Written by Jim Welsh
Macro Tides Weekly Technical Review Special Update 02 July 2020
The June employment came in much better than expected showing an increase of 4.5 million jobs versus estimates for an increase of 2.9 million. I’ll save the rest of the details for next week’s WTR. The main point is that after the May employment astounded the markets on June 5 the S&P 500 hit a short term peak on June 8 the Monday after the great jobs report.
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As noted in the June 29 WTR:
“Seasonality going into the Fourth of July holiday should support additional upside. At a minimum the S&P 500 is likely to exceed its June 25 high of 3086 and could test the uptrend line near 3110 it broke below last week. If the S&P 500 closes above this trend line it could surpass the high of 3155 reached on June 23 to complete an a-b-c from the low of 2966.”
The high today was 3166 so the S&P 500 may have completed the pattern as expected. If the S&P 500 follows the pattern after the May jobs report exactly it may exceed today’s high by a small amount. If the S&P 500 has indeed completed the a-b-c rebound from 2966, the S&P 500 can now drop down below 2966 and possibly as low as 2899. It won’t take much weakness for the 5 day MA to cross below the 13 day MA and confirm at least a short term high.
Once again the Nasdaq 100 (QQQ) has recorded a new all time high with no other average confirming the new high, Its RSI has diverged again and this is the second divergence and is well short of 70 so these factors increase the odds of a pullback. The Nasdaq 100 is also bumping up against the trend line that has contained it.
The Russell 2000 has failed again to break above 1460 (blue horizontal trend line). If the S&P 500 corrects as expected the Russell 2000 should drop below the June 15 low of 1344. It won’t take much weakness for the 5 day MA to cross below the 13 day MA and confirm at least a short term high.
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