Preface
On Friday, equities were lifted again to new highs as we got more good news on the inflation front.
Core PCE fell from 4.7% to 4.6% in May, and the PCE deflator plummeted to 3.8% from 4.3% prior according to the U.S. Bureau of Economic Analysis. Although expectations held firm for a Fed rate hike at the July meeting, the market expects that to be the final raise for the year.
The S&P500 made fresh 52wk highs off the print, and I believe the Nasdaq and Dow are up next, followed by the Russell 2000. There seems no end in sight to this run, despite the endless media negativity toward it. Follow the trend until it changes.
Economic Calendar
Highlights
ISM Manufacturing PMI - Monday
FOMC Minutes - Wednesday
ADP Employment Change - Thursday
ISM Services PMI - Thursday
Nonfarm Payrolls + Unemployment Rate - Friday
Data Preview & Commentary
PMI numbers are a leading indicator for CPI, and they’ve been trending down all of 2023 so far. A sudden resurgence would infuse volatility into the markets and impacting the Federal Reserve expectations. These estimates aren’t expected to show much surprise, however.
We already know that the July FOMC will be a live meeting, as Jerome Powell offered this revelation a couple of weeks ago. It’s hard to imagine anything out of the ordinary or that hasn’t already been revealed, so this Fed minutes release is quite possibly more of a non-event than usual.
Private businesses created 278K jobs in May, and this employment metric has remained robust so far in Q2. I’m always skeptical of these readings, as many of the online job listings are fake. A number well above 200k, however, could shift rate hike expectations higher and create some risk-off in the markets.
Main Event
Nonfarm Payrolls is the cherry on top of our 4th of July holiday week cake. Forecasts are weak, which should encourage the markets if true. The stronger these numbers come in, the further out the Fed feels it needs to keep rates elevated. The economy’s unexpected injection of 339K jobs in May is likely unsustainable, and traders are looking for a low number here to prove it’s not a sticky trend.
Charts
BTC
There was a lot of Twitter debate over which direction Bitcoin would go first, and ultimately it resolved to the downside but then recovered quickly after touching our first support at 29.5k. As of now it looks like a failed breakdown, which means price may in fact accelerate to the upside and hit that 32k area.
However, it’s important to note we’re entering the weekend and also the week of July 4 so everyone is now in holiday mood. We could see some whale action and illiquid moves over the next few days.
S&P500
We’ve left a gap around 4400, which creates some room for consolidation short-term. Next big levels on the upside are 4589, 4748 and ATH. I won’t be changing my bullish stance on buying the dip in stocks until we experience a daily trend change (lower high, lower low) here.
Total2 Market Cap
Overall market cap without BTC is looking nice after setting a daily higher low. I expect this move to continue higher as long as 531B is held. Nice and simple.
That’s all for today! Happy Fourth of July to our American friends!! 🇺🇸🇺🇸
Jay Charles
Editor in Chief, The Trading Tank.
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Volatility looks like its increasing on BTC while some altcoins are starting to pop. Seems like a bright future!.