May Jobs Report and US Government Debt Concerns Abated, Sent the Bulls Charging Today

Tom Gentile

Posted in
Technical Analysis

By: Tom Gentile
June 2nd, 2023

3 mins read

Why wait to show you the chart on the SPY, the ETF that tracks the performance of publicly traded stocks in the S&P 500.

Figure 1: 253-Day OHLC Chart on SPY
Figure 1: 253-Day OHLC Chart on SPY

One can see on the chart SPY tried to close above and maintain a breakout above prior resistance of 416-417.

A conservative approach to trading technically is to give the security at least 3-days to hold above the resistance price it is breaking out above.

The most recent time it tried prior to this most recent breakout it did not hold.

This time it is not only holding, but marching higher.

5-trading days SPY broke out and then instead of trading back under the price of the breakout it instead tested that resistance price on a retracement, making that old resistance now new support.

As for a price target for the SPY right now, the prior resistance closing high back on August 16 is a reasonable price target, as I see it.

If one wants to use a technical stop point reference consider a stop on a close back below that prior resistance 416-416 price.

Good News Prompting This Bullish Move – Resolution of US Debt Concern and May Jobs Report

One of two concerns facing this market prior to today was whether or not our US Government would suffer its first default on its debt.

The Fiscal Responsibility Act was reached days before the US defaulted and now awaits President Biden’s signing.

The other item that was a concern was the May jobs report that came out this morning.

Nonfarm payrolls grew much more than expected in May.

The number came in showing they rose 339,000.  Expectations were for a190,000 increase. This is the 29th straight month we’ve seen positive job growth.

There seems to be signs that inflation is starting to wane.  This could mean the Fed has reason to paus on its compulsion to raise rates any further.  Maybe not for good, but a pause is possible.  Whether or not this means the Fed will be able to pull off a soft landing or not is still to be seen.

Options Trading Action to Consider from Here

If one wants to go after bullish option trades now, I see that as an aggressive approach.  A more conservative approach is to see if we get some profit-taking, and the SPY pulls back to test that prior resistance as new support again and then consider initiating bullish option trades.

There may be more upside follow through which may mean one has to initiate bullish trade on the guise of looking for strength to beget more strength.

I will look to my scans and the Morning Reports lists for option candidates that look promising in either case.

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