Job Contraction
S&P – The March Non-Farm Payroll report showed a loss of 80,000 jobs, underscoring the weakness in the labor market. The report included a downward revision of the February figure from a loss of 63,000 jobs to a loss of 76,000. The unemployment rate surged to 5.1 percent from 4.8 percent the prior month. Stock index futures sold off sharply immediately after the release of the data, but have bounced back to positive territory. While the recovery in the index futures defies common logic, traders may actually be pleased with the report, believing the Fed may continue injecting liquidity via rate cuts. Banking stocks got a boost in pre-market trading, which seems to go along with this mindset. Traders may also have been prepared for the report after yesterday’s large initial claims figure and are now looking beyond the report, hoping for an economic recovery later this year. If the market continues to move higher, the June e-mini S&P may show a breakout from a two-day bull flag pattern. A breakout could signal that the market may be ready to attack early February highs of 1402.50. Momentum continues to outpace both price and RSI, suggesting near-term strength. Support comes in at 1362.75, 1352.00 and 1344.50, while resistance can be found at 1381.00, 1388.50 and 1399.25.
Crude Oil – Oil futures have bounced back after selling spurred by the release of the payroll report. The demand outlook continues to look weak based on the data, but the possibility of a reversal of the recent upturn in the U.S. Dollar is friendly to commodities. The Oil market continues to play off of the currency markets instead of fundamental data. Even though the last two EIA reports were supportive of petroleum prices, the market is well off of highs because of the resurgence of the greenback. The daily and weekly May Crude Oil charts show consolidation and indecision. It is apparent when looking at the chart that there is reluctance to push prices beyond $110 a barrel, but at the same time, bulls seem to step up the buying pressure when the contract flirts with $100 on the downside. A breakout of this congestion will likely determine the direction of the market over the next several months after either the bulls or bears gain a decisive edge. Support comes in at 102.55, 101.26 and 99.32, while resistance can be found at 105.78, 107.72 and 109.01.
Bonds – Bond futures got a lift from the payroll report, as traders flocked to safer investments. While the report can be seen as very Bond-friendly, the implications for the U.S. Dollar may stymie treasury buying from overseas investors. Overall, the report could stop the recent slide in Bond prices. The solid economic data earlier this week hinted toward the Fed possibly pausing rate cuts, or at the very least being less aggressive with them. This report may change that mindset among traders. June Bonds found support at 117-00 and are currently trading above chart resistance at 118-23. Closes above 118-23 and 119-19.5 may be seen as bullish in the near term. Support comes in at 117-05, 116-25 and 115-28, while resistance can be found at 118-14, 119-11 and 119-23.
Rob Kurzatkowski, Commodity Analyst
