To The Moon

The US market rally pulled back in a holiday-shortened week.

US Market Performance, Last Week:

• DJIA fell -2%, falling below its 21-day moving average (ma).

• S&P 500 fell -1.2% to just below its 10-day ma.

• Nasdaq fell -0.9% and holding its 10-day ma.

• Advancing issues outnumbered decliners on the NYSE by a 2.49-to-1 ratio; on Nasdaq, a 2.00-to-1 ratio favored advancers

Importance of the 10-day & 20-day ma:

1. 10 day ma: a powerful tool to know if prices are moving in an uptrend or a downtrend.

2. 20 day ma: provides many more reversal signals than a 100-day moving average.

The US Non-Farm Payroll (NFP) data was the main catalyst that affected the US market on Friday (see below).

• Nonfarm Payroll measures change in the number of people employed during the previous month, excluding the farming industry.

• Job creation is the foremost indicator of consumer spending, that accounts for majority of economic activity.

• A higher-than-expected reading should be taken as positive/bullish for USD.

• Similarly, a lower-than-expected reading should be taken as negative/bearish for USD.

• June 2023, NFP showed that US economy created 209,000 jobs (see above).

• This is -7.11% lower than analysts’ forecast of 225,000 jobs.

• At the same time, unemployment rate has fallen to 3.6%.

• Average hourly earnings increased by +4.4%, marginally above the forecasted 4.2%.

• NFP data suggested that labor market recovery was losing steam, as hiring was weaker in following sectors (i) leisure & hospitality, (ii) retail & transportation and (iii) warehousing.

• This was partially offset by hirings by (1) US government, (2) health care, (3) social assistance and (4) construction.

• US market fell, disappointed by the (a) weaker-than-expected job growth and (b) worried about the implications for inflation & monetary policy (see below CME Fedwatch).

Latest CME Fedwatch

• Looking at the latest CME FedWatch, probability of the Fed raising interest rate by another 0.25% later this month has risen to 95% (see above).

• After the hike, the new target rate will range between 5.25% to 5.5%.

• When trading resumes on Mon,10 July 2023, US market is expected to face more volatility as traders continue to digest & react to the latest data released.

• Q2 2023 quarterly earnings will be in-focus as mega cap companies will present their results.

• Companies reporting includes - Thu, 13 July - $Pepsi(PEP)$ and $Delta Air Lines(DAL)$.

• Fri, 14 July - $JPMorgan Chase(JPM)$, Wells Fargo, $BlackRock(BLK)$ and $Citigroup(C)$.

What I Would Do This Week:

1. Continue to monitor my watchlist stocks.

2. Will be extra cautious when I find a “good value” buy. This is because last week, a few of watchlist stocks exhibited “entry opportunity”, only to pull back amid the rangebound market.

3. Will not assume things will work out.

• Do you think US market will continue to consolidate this week?

• Do you think the Mega cap companies will hand up a stellar report card, fortifying the US market in the process?

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