How markets will react to Friday's employment report

Price Action & Setup Analysis

If Friday’s Employment Situation report isn’t a surprise… then the market will be disappointed. Trending shallowly into Wednesday’s confirmation, and dipping most of Thursday, suggests the market is defensive — albeit while sitting at new highs. Cautiously optimistic. Yeah, what could surprise that posture.

Pattern points… (Setups and technicals)

Thursday’s dip into negative territory was recovered to essentially unchanged. Clearly, that’s where the market wants to greet Friday’s Employment Situation report. That doesn’t make one reaction likelier than another. But it is interesting for what was avoided.

For example, dipping intraday created room to absorb initial buying pressure. One path down would have been to absorb an initially favorable knee-jerk reaction up. But that dip is already recovered.

A new high close was just a handful of points higher, which would have fulfilled the outstanding objective of Tuesday’s confirmed breakout. Reacting down could have left no unfinished business above, but optimism remains in-check.

Thursday’s low did leave outstanding an oversold RSI at 1875.50. But there is no time schedule required for its eventual retest. A knee-jerk reaction down to it would more likely recover to launch a rally into the afternoon, instead of breaking lower. But even a knee-jerk reaction up wouldn’t be assured of trending up into the close.

What’s Next… (Outlook and opportunities)

There usually isn’t relevant price action the night before Employment Situation reports, and no preliminary position is suggested — especially with the close being at unchanged.

Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.

About the Author
Rod David

Rod David develops analytical techniques that are designed to efficiently identify targets and turning points for any liquid stock or market in any time frame. He primarily analyzes S&Ps, generating several round-turn candidates daily. Rod publishes "Trading Plan" and more each session at the blog http://IfThenSignals.com.

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