Monday is a bank holiday in the US and Canada and marks the unofficial end of summer. Many traders will be back in the office this week after August holidays, even amid the coronavirus pandemic. Stocks were the story last week, as major index retreated from at or near all-time highs. Traders will be looking to see whether the selloff continues or if it was just a correction in a bull market. The US jobs report was roughly in line; however, the employment components and the ADP Employment Change was all over the map. Most schools are back in session after the summer break, and it will be important to watch for an increase in coronavirus cases! This week also brings the BoC and ECB interest rate decisions. Statements will be monitored to see if further stimulus is needed.
“Summer has come and passed, The innocent can never last, Wake me up when September ends” – Green Day
How many traders took a holiday in August, only to return this week to see the selloff? Now can’t wait for September to end! The volatility this week across the board has many traders concerned. For the week, the US Dollar Index is up .5%, the S&P 500 is down 2.25%, the Nasdaq is down 2.6%, the FTSE is down nearly 3%, the DAX is down nearly 1.25%, and crude oil is down 7%, breaking below $40. The VIX for the week is up 32.5%. Will this volatility continue? Will there be profit taking ahead of the US elections in 2 months? Or is this just a correction in a bull market? Traders will be watching closely to see if these moves continue.
The US released Non-farm payrolls for August on Friday. The print was 1, 371,000 vs an expectation of 1,400,000, nearly inline. However, the manufacturing component was 29,000 vs 50,000 expected. In addition, the ADP Employment Change print was 428,000 vs an expected 950,00. But the big story here is that the unemployment rate fell to 8.4% vs 9.8% expected and 10.2% last. In addition, average hourly earnings, which is one of the primary indicators the Fed looks at to gauge inflation, was 0.4% vs 0.0% expected! This suggests that something was out of whack, and traders should look for a revision next month!
Children in the UK went back to school last week and the county is on pins and needles as people wait to see if this will increase cases of the coronavirus. In the US, children have already gone back to school. Depending on the state, and even the local conditions, children are either in person or virtual.
The big macro events to watch next week are the Bank of Canada (BoC) interest rate decision meeting and the European Central Bank (ECB) interest rate meeting. Canada’s Employment Change for August was 245,800 (worse than expected) and the unemployment rate at 10.2% (worse than expected). A Reuters poll shows that most economists expect that the BoC will discuss inflation targeting, a la the US Fed. As with the Fed, the Bank of Canada may ultimately give the same signal: lower rates for longer time. The ECB is not only worried about a slowdown in the data and low inflation, but they must also worry about the rise of the price of the Euro. Although no change is expected, traders need to watch for talks of “deflation”. Not to be left out, although the Bank of England (BOE) doesn’t meet until September 17th, BOE have been on the wires last week discussing negative rates and potential for the coronavirus impact to be worse than expected. Watch for more comments next week!
Although it is not earnings season, there are some notable releases to watch, including AHT, LULU, ASBFY, ORCL, CHWY, PTON, and MRWSY.
In addition to the BoC and ECB meetings next week, other macroeconomic data releases are as follows:
Monday
- China: Trade Balance (AUG)
- Germany: Industrial Production (JUL)
- UK: Halifax House Price Index (AUG)
Tuesday
- Japan: GDP Growth Rate QoQ Final (Q2)
- Australia: NAB Business Confidence (AUG)
- Germany: Trade Balance (JUL)
- EU: GDP Growth Rate QoQ 3rd Est (Q2)
Wednesday
- Australia: Westpac Consumer Confidence (SEP)
- China: Inflation Rate (AUG)
- China: PPI (AUG)
- Canada: BoC Interest Rate Decision
- Crude Inventories
Thursday
- Japan: Machinery Orders (JUL)
- Australia: Consumer Inflation Expectations (SEP)
- EU: ECB Interest Rate Decision
- US: Initial Jobless Claims (week ending Sept 5th)
- US: PPI (AUG)
- Canada: BoC Gov Macklem Speech
Friday
- New Zealand: Business NZ PMI (AUG)
- Japan: PPI (AUG)
- Germany: Inflation Rate Final (AUG)
- UK: Trade Balance (JUL)
- UK: Industrial Production (JUL)
- UK: Manufacturing Production (JUL)
- US: Inflation Rate (AUG)
Chart of the Week: Weekly S&P 500 Index
Source: Tradingview, FOREX.com
The S&P 500 Index (SPX) is in a megaphone formation on a weekly timeframe dating back to January 2018. This formation indicates that there could be a great deal of volatility ahead as it shows not only the wide-ranging volatility that we have had in the past, but also the potential for more! Focusing on the top, rising trendline of the megaphone, we can see that price has traded above the line and reversed to close the week below it. This is known as an overthrow and is a potential reversal indicator. In addition, since the beginning of the megaphone, price has put in 3 higher highs while the RSI has put in 3 lower highs. This formation is also and indication of a potential reversal. Resistance is at last week’s highs near 3589. First support is at last weeks lows near 3350. Below there, horizontal support crosses near 3233 and 3168.
As far as news is concerned, this week could be a slow week. However, with the recent volatility and the Central Bank meetings, markets could continue their reversals. Watch for possible selloffs in stocks and a stronger US Dollar in the weeks to come, as we may see some profit taking ahead of the US elections.
Have a great weekend and please remember to always wash your hands!
Signal2forex.com - Best Forex robots and signals
