Before analyzing SPX this week, I come back the latest new regarding US economy on last Friday: NFP report. As we knew, NFP report was more negative than expect : It printed 113k vs 185k forecast. Most traders thought about big sell-off in equity market but this didn’t occur. Why negative NFP report caused soar up in S&P500 ?. This contradicts with all predictions from economists. Why ?. There are three reasons :
- Firstly, NFP report was released simultaneously with Unemployment rate. While NFP report was more negative than expect, Unemployment rate quickly fell down to 6.6% (6.584%). This reinforced for Taper decision of FED and proved the recovery of US economy is reasonable.
- Secondly, Average Hourly Earning (MoM) was very positive despite of negative NFP report. More earning, more shopping , and promote US economy; this consolidated the confidence of investors and traders to push SPX higher despite bad NFP report.
- Thirdly, earning report of 343 companies in the S&500 were very positive, 67.9% of 343 have topped Wall Street’s expectation, slightly above the 67 percent beat rate for the past four quarters and ahead of the 63 percent rate since 1994.
Positive business result dispelled the anxiety of NFP report.
The question on the table now is whether that dynamic from last Thursday and Friday is maintained or just temporary?.
Recently , I saw a neglect of investors toward important news on Friday. They simply don’t trade when important news is released, and they use weekend for analysis, judgement, and after that, they trade on next Monday. We saw this occurred last week, FED decision taper on Friday, the market unchanged much, and on Monday, big sell off. I worry this mood would happen on next Monday, investors could hit SELL order cause of negative NFP report despite reasons I give above.
I don’t know what in investor and trader heads, I don’t know what they think, but if they choose to hit SELL order on Monday, it’s understandable due to the complexity of Stock market. They need time to analyze when they uncertain about something.
Come back this week, the main attention will be:
- Two Speeches of FED president Janet Yellen in front of House and Senate about FED .
- Retail Sales on Thursday.
I ignore Retail Sales because I know surely that it at least is neutral. It will not negative to cause damage to S&P500 .
I concentrate on FED President Janet Yellen speech. What will she said ?. A change in Unemployment rate benchmark or a defense for FED taper decision ?. I don’t know what she will say but I know surely her speech will not harm the market. Simply this is politics. She would choose the speech very carefully and at least it would be positive for market.
Hence, if SPX doesn’t sell off on Monday, most likely it will be its and test the next .
- Technical Analysis:
It’s very difficult to analyze in this situation because I don’t see any signal for this week. Everything I see is SPX is touch pattern, and other technical information doesn’t have much value.
I draw on the chart two possible range of SPX next week. In my opinion, I believe that SPX will test 1813 level next week. SPX would keep its dynamic due to good economic condition and recovery in confidence.
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