The Rooster Call: US Employment Report Will Have Impact

Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day

Happy Friday to everyone! August is upon us. Vacation is on the brain in Europe for most consumers and in the USA, vacations for school kids are winding down in the next three weeks.

Today we have USA Employment Situation Report. The Street will express surprise on a number below 200,000. Consensus range is 200,000 to 280,000 new jobs created. This covers a wide swath of expectations with most looking for 233,000. As a general rule, the stronger this report, the harder bonds tend to fall. A weaker report supports bonds.

Important data points continue in the USA today with Personal Income and Outlays, USA PMI, Consumer Sentiment, the important ISM Manufacturing Index, and Construction Spending. Those reports I underlined are market moving reports. We should expect a volatile morning of trading in USA equity index futures.

Overnight the European Union PMI Manufacturing Index was reported at 51.8 matching June’s report. We can say there is growth albeit sluggish. Germany reported 52.4; below expectations, but higher than June. France reported 47.8; above consensus, yet below June.

The UK released PMI with downside surprise. Consensus called for 57.1 and the reading came in at 55.4. The June reading was 57.5.

In Asia, Chinese PMI came in at 51.7 versus June’s 50.7 reading. Japan reported 50.5 versus a June reading of 51.5.

All in all the collective PMI’s show a sluggish global economic growth rate with France (Euro zone’s number two economy), working on a recession for the quarter ending August.

Sanctions on Russia will certainly start affecting future European PMI reports. There is nothing the ECB can do about this…no magic wands…just words of encouragement as we have seen over the last 5 years.

It’s not that you cannot trust the government…you simply remind yourself that the government is simply composed of people and people in position are always trying to say what you want to hear. The ECB is doing the best they can but the structural economic problem is much larger than the ECB. Formulate your own informed opinions.

Summer Reading Books…

The Great Crash 1929 – John Kenneth Galbraith
An excellent approachable reading. How do you convince the nation things will get better?

The Dreyfus Affair: The Scandal That Tore France in Two – Piers Paul Read
I cannot say enough about this book which illuminates how power factions operate in the constant battle to win and shape public opinion.

Reminiscences of a Stock Operator – Edwin Lefevre
An easy fun beach read for traders with a common sense approach look at the trading world of the 1920’s and 1930’s.

Today’s Reports and FED Activity

8:30 Nonfarm payrolls
8:30 Personal Income and Outlays
9:45 PMI Manufacturing Index
9:55 Reuters/UofM Consumer Sentiment
10:00 ISM Manufacturing Index
10:00 Construction Spending
11:00 Global Manufacturing PMI

Overnight/Pre-Market

  • Equity index futures are lower. We thankfully have crash trades using options. At the same time we are losing on a trade where we expected the market to rise. We reduced exposure prior to yesterday, but still have a loss on a bet TF would rise. This is trading, folks. Crash trades help mitigate the loss working as designed!
  • Crude lower. Everything we thought would happen is occurring in crude. Price is at an important line in the sand. Breaking through suggests we test much lower levels.
  • Natural gas flat and tight range.
  • Gold delivered a whack yesterday placing 1260 in play.
  • Copper lower.
  • Grains incremental tight side way action.
  • Softs lower, except coffee.
  • Bonds lower
  • Currencies quiet in front of USA Employment Situation Report.

Think About This!

TIt would be nice to have 100% winners. Not going to happen. I have been reluctant calling option trades in July for good reason. Trend and momentum wave of higher probability follow-through was missing. Like the professionals…we stayed mainly in cash with a few forays in option trades. Remember, I teach relaxed trading.

To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.