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Chart of the Day
Breakdown Leaves Mark on U.S., Canadian Software Stocks
Software stocks in the U.S. and Canada are going through a “relative breakdown,” according to Jonathan Krinsky, chief market technician at Bay Crest Partners LLC. Krinsky cited an exchange-traded fund that’s linked to the S&P North American Expanded Technology Software Index in a report Tuesday. The ratio between the index and the S&P 500 fell 16% through Tuesday from a record set in December, according to data compiled by Bloomberg. Along the way, the ratio reached its lowest level in a year.
It’s All About Friday’s Jobs Report
The ( ESM21:CME) traded back up to 4180 during yesterday’s S&P 500 index trade. The future rallied 60 points off Tuesday’s 4120.50 low. We could do a big thing on all the ‘ups and downs’ but that’s not what we are going to do today. What we can say is that late in the afternoon, the Nasdaq futures that were weak all day reversed and the ES went down with it. In the end, the overall tone of the ES was firm but remains susceptible to the whims of the (NDU21:CME) In terms of the day’s overall trade, 1.3 million ES traded, down nearly 600,000 from Tuesday’s volume.
US private payroll increased by the most in seven months in April as companies boosted production amid surging demand and the U.S. economy continues to gain momentum. The services industry employment increased last month by the most in more than 2-1/2 years. According to the ADP National Employment Report, companies hired 565,000 workers in March. Economists polled by Reuters had forecast private payrolls would increase by 800,000 jobs in April and the ‘acceleration’ in hiring was across the board with the leisure and hospitality sector adding 237,000 jobs, manufacturers hired 55,000 workers, and payrolls in the construction sector increased by 41,000 jobs. The Dow Jones estimate for the April nonfarm payrolls report, which comes tomorrow, is 1 million, compared with March’s 916,000. While nonfarm payrolls increased by 1.6 million in the first three months of 2021, the labor market remains well below its pre-pandemic levels. In all honesty, I do not know how this will play out. Will the index markets sell-off on the better jobs number? That seems to be the consensus…
Our view, I have to be honest; I have had a rough week. I do not know why I continue to break my trading rule about not trading the midday chop but I did on Monday and Tuesday started out terribly also. It’s funny, when I was with the PitBull yesterday we talked about when we first met and what he said to me. He asked me if I follow the winners? And I came right back at him and said ‘Of course I follow the winners’, and he barked back at me ‘Well, that’s good because I don’t want to work with people that follow the losers’. Making and winning is all part of the game, if we made money every day we would not be doing it. I know some people would say they would keep trading but not me! I almost think after you have a good run you are supposed to sit on your hands and WAIT! The other thing about being on a roll is like the PitBull says, it’s not a profit until it’s booked. Our lean, barring some crazy headline, I think today could be a quiet chop in front of tomorrow’s jobs report. I think you stick with the current price action of selling the rips and buying the dips. Friday could be different.
Danny Riley is a 39-year veteran of the CME trading floor. He ran one of the largest S&P desks on the floor of the CME Group since 1985.
As always, please use protective buy and sell stops when trading futures and options.
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