DAX Seeking Boost from ECB; S&P 500 Staring Down New Record

Talking Points:

  • S&P 500 trying to trade to new record highs but may stall; data docket lacking ‘high’ impact events
  • DAX is trying to reverse trend with a softening euro; ECB on Thursday could reinforce more upside
  • FTSE 100 remains neither here nor there; no major data points this coming week
  • Trading psychology can’t be understated, check out our guide – Building Confidence in Trading.

    S&P 500

    On Friday, U.S. jobs data for August came in weaker than expected, with the headline NFP figure at +156k compared to the +180k estimate, while the July number was revised lower to +189k from +209k. Unemployment ticked higher to 4.4% from 4.3%, and average hourly earnings remained even at +2.5% YoY, but slightly below the 2.6% expected. The report capped off a week where we saw a gap-down open on Tuesday in reaction to North Korea firing a missile over Japan. The theme recently has been for escalations with NK to be brief and market weakness to be short-lived, and so it was again last week. The market’s response to lower prices was the strongest so far since the situation with NK began flaring up last month.

    To start the week, U.S. stock markets are closed in observance of Labor Day. Once they reopen Tuesday, general risk trends could be the driving force behind price fluctuations with the economic calendar light on ‘high’ impact data events. The biggest data release comes on Wednesday when ISM Services/Non-Manufacturing Composite for August is released. For data release details, see the economic calendar.

    From a technical perspective, we continue to see good buying pressure on dips, and with that a bullish posturing as record levels lie not far ahead. While it is a bit too soon to take into serious consideration, one scenario we could see come to fruition is a ‘head-and-shoulders’ top. But for this to take shape we will need to see the market turn down almost immediately if it is to carve out a ‘right shoulder’. We’ll expand on this scenario at a later time should it become relevant. If the S&P doesn’t start rolling over and can take out the prior record high at 2491, the psychological 2500-level is likely to come into focus quickly. Beyond there no resistance lies until an upper parallel extending higher over peaks starting back in June.

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