U.S. equity markets rapidly gave back yesterday’s gains and more after a weaker than expected U.S. employment report knocked the wind out of bulls’ sails. U.S. non-farm payrolls fell by 467k in June, much worse than the 367k the street had expected and May’s 345k decline. This report dumped more cold water on thoughts of a quick recovery and provided additional evidence that although the worst of the recession may be behind us, the road to recovery may still be long and bumpy with the risk of significant setbacks along the way. 

To this point, today’s declines still appear to be taking the form of a pullback within current consolidation ranges rather than the start of a significant decline, although there remains a risk of a broad correction in the next few weeks. Current trading ranges for major U.S. indices remain 8,100-8,600 for the Dow Industrials (US30 CFD), 880-930 for the S&P 500 (SPX500 CFD), and 1,410-1,490 for the NASDAQ 100 (NDAQ100 CFD). 

Note that with U.S. markets closed tomorrow, investors may be hesitant to take on new positions, and we may see more capital move to the sidelines ahead of the long weekend. 

Since Canadian equity markets were closed yesterday and didn’t participate in yesterday’s U.S. gains, they haven’t participated in today’s losses to the same extent either. Weakness in commodity prices, however, does appear to be overhanging Canadian market sentiment. The S&P/TMX 60 (Toronto60 CFD) has slipped back under the 630 level with next support in the 590-610 range and resistance near 630 and 650. The S&P/TMX Composite has dropped back under 10,350 with next support near 10,000 and resistance near 10,350 or 10,500. 

Commodities have been under pressure today although they appear to have moved up off their lows as the morning has progressed. This appears to be due to concerns that an economic recovery may not be as strong or quick as previously thought, and a strengthening in the U.S. dollar. Copper appears to have successfully tested support near $2.25/lb but remains below $2.30. Similarly, silver appears to have successfully tested $13.25/oz support but has been having trouble getting above $13.40 or $13.50/oz. Gold appears to have held $925/oz and stabilized near $930. 

Energy prices also appear to be picking up a bit off the mat with U.S. crude settling near $67.00/bbl after successfully holding above its $66.00-$66.50/bbl support range but facing resistance near the $68.00 or $70.00 levels. Natural gas also appears to have found some support after inventories grew by only 70 BCF last week vs. the 74 BCF street estimate. Grains have also been testing key technical levels today with soybeans trading back to the $12.50/bushel level, wheat holding just above $5.00/bushel and corn trading just below $3.50/bushel.     

About CMC Markets

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Disclaimer

This commentary is based upon technical analysis. Technical analysis is the study of price and volume and the interpretation of trading patterns associated with such studies in an attempt to project future price movements. Technical analysis does not consider any of the fundamentals of an underlying company, and as such is inherently uncertain and should not be the only factor considered by an investor in making an investment decision.

CMC Markets Canada Inc. is a member of the Investment Industry Regulatory Organization of Canada and Member CIPF. CFDs are distributed in Canada by CMC Markets Canada Inc. dealer and agent of CMC Markets UK plc. Trading CFDs and FX involves a high degree of risk and investors should be prepared for the risk of losing their entire investment and losing further amounts. CMC Markets is an execution only dealer and does not provide investment advice or recommendations regarding the purchase or sale of any securities. CFD and FX trading is available in jurisdictions in which CMC is registered or exempt from registration, and may be available to Accredited Investors only in certain jurisdictions.


Note that any references to CFD prices or price changes are sourced from CMC Markets' proprietary trading system Marketmaker™.