US Employment rate showed a large increase in jobs of 850,000 in June.
This was no where near the initial recovery phase numbers, but people treated it as an out of the world great number. It is a good number, but quite emphatically, the employment situation in the USA remains in a very negative overall situation.
Yes, things will continue to improve, but a big proportion of this jobs number was simply the re-opening of schools. Back to school in many states meant an increase in jobs data of around 270,000. Nearly a third of the overall number. Furthermore, total employment, the number of people who have jobs, is still down 4.4% from where it was before covid. This is a hugely negative Main Street reality. It equates to 6.8 million workers who lost their jobs, remaining un-employed.
Markets did what they only seem to know how to do, and rallied sharply. A bullish response was reasonable in the circumstances, but all those looking to off-load their portfolio, or sell for any reason, simply stood aside. Leaving only upside price action to develop further on the day. This psychological process is likely to persist through Asia today. Such scenarios usually run for 24-72 hours, if over-heated, before retreating.
If this suspicion is correct, that it does not matter what is happening in the real world and the economy, there will be continued investment flows regardless, then even commodities may now stage a come back. Something to watch for through this week.
What we do have now, is a major, clear pivot point for markets. The pre-jobs data price level lows of around Dow Jones 34,500, Nasdaq 14,500, SP500 14,500 and AUS200 7,250. While those now major support levels continue to hold, if bullish , you can feel comfortable. Should you be skeptical of how long this upside can last, or be looking to sell for whatever reason, you may prefer to stand back and watch for a moment. Though any signs of sharp reversal after this jobs data reaction, should be of great interest to you.
In Australia this week, the Reserve Bank meets and will of course keep rates as they are. Unchanged. They should, however, announce that they will 'taper' the bond buying program. Which was always ridiculous and un-necessary, but the Fed was doing it, so the RBA wanted to look sophisticated too? With the current economy strength, it stands out like a sore thumb that this policy is entirely inappropriate. The RBA will likely move to act on this, tapering, though doing so far too slowly.
Given the un-bridled bullish sentiment, and coming in the shadow of the US jobs data, the Australian stock market will likely see whatever the RBA does this week as a reason to buy.
For the start of the week at least, it is hard to see sellers being in a hurry to take action in the market. While many bulls will barely be able to contain themselves. All bears should wait to see how far this further rally extension can run in the next few days. Then review.