technical
Analysis – Daily Timeframe
Russell 2000 Daily
On the daily chart, we can see that the Russell
2000 rejected the key resistance zone
around the 2030 level and the started to fall towards the 1920 support. The
buyers are leaning on the red 21 moving average as we
can see from the various rejections depicted by the wicks. The sentiment
though, remains bearish and the market may even play it defensively trading
into the CPI report.
Russell 2000 Technical
Analysis – 4 hour Timeframe
Russell 2000 4 hour
On the 4 hour chart, we can see that we had a divergence with the
MACD trading
into the key resistance area. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. In this case, we are still seeing a
pullback, but a break below the 1920 support would confirm the reversal and
likely lead to new lows. For now, the buyers are piling at this 1960 support
with a defined risk below to target the breakout of the key resistance.
Russell 2000 Technical
Analysis – 1 hour Timeframe
Russell 2000 1 hour
On the 1 hour chart, we can see that the
sellers have a short term resistance area around the 1985 level where they keep
piling in at every rally. This has created a mini range between the 1960
support and 1985 resistance which makes the setup pretty easy to trade. A break
above the resistance should lead to a rally towards the 2030 resistance or
beyond. On the other hand, a break below the support should lead to a fall into
the 1920 support or lower.
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.