Nasdaq 100 Might Trade Lower, NFP Report Not as Strong as Headline Suggests

Summary:

Nasdaq 100 spikes higher by 0.32% five minutes following the release of the US Non-farm payroll report (NFP). However, the NFP report was not as good as..

The Nasdaq 100 spiked higher by 0.32% five minutes following the release of the latest US Non-farm payroll report (NFP). As similar move higher was visible in the S&P 500 and Dow Jones.

The NFP report was better than expected as the US economy created 1.76 million new jobs vs the 1.65 million expected. However, the boost comes from government hiring. The public sector created 301,000 new jobs vs 33,000 in the prior month. Private payrolls rose by 1.46 million vs the 1.51 million anticipated.

I argue that the report is not as good as anticipated because, without the government boost, the job creation would have failed to reach its target.

It is, however, important to understand, that the boost to government jobs comes after the public sector cut 980,000 jobs in May and 585,000 in June.

Fifteen minutes after the NFP report was published, the Nasdaq 100 had given up its gains. One possible explanation to the lower Nasdaq 100 is that the NFP report was not as good as anticipated, but more importantly, the Nasdaq 100 saw a sharp rise in yesterday’s session.

Yesterday’s gains do not provide a good risk-reward ratio for new positions at the current price of 11212. Instead, I think the price might need to give back some of its gains and reach the August 5 high of 11158 to entice traders to buy the index.

Looking beyond the near term, the trend will remain upwards above the August 4 low. Also, earlier this week, the Nasdaq 100 breached the July 13 and 21 double top with a price objective of 11779.