Non-farm payrolls for June were released Friday and showed job gains of 206,000 for the month, exceeding the estimate of 190,000 the market was looking for, yet previous months had downward revisions of 111,000. The data for May was revised down to 218,000 from the previously reported 272,000. The unemployment rate went up to 4.1%.

Some notable quotes from Bloomberg on Friday’s report:

“Average hourly earnings climbed by 0.3% in June from the previous month, taking the annual increase to 3.9% while average weekly earnings growth of 3.9% year-on-year matches the April gain but is the lowest in three years.”

“The median time it takes to find a job rose to 9.8 weeks, up from 8.9 weeks in May and the highest since February 2022; temporary help fell 48,900 in June, the most since April 2021.”

“One oft overlooked aspect of the data is churn in the US labor market: 1.542 million people who were employed in May lost a job in June. Meanwhile 1.791 million unemployed people found a job in June.”

The market is now looking at the prospect that as wages continue to cool, and job gains slow from the lofty levels they were once maintaining, that a September rate cut seems probable. Remember that the Fed can make the argument that they will still be in a highly restrictive policy rate with one cut, and that’s probably what they are leaning towards if the data continues this way through July and August.

The market, on the other hand, might not be too excited to hear that wages and job growth is slowing, while the unemployment rate reached 4.1% that is tied for the highest level since October of 2021.

I’ve included some longer-term charts of the Nasdaq100 and the ES contracts, showing the dramatic AB = CD formations. It’s amazing that the NQ has completed a 10K+ AB = CD formation, and the ES is on the verge of a 2,634 point AB = CD formation.

The 10 year looks like it wants to trade back to about the 111 level, which is where it was trading at in the middle of June. The DXY looks like it wants to trade back to the 104 level. This action in Notes and the Dollar should add some strength to Gold. We will see if Gold can break above the $2,450 level, which has been a level of resistance recently.

The VIX looks very complacent as unemployment has risen to levels tied for the highest since October of 2021. This market seems like it is priced for perfection right now, when risks seem to be lining up to tell the Fed that it is time as the economy is beginning to show signs of weakness.

Disney has pulled back a bit. We will see if it can hold the .618. Keep your stops in place.

Stay tuned for updates as we are only 4 months out from an election and markets continue to make new highs even as the economy shows signs of weakening. I don’t think Fed cuts are what this market wants. The market has traded higher on the fundamentals of this economy, and if the economy begins to weaken, then I don’t think one or 2 cuts will make up for what could be a pull-back in equities.

Positions:

Long DIS at $102.25. The stop is $88.97. DIS is trading at $97.99

 

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