Market Direction Week of September 3, 2019: Jobs Report Key this Week

Market Direction: BEARISH alert issued 8/14/2019



Be a part of our book of the quarter community get Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett The Worlds (Sponsored Link) Make the decision to be a lifelong learner.

Stock on the Radar (STAR)© is a service we provide. If there is a new stock strategy for the week we typically make it available Sunday evening. This allows investors time to research the strategy and decide if they want to take a position Monday when the stock market opens. Our competitive advantage is we provide our strategy for "FREE" to registered members.

Congratulations! Register below or login to get the next potentially explosive Stock on the Radar (STAR)© strategy. You be the judge.

Register here!

Market Direction Week Review: U.S. stocks climbed higher last week, finishing the volatile month of August on a high note. Behind the rally was optimism that further escalation in the trade spat between the U.S. and China will be avoided based on vague conciliatory comments from both sides. Economic data also helped after showing that consumer spending, which accounts for 70% of economic growth, rose by 4.7% in the second quarter, the strongest gain in four years. In another twist on the Brexit saga, odds of the U.K. leaving the European Union without an agreement increased last week after the prime minister announced he would be suspending Parliament before the October 31 Brexit deadline. Despite all the geopolitical uncertainties, it's the solid consumer fundamentals, still-rising corporate profits, and accommodative monetary policy that can help extend the economic expansion.

On Wednesday (8/28) the office of the United States Trade Representative (USTR) announced that it would increase tariffs by 5% on approximately $550B worth of Chinese imports. The increase includes $250B of goods which currently have a 25% tariff, and it will be effective Oct 1^st following a notice and comment period, and another $300B of goods originally cited for a new 10% tariff. The first tariffs on new items will be effective in two parts; $112B on Sep 1^st and another $188B on Dec 15^th. The new tariffs that will be effective on Sunday (9/1) include 3,200 items such as condiments, household goods and apparel, and could finally dampen consumer sentiment and spending, which has been fairly strong recently.

The USTR also accused China of unreasonable acts, policies, and practices resulting in increased harm to the U.S. economy. Responding to these charges and the aforementioned tariff increases, China softened its approach a bit stating that the two sides should work to de-escalate tensions and create the necessary conditions for continued negotiation. As a result, it is not entirely clear whether or not it will follow through on its previously announced retaliatory tariffs on $75B of U.S. imports, including U.S crude oil.

Separately, as protests in Hong Kong continue, news reports have begun to focus on the growing number of mainland Chinese who have covertly joined the demonstrations. Many of them are college students who attend school in Hong Kong and have experienced the more open and free society there. Back in 2014, college students organized a protest that occupied Hong Kong for 79 days, though current protests have garnered much more widespread participation. Apparently Chinese authorities have been checking the smartphone of any travelers going into Hong Kong from Shenzhen, for evidence indicating they might be participating in the protests.

This week in Brexit news, U.K. Prime Minister, Boris Johnson, asked the queen to shut down Parliament in mid-September just 6 weeks before the date of the Brexit (currently 10/31) arrives. Apparently his plan is to make it more difficult for members of parliament (MPs) to block his plans for a no-deal or hard Brexit. Opponents of the plan called it a “constitutional outrage” and “profoundly undemocratic”.

Of course, if the U.K. leaves the E.U. without a deal, then the current agreement would require a hard border between Northern Ireland (which is part of the U.K.) and the rest of Ireland, (which would still be part of the E.U.). Johnson opposes this Irish backstop, which was negotiated by former Prime Minister Theresa May. It is still possible that MPs who oppose a no-deal Brexit could change U.K. law to delay the deadline beyond 10/31 (as they have done once before) if Johnson’s shutdown tactic fails. 

How the market finished last week, the S&P 500 up 2.8%, the Nasdaq up 2.7%, and the Dow up 3.0%.

Trade stocks & options for as low as $1 until Independence Day 2019 at ZacksTrade (Ad) 

Market Direction This Week: We track the stock market based on our Bullish and Bearish Alerts a new Bearish Alert recently started on 8/14/19 and we suggested to our followers not to trade any new long positions. We will continue to provide you the current stock market conditions as they develop. The current stock market environment is in a correction trade with caution (see Market Direction Mid Week Update: Trading Strategies).

It will be a shortened trading week, as U.S. markets are closed Monday in observance of the Labor Day holiday. While the earnings calendar remains light for the week, a couple of key events will be in focus for investors.

Market watchers will be able to gauge the health of the U.S. labor market Friday when the August jobs report is released. Economists polled by Bloomberg are expecting the U.S. economy to have added 159,000 jobs in August, down from the 164,000 added in July. The unemployment rate is anticipated to have held steady at 3.7%.

Though job gains have slowed from last year, consensus remains that the pace has still remained largely solid. “Employment growth should continue to hold up in August, giving the Fed no reason to adjust its July meeting characterization of the labor market as ‘strong,’ Wells Fargo said in a note Friday. “The six-month moving average of nonfarm gains has certainly come down, especially relative to last year’s impressive pace, but continued gradual labor market tightening has kept income and spending rising.”

Credit Suisse economist James Sweeney argued that the labor market is not immune from broader growth weakness, and thus, job gains will continue to moderate. “Job gains are slowing to a more-sustainable pace after several strong years, which should keep headline unemployment in its current range.”

The economic calendar is fairly heavy next week, but upside technical resistance, new tariffs coming online, and 3 days of government by Twitter are likely to create a rather risky trading environment next week.

While equities have moved higher this week they are approaching technical resistance; thus the upside looks very limited at the moment. Additionally, participants seem to be hedging ahead of the new tariffs due to be implemented before the open on Sunday (9/1). Add to that, with a 3-day weekend approaching, President Trump will have lots of time to send anxiety inducing tweets.

Economic Calendar: Chicago PMI (9/3), ISM Mfg Index (9/3), International Trade (9/4), IMS Svcs Index (9/5), Employment Report (9/6)

Some of the major earnings announcements on deck: HQY, PANW, WORK, CRWD, LULU.

$tockMarketDirection proprietary model is currently BEARISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Building a community of investors one trade at a time. Share with a friend. Cha-ching!

Related Link: http://www.stockmarket-direction.com/