The June U.S. Non-Farm Payroll jobs report recorded a blowout month with nearly five million Americans returning to work. According to data from the Bureau of Labor Statistics this helped the headline unemployment rate drop to 11.1%. Global stock markets immediately moved higher on the news announcement as signs point to a broad based labor market recovery. But is it enough for stock markets to continue pushing higher? Let's take a look!
June's blowout jobs report
According to some analysts, hiring in June was strong in nearly every sector of the economy, with 34% of Covid-19 related job losses regained. While June saw nearly 5 million Americans returning to work, investors also cheered the upward revisions from May from 2.5 million to 2.7 million jobs added to the economy.
However, some analysts point to the fact that the report doesn't account for the number of rising infections in the past few weeks and the reversal of some states and businesses to re-open. While more than 16 million Americans are still out of work, investors did cheer the better than expected drop in the unemployment rate from 13.3% in May to 11.1% in June. This also beat analyst forecasts of 12.4%.
Immediately after the report the US dollar ticked higher against nearly all major currencies but the moves were muted. Bigger moves were seen in global stock markets with the positive tones also helped by news of drugmakers Pfizer and Gilead Sciences advancing in the race for a coronavirus vaccine. Both news announcements helped the S&P 500 stock market index to break through key resistance lines which now opens up some interesting trading opportunities.
How to trade the S&P 500 index
Below is the long-term, monthly price chart of the S&P 500 stock market index:
Source: Admiral Markets MetaTrader 5, SP500, Monthly - Data range: from 1 May 2005 to 2 July 2020, accessed on 2 July 2020 at 2:30 pm BST. Please note: Past performance is not a reliable indicator of future results.
With Admiral Markets UK Ltd, traders can speculate on the price direction of the S&P 500 index, among other markets by using Contracts for Difference (CFDs). This product allows users to trade long and short while utilising leverage. You can learn more in the 'What is CFD trading?' article.
The combination of the better than expected June U.S. Non-Farm Payrolls report and advancements in the race for a coronavirus vaccine helped the price of the S&P 500 index breakthrough key levels of resistance, as shown in the chart below:
Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from 26 November 2019 to 2 July 2020, accessed on 2 July 2020 at 2:45 pm BST. Please note: Past performance is not a reliable indicator of future results.
In the chart above, the price action of the S&P 500 index has been contained in between a wedge chart pattern which is shown from the two black lines on the chart. Now that buyers have managed to break through the top level of resistance, traders will be looking for clues that they can hold above this level and build to the upside.
Traders may look to the lower time frames such as the four-hour and one-hour chart to look for clues of buying strength such as higher high and higher low cycles or bullish momentum technical indicators. If buyers do remain in control, traders may be eyeing the previous swing high point as a potential target area which is around the $3,228 price level.
Some key risks still remain such as the rising rate of infections which is slowing the reopening of many businesses and ongoing US-China trade tensions. For now, however, investors are focused on news that is getting the economy going again which the June jobs report shows. How will you be trading it?
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