Morning Futures Roundup

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Stock Indices Looking Toppy Ahead of Non-farm Payrolls Report

   Fundamentals
Many U.S. equities traders have been biding their time during the past month, as fears of slowing growth in the U.S. economy has stalled the rebound in the stock indices. Among the biggest concerns has been a slowdown in employment growth, especially after the disappointing Non-Farm Payrolls report for March in which only 120,000 jobs were created. Adding to this fear has been the rise in jobless claims, which reached its highest levels in over 5 months.

Coming into this morning's release of the April jobs report, analysts have seen a mixed bag of data. On the downside was the release of the private sector jobs report from ADP/Macroeconomic Advisers, which reported that only 119,000 jobs were added last month, which was well below analysts' estimates of 175,000 jobs being created. Of more concern with the ADP figures was that factory jobs declined last month. This would be the first decline in 7 months and, if true, would be contrary to previous economic reports.

Not all the news was gloomy, as yesterday's Jobless Claims figures fell by a much larger than expected 27,000 to stand at 365,000. This was the largest 1-week decline in nearly a year, and helped put an end to the upward trend the past three weeks. Many traders are revising their forecasts for today's report, with the consensus estimate calling for 165,000 jobs created in April, with all the increase coming from the private sector. The public sector is expected to continue to shed jobs, with analysts looking for a decline of 5,000 jobs last month.

Much has been made in the media of the decline in the unemployment rate the past few months, currently at 8.2%, with the debate centered on whether the decline in the rate is a sign of improving job prospects or a signal that potential workers are getting discouraged and leaving the job market entirely. Many traders are looking for the rate to remain unchanged, as are estimates for the average hours worked at 34.5. Given the relatively tight range the S&P futures have been trading within the past month, any "surprise" in the data could spark a breakout from its current range and potentially set the stage for the next major move in the market.

   Technical Notes
Looking at the daily continuation chart for the E-mini S&P 500 futures, we notice prices moving sideways, trading on both sides of the 1400.00 price level. Prices are holding just above both the 20-day moving average and the uptrend line formed from the October 2011 low. Trading volume has been light the past two weeks, and the 14-day RSI has begun to weaken, with a bearish divergence forming. Major resistance is seen at the contract high of 1419.75, with support seen at the April 10th low of 1352.50.

  
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