Stocks to gain on better economic data

Stocks went closer to their recent local lows yesterday – is this still a potential bottoming pattern?

The S&P 500 index lost 1.16% on Thursday, as it got closer to the 3,800 level again. The broad stock market’s gauge continues to trade within an over two-week-long consolidation following mid-December sell-off from the 4,100 level. On previous week’s Thursday it reached new medium-term low of 3,764.49, before bouncing back above 3,800. Overall it kept extending a consolidation recently. In mid-December the S&P 500 has been negatively reacting to the December 14 FOMC interest rate hike, among other factors.

The S&P 500 will likely open 0.4% higher this morning following better-than-expected Nonfarm Payrolls release (+223,000 vs. the expected +200,000). Also, the Unemployment Rate fell to 3.5% and the Average Hourly Earnings gained just 0.3% m/m. The S&P 500 index trades within a consolidation along the 3,800 level, as we can see on the daily chart:

Futures contract remains above 3,800

Let’s take a look at the hourly chart of the S&P 500 futures contract. It went higher following the important monthly jobs data release. The resistance level is at around 3,900-3,920, and the support level remains at 3,800.

Conclusion

Stocks will likely open higher this morning. So it may see more sideways trading action. Investors will be waiting for the next week’s Fed Chief Powell’s speech on Tuesday, the Consumer Price Index release on Thursday and a coming quarterly corporate earnings season. There have been no confirmed positive signals so far. However, stocks may be forming a bottom here.

Here’s the breakdown:

The S&P 500 index is expected to open higher this morning on monthly jobs data.
There have been no confirmed positive signals so far, however, stocks may be forming a bottom.
In my opinion, the short-term outlook is bullish.

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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' employees and associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.