Tomorrow's nonfarm payrolls report is a really, really big deal. Maybe not so much from a fundamental perspective, but it certainly is from a technical perspective. Over the past few months, we've seen heavy volume selling and a rotation toward defensive areas of the market like few periods I can recall. That's the stock market's way of speaking and saying that the economic outlook ahead is cloudy at best. Since February 11th, though, we've seen a significant recovery in our major indices and we've gravitated to very critical price resistance levels - just as we prepare for the jobs report, which is due out at 8:30am EST on Friday. Two industry groups critical to economic recovery - home construction ($DJUSHB) and banks ($DJUSBK) - are on the verge of challenging key price and moving average resistance zones as these employment numbers are released. I'll be focused on the market's reaction to the numbers rather than the numbers themselves. Here's the current technical picture on the DJUSHB and DJUSBK:
Banks held price support in the 290-300 range for a couple years before losing that support level in early 2016 on heavy volume. The oversold bounce has carried banks back to test that resistance zone with the declining 20 week EMA also offering up resistance. Clearly, the reaction to the jobs report tomorrow will be very important from a technical perspective here. The home construction stocks aren't much different as they too are looking to clear price resistance.
Happy trading!
Tom
