Week review · w/c 31 May 2022 · Memorial Day week, with the jobs data in focus
My review into the Memorial Day week: Friday's debrief, the monthly, weekly and daily profiles marked up with my levels, and the jobs data ahead. The weekly is now OTFU, trading well above last week's high.
WK HIGH 4202.25 | WK LOW 4071.5 | CLOSE 4099 · 24-hour session
The week in brief
MonthlyA very strong rally into month end: a strong movement in price that is not well supported by daily structure, but looks very different on the HTF chart. We are back inside the prior multi-month balance.
Can the daily imbalance find acceptance inside the prior monthly balance area?
WeeklyWeekly now OTFU, trading well above last week's high at 4089.5.
Day by day
Friday 27 MayInto the long US holiday, but with month end still to contend with. The daily auction is now OTFU and looking to start OTFU on the weekly auction, above the prior week's high at 4089.5. This was an important piece of information into the RTH, as ON buyers were unable to test it successfully. IF we can find acceptance and a lack of sellers above last week's high at 4089.5, it may be the case that sellers are waiting for higher prices and buyers will move the auction higher to meet them.
The openInto the RTH session we had a small opening gap, where we had previously closed in the upper distribution of another (26/5) short-covering P distribution. Value has been shifting higher on the daily since the Ylow formed on 24 May, but it has left multiple NVPOCs. "Strongest price, weakest structure" is the quote from J Dalton.
The sessionRegardless of the structure below, on the open buyers showed a strong early hand that failed to attract sellers, with price moving away from the prior close and leaving multiple single TPOs. Indeed, the auction quickly broke above the ON high at 4087.25, to eventually trade and consolidate above last month's lows at 4120. The auction held for a long period around the IB high, in what looked like a sleepy end to the week given the holiday, but a late push higher saw it leave a singles marker at 4136 and trade up to the week's high of 4157.
The weekly structure
Weekly now OTFUTrading well above last week's high, 4089.5. The NWVPOC was touched into Friday's close.
- Lows 1, 2, 3 and 4 are non-excess lows.
- 5) Poor weekly structure, created from Thursday's and Friday's open-drive auctions, leaving an unfilled gap at 4075.
Levels for next week
From Friday's debriefLongs will be looking to hold on to these higher prices and maintain upward momentum. Failure to defend the spike base at 4148 and the singles marker at 4136 may engage sellers to test the resilience of the buying at Friday's VPOC at 4129. Below 4108 (Friday's PB to VWAP) we may see some further backtesting of singles, and a fill of the open gap left behind at 4073.5.
From the weekly
- Longs will want to hold on to late gains and defend the singles at 4136 and 4119. A TPO/volume ledge failure will see the auction likely backtest down to the unfilled gap.
- Below the volume ledge from Thursday, I'm looking for support at 4034, the lower edge of Thursday's P distribution.
- Backtest to 3995.
Realistic targets, based on expected daily range extremes, are marked on the latest review, above and below.
Data ahead
Highlights: key labour market reports out this week.
Next week, market watchers can expect several key updates on the strength of the US labour market. On Wednesday, the Bureau of Labor Statistics (BLS) releases its monthly Job Openings and Labor Turnover Survey (JOLTS) report, measuring openings, hires and separations for April. Job openings stood at a record 11.5 million in March, amid a historically tight labour market, and projections for April anticipate a slight decline to 11.4 million. Meanwhile, the quits rate stood at 3%, as turnover remains high amid the Great Resignation, with workers continuing to seek more favourable job opportunities.
Payroll provider ADP releases its monthly National Employment Report, tracking private-sector payrolls, on Thursday. Consensus calls for a gain of 280,000 positions, following a smaller-than-expected gain of 247,000 jobs in April. The BLS also releases the May non-farm payrolls report on Friday. Projections call for a gain of 310,000 jobs, compared with increases of 428,000 in both March and April. As of April, non-farm payrolls stood at 151.3 million, 0.8% below the pre-pandemic peak of 152.5 million recorded in February 2020.
Events calendar
- Monday 30 May: US market holiday.
- Tuesday 31 May: Salesforce (CRM) and HP (HPQ) report earnings; S&P Case-Shiller National Home Price Index (March); Federal Housing Finance Agency Home Price Index (March); Dallas Fed Manufacturing Index (May); CB Consumer Confidence (May); Chicago PMI (May).
- Wednesday 1 June: S&P Global Manufacturing PMI (May); JOLTS job openings and quits (April); Dallas Fed Services Index (May); Fed Beige Book.
- Thursday 2 June: Broadcom (AVGO), CrowdStrike (CRWD) and Lululemon (LULU) report earnings; ADP private-sector payrolls (May); factory orders (April).
- Friday 3 June: Non-farm payrolls (May); S&P Global Composite PMI, final (May); ISM Non-Manufacturing PMI (May).
Weekend reading
The Federal Reserve's press release on its balance sheet, and Benzinga's piece on what the Fed's balance sheet reduction will mean for stocks.
The Fed's balance sheet saw its first monthly decline since July 2020 as the long-awaited taper slowly began. Earlier this month, the Fed announced its plan to allow $30 billion of runoff a month for the first three months, before eventually raising it to $60 billion. Although the topic is hotly debated, stocks have historically struggled during periods of balance sheet contraction.
Key lessons
Trade well and prosper.
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