July 8, 2011
Markets Flatten ahead of NonFarm Payrolls as Day Traders prepare for major news this morning
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All eyes are on the jobs report this morning at 830am with NonFarm Payrolls here in the US. Often referred to as the ‘jobs report’ this is the biggest news report we have to watch for, and it has some very distinct personality to it.
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| NonFarm Payroll Data |
Nonfarm payroll employment in May grew a modest 54,000, following a revised 232,000 jump in April and a 194,000 increase in March. Sluggishness in payroll jobs was broad based. Private nonfarm payrolls advanced 83,000 in May, following a 251,000 increase in April. Government jobs contracted 29,000, following a 19,000 dip in April. This latest decrease was largely local government, led down by local government education. On a positive note, wage growth improved in May as average hourly earnings rose 0.3 percent, following a 0.1 percent uptick in April. The average workweek for all workers in May held steady at 34.4 hours. Turning to the household survey, the unemployment rate nudged up to 9.1 percent from 9.0 percent in April. Household employment actually rose 105,000 for the month but was outpaced by a 272,000 gain in the labor force.
In my experience NonFarm Payrolls will show us narrow trading ranges (consolidation) before this major news release, and then after the news comes out we always see either very fast price action (too fast to trade) or the market will sit sluggishly (too sloppy to trade) until the markets can figure out which direction they want to go.
I always seem to have a hard time waiting long enough to really trade the correct time of the morning after 830am. It tends to be around 845am that we get the first easy trade, often being either too fast and whippy or too slow and sloppy immediately after the release.
Another major issue with this NonFarm payrolls number is the breadth of the news being released. There are dozens of pieces of information released today @ 830am and traders may have a hard time picking these apart and placing their bets. NonFarm Payrolls are the best example of a news event that we cannot predict, we can only react, and we will be watching the dollar along with reading the tape on the markets we trade most looking for clues as to how the market is going to react.
Once we get through 930am US Market Open this morning we really don’t know how long the volume will last. I will assume no trades after 11am today because of a Friday, so watch closely at the speed and personality of the markets after 10am est today, and expect 1030am to bring some significant drop off in the action. We will wrap things up today with a Webinar at 11am to answer all of your trading questions.
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Let’s take a look at the charts this morning, starting with the US Dollar Index.
The US Dollar Index is trading in a sideways range this morning, expected before a major news event, so we have potential in all three directions this morning. The dollar may jump to the highs on bullish news, may drop to the lows on bearish news, and may trade sideways in the middle of this range if the news comes out mixed.
Remember to use the Dollar Index correlation when using this market this morning.
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| US Dollar Index SchoolOfTrade.com |
Crude Oil Futures are trading lower, just off their highs from earlier in the week, showing signs that 100.00 may be just out of reach…for now.
Crude has developed into a sideways range after making new highs earlier this week above the 98.00 ‘No Trade Zone’ and with the pullback off the highs we assume there will be an easy trend line down from the highs to create a bull price wedge.
It will be important to watch the range around 98.00 to make sure we don’t get chopped up around this sloppy area. The bull price channel tells us to keep buying pullbacks and buying at support levels as price keeps rising for the highest percentage trades of the day.
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| Crude Oil SchoolOfTrade.com |
Gold Futures are in the same spot we found them earlier this week, trading sideways just off the highs of the price wedge, bear price channel, and sideways ranges. Earlier this week we took a swing trade short at the highs of this range and still waiting for price to drop to the lows this morning with our stop above the Highs of 34.5.
Gold will be tied to the US dollar very closely this morning as the news comes out, and remember that fear may drive Gold and the US dollar index in the same direction (when the dollar index correlation fails) so we will be reading tape looking for clues on Gold after 830am news.
The bear price channel and bear wedge give us big clues to sell retracements and sell at resistance with lower prices this morning as the highest percentage opportunities.
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| Gold Futures SchoolOfTrade.com |
