We have NFP tomorrow and Fed chair Powell only wants to see a “decent number” to reduce Fed stimulus. In this article, we will look at how the SP500 might react. Our view of the fundamentals, sentiment, and technicals enclosed.
In terms of NFP, the SP500 has seen weakness over the last couple of weeks as the USD has been firm and also bond yields have risen and we can see the correlations with the SPX on the charts below.
If we see a strong NFP number this will signal a cut in Fed stimulus probably in November and could firm the USD and bonds which is bearish for the SPX but will we get a good number?
Nonfarm payrolls are seen increasing by 488k in September after a gain of 235k in August. Payrolls should be above 500k in our view the “Biden bonus” in terms of extra unemployment benefits finished at the start of September which was the main reason for the poor August number. In addition, the return of in-school learning in early September has freed up more parents to go back to work.
A good number could firm the USD and yields in the bond market and send the SP500 lower but a miss could send the SP500 higher. The key will of course be to watch price action our view of the key technical levels to watch below:
On the daily chart, we have seen the SP500 rally back to first level resistance and the 20 Day Moving Average – If this level were to break we would meet resistance at the 4500.00 level. Support on the downside is at yesterday’s open. If we were to break lower, the weekly chart shows big weekly levels of support. If we were to break 4500 we would expect the uptrend to resume.
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