Weekly Stock Market Forecast: Equities Little Changed, US Dollar Rips
Equity markets in the US remained range bound for the week, with little volatility on the daily chart but still leaving some opportunities for day traders to earn their living.
The month of July finished positive by just over 2%.
Now, the market is stuck in low seasonal volumes and this trend continues through August. You can learn more about stock market seasonality in this article.
In the SP500 this week, the market rallied then sold off on Monday. Tuesday morning we caught a bid and held near the highs into the close.
By Wednesday this momentum reversed sharply, only to bounce off the lows and close unchanged. Thursday and Friday were quiet, despite the Non-Farm Payrolls data.
From a stock market sector perspective, the utilities rallied over 1.45%, along with financials which added 1.42% since Monday.
Despite turbulence in the technology sector throughout the week tech stocks managed to close in the green by 0.05%.
Energy was the biggest loser, down a total of 1.1% for the week.
Meanwhile, we think the US dollar is about to chase out some short sellers and rally in the next few weeks. Friday’s bullishness was helped by a strong employment report, which we’ll cover next.
We think dips on the US dollar are to be bought until we run out the 95.50 to 96.00 liquidity to the upside.
Strong Jobs Data on Friday, But Pretty Meaningless to Federal Reserve
The one thing the Fed has been very clear about, is that they think the jobs market has improved.
Friday’s Non-Farm Payrolls report, known as the “jobs report” confirmed their sentiment.
The latest data showed that the US added 209,000 jobs in July, much stronger than the expectation of 182,000, but less than last month’s 231,000.
At the same time, the average hourly earnings increased while the unemployment rate fell.
This was a triple positive.
But why didn’t the market react strongly?
Because the odds of a Fed rate hike in September are already low, and the strong jobs number reported just confirmed what the Federal Reserve speakers have been jabbering about for months.
The jobs report did have a significant impact on the US dollar, sending it higher by over 1% in under 2 hours.
There were just too many shorts of the US dollar, and the buy stops came out in full force on the excuse of strong data. We think the upside will continue to be the upside until we squeeze out some more late sellers, before reversing to move lower. Learn more about how to find short sellers here and how to find trapped traders and avoid becoming one here.
All Eyes on FANG Stocks and the Technology Sector
Monday opened up on heavy selling, down over 2.4% by the early afternoon.
The FANG Index recovered by Tuesday, but found it’s way lower into the Friday close.
Pay attention to this index this week, as it can help you spot early reversals.
Want to learn more about creating your very own FANG Index and how to use it? Watch our YouTube video here.
What to Watch in the Stock Market This Week
US Dollar – will the short sellers continue to get squeezed out, while sending the currency higher? If so, watch for gold to weaken.
FANG Index and Tech Sector – Will the weakness in FANG stocks continue, and if so, will the SP500 catch the cold and also head lower.
Inflation data on Thursday August 10th – will the PPI release on 8:30AM show a sign of weakness, will this impact Fed outlook for rate hikes?
Inflation data on Friday August 11th – will the CPI month to month release at 8:30AM confirm Thursday’s data, and how will that impact the market?
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Good luck and have a great week.
The information contained in this post is solely for educational purposes, and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.