The Stock Market Rally May Be Near Its End
Michael Kramer | Aug 05, 2022 01:09AM ET
Stocks finished the day flat yesterday, ahead of the big job report. Estimates for 230,000 new jobs to have been created in July, down from 381,000 in June. But the unemployment rate is expected to remain flat at 3.6%. But the considerable number will be the average hourly earnings, which are expected to rise 4.9% y/y versus 5.1% last month. I think that the wage number is the biggest number to watch, as a number higher than estimates could suggest upward pressures on wages.
This recent rally, has at this point retraced the entire decline from mid-June. We saw a similar type of patterns in April and May. With the entire June drop now retraced, this has typically been when the market has run into trouble.
Additionally, there is a rising wedge pattern that is present, and that would be a bearish reversal pattern. If this plays out the way previous moves have played out, then I would expect the market to give back this entire rally.
For the NASDAQ the picture is not any better, with the futures showing a clear bump and run pattern, and also what appears to be a rising wedge pattern. Like the S&P 500, I would expect the majority, if not the entire, rally to melt away.
This is not to say this shall happen or start today I am not saying that. I am saying that when the pattern has completed. The patterns are close to being complete, but there is some more room if they choose to rise a bit further. But once the trend line on the wedge breaks I would think we would see the start of a decline.
JPMorgan (NYSE:JPM) may be telling us something, as the stock struggle to push above $116. It now finds itself back at support just above $110. That support level needs to hold, because if it breaks I would think that the stock retest the lows.
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That’s going to be all until the weekend.
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