NFP Data on Tap, S&P 500 Slowly Grinds Higher, Overbought?

Updated on

Holiday-style trade, narrow ranges, and low volatility have been this week’s theme in the S&P 500 thus far. What is the slow chug leading up to, with Friday’s BIG Jobs Number?

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q1 2021 hedge fund letters, conferences and more

The Latest Jobs Report

It seems like we just got the last jobs number yesterday , but here we are again awaiting the big data drop on Friday at 8:30 AM ET. The market consensus seems to be for 700K jobs added during the month of June, with some consensus indicators showing 690K. The expectations have seemed to increase over the last week, as expectations have risen from ~ 660K.

Last month, the Non-Farm Payroll number missed expectations; printing at 559K versus 645K expected, and the US Equity and bond markets did not care, as both marched higher.

But that was so last month . How could the markets behave on Friday’s data release?

I tend to avoid having leveraged open positions heading into big data releases like NFP and CPI. Longer-term swing trades and position trades are just fine to hold onto, however.

There is some seasonality for the S&P 500 to move higher heading into the 4th of July. Some analysis shows getting long 2 days prior to the release yields certain results over X amount over a number of years, and other analysis seems to show getting long the day before is good too. You can read about what veteran Trader Larry Williams had to say about this last year.

Analyzing the SPY today for the ETF Traders out there:

S&P 500

Figure 1 - SPDR S&P 500 ETF February 18, 2021 - July 1, 2021, 10:20 AM, Daily Candles Source stockcharts.com

The Recent Selloff In The S&P 500 Index

Looking at the SPY, we have been higher eight out of the last nine trading sessions! That is a rare feat in the index. Given the recent selloff to the 50-day moving average that we were waiting for, it does make sense that we have continued higher, but eight out of the last nine sessions is rare. This is just some food for thought. In addition, we are seeing Daily RSI(14) at 67, which could indicate the SPY approaching short-term technically overbought levels in the trading days ahead. It is not all that often where the SPY will hold an RSI(14) Daily level above 70 for a lengthy period.

Drilling down further to the hourly candles, I notice some indications of short-term overbought levels (well, we have been higher in eight of the last nine trading sessions, after all!).

S&P 500

Figure 2 - SPDR S&P 500 ETF June 15, 2021 - July 1, 2021, 10:45 AM, Hourly Candles Source stooq.com

There aren’t too many surprises here when looking at the hourly chart. The S&P 500 has been moving higher steadily, and it feels like we are headed for a short-term volatility spat (either higher or lower) with the NFP data release on Friday.

Let’s keep in mind that this is a Holiday week in the US. Trading volumes tend to dry up, and slow moves higher can be a prevailing theme during holiday-style trading. US equity markets are closed on Monday, July 5th in observance of Independence Day in the US. Some futures products will trade on July 5th with abbreviated trading sessions. You can see the Holiday trading hours for the CME here . Be sure to know the holiday trading hours for your product!

Conclusion

Heading into Friday, I am not expecting much in the way of market fireworks before the NFP data release. The slow grind higher has been the theme as market participants await the big NFP jobs data.

Let’s recap the markets we are following and see if there are any key levels or developments in each for Premium Subscribers .

Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.

Thanks for reading today’s article. Have a great Independence Day Weekend!

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Rafael Zorabedian

Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care


This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits' employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.