With earnings being the main focus of July, we saw US Indices retreat from their new all time highs as FAANG earnings surprised many investors. Last week saw the NASDAQ, Dow Jones and S&P500 close at -0.84%, -0.12% and -0.10% respectively.
FAANG companies made an effort to warn investors about slow growth rates as well as lower margins due to economic activity slowly going back to normal. This, in addition to the Delta variant being responsible for 92% of new COVID cases reported, has investors nervous as the labour market recovery continues to be hindered. This brings our focus to Non-Farm Payrolls on Friday.
With August being known as a dry month in terms of volume and liquidity, this week’s risk events will be closely monitored as it could provide some clue as to where we could be heading. Obviously this week’s main focus will be NFP, but we also have Initial Jobless Claims and Unemployment Rate on Thursday and Friday respectively. Last week’s jobless claims data disappointed investors as it still shows a fragile rebound in the labour market and may strengthen the Fed’s Dovish stance.
Technically, NASDAQ continues to make new all time highs every week. We saw the slight pullback on Friday on the back of FAANG earnings surprising investors. The bigger picture on NAS still shows upside however. While a technical pullback is still possible, we would need a fundamental catalyst to swing price in a certain direction. Since NASDAQ is still trading at new highs, it has almost no levels of resistance going forward. This week will most likely see investors adopting the “Buy The Dip” mentality, buying up any retracements. A break and closure above the previous highs around the $15 150 region could constitute continued bullish momentum until profit taking occurs.
The Dow Jones has been range locked for the last week, struggling to choose a true direction from that psychological level of $35 000. Fundamentally, the Dow has room to rise with banks and infrastructure being in focus and finally showing growth. A “Buy the Dip” mentality can adopted here as well as we await any retracements on the Dow to potentially take price higher. The psychological region of $34 500 looks very favourable as it lines up with our 50% Fib retracement region. Be weary of manipulation spikes down into $34 250 potentially.
As always traders, exercise healthy risk management and we hope you have a fantastic trading week ahead. For more updates like the one above, subscribe to our blog for instant updates to your mail or join our Telegram Trading Floor via our website at http://www.aspirefx.co.za.