US stocks look to complete recovery; Jobless claims fall

Summary:

• US futures point to a green open

• 61.8% Fib at 3124 tested for US500

• Initial jobless claims falls sharply; NFP tomorrow

The recovery in US stocks is poised to continue this afternoon with indices trading above last night’s close heading into the cash session. The market has now recouped a fair chunk off the loss from the sell-off at the start of the week and how it trades in the next couple of sessions will likely set the tone going forward. From a longer term perspective the starting level from last week at 3117 for the US500 could be seen as an important line in the sand with a weekly close below there confirming a bearish engulfing candle on W1. However, a failure for this to occur and the resultant long wick beneath the W1 that would therefore be drawn would likely be seen as positive and keep the bulls in control of the tape.  

The weekly close on the US500 could be key going forward and the market is now back trading at 3119 - the exact level it began last week. Source: xStation

With the price action ahead set to be key, all eyes will be on tomorrow’s NFP report with the consensus calling for 186k jobs to have been added in the month of November. The prior reading was 128k. These forecasts were made before we received additional data points however, with Wednesday’s awful ADP miss raising the probability that we get a bad number tomorrow - the 67k reading was the 3rd worst since 2011. Since then there’s been a couple minor positives though with the employment component of the ISM services reading improving and in the past hour the release of the weekly initial jobless claims showing its lowest level since April (203k vs 215k exp. 213k prior). 

Overall this gives mixed messages on the US labour market and tomorrow’s NFP report will likely have the final word. This is always a big event for the markets but given the proximity to the next Fed meeting and also a general feeling that the central bank is now back towards a neutral bias it has the potential to have an even greater impact than usual.  

A break above the 61.8% fib retracement at 3124 would pave the way for further upside with the 78.6% coming into play at 3139. As for potential support the 38.2-41.4% fib region from 3103-3106 could now be seen as important in the near term and as long as price remains above here then the action could be described as constructive. Source: xStation