E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Buying Weakens on Rising Initial Claims
September E-mini Dow Jones Industrial Average futures finished higher on Thursday, but only after giving back more than half of its earlier gains. The blue chip average rallied on the back of stronger-than-expected U.S. Non-Farm Payrolls and a drop in the national unemployment rate, however, gains were limited by lingering pessimism over elevated unemployment claims.
On Friday, September E-mini Dow Jones Industrial Average futures settled at 25759.
Stocks initially rose Thursday morning after the Labor Department reported U.S. nonfarm jobs increased by 4.8 million in June, far better than the 2.9 million jump economists polled by Dow Jones had been expecting.
Investors also first applauded a decline in the national unemployment rate, which dropped to 11.1% from 13.3% in May.
However, the buying slowed after the Labor Department said Thursday that initial jobless claims rose by 1.427 million. The bearish news may have been the number of continuing claims – the number of people receiving unemployment benefits for consecutive weeks. It rose to 19.29 million, an increase of about 59,000.
Given the increase in COVID-19 cases the past couple of weeks along with new restrictions and lockdowns in some areas of the country, June labor market numbers may be the best we can expect for a while.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. However, momentum has been trending sideways to lower since the closing price reversal top on June 9.
A trade through 27466 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through 22640.
The minor trend is also down. A trade through 24409 will change the minor trend to down.
The short-term range is 27466 to 24409. Its retracement zone at 25938 to 26298 is resistance. This zone stopped the buying on Thursday at 25877.
The intermediate range is 22640 to 27466. Its retracement zone at 25053 to 24484 is support. This zone stopped the buying at 24743 on June 29.
The main range is 18053 to 27466. Its retracement zone at 22760 to 21649 is the major support.
Despite some of the headlines on Thursday, in my opinion, the jobs data was mixed to bearish. This is because I am looking forward like most professional stock market investors are.
The June Non-Farm Payrolls report may have been interpreted as bullish to some, but it’s old news since it represents what happened in June. With COVID-19 infections rising and states making moves to protect their economies, going forward, the focus will be on Weekly Unemployment Claims. If they start to spike higher, then I expect stock market investors to start trimming their long positions.
Despite the developing bearish outlook, there is still hope that the government and the Fed comes to the rescue with fresh fiscal and monetary stimulus, respectively. This is why I suspect we’re only going to see a mild correction and not a steep sell-off.
Overcoming the retracement zone at 25938 to 26298 will indicate investors are betting on a rescue package. Breaking below 24409, however, will indicate investors are betting on the economy worsening over the near-term.
For a look at all of today’s economic events, check out our economic calendar.