Morning Notes — Goldilocks Jobs Report

Jobs: The Fed has been clear it wants to see a slowdown in labor markets before it changes its tightening path.  Today’s increase in the Unemployment Rate
to 3.7% from 3.5% and the small downtick in wages (+5.2% YoY vs. consensus for +5.3%) are steps in the right direction. The report is a net-positive for equities (terminal rate down -6bp to 3.695%) and should help steepen the yield curve in the near-term.  Upcoming catalysts include next Thursday’s ECB meeting, next Thursday’s Powell speech and the 9/13 August CPI report.

SPX: Technical support for the S&P 500 sits in the 3900-3940 range with ~4300 serving as resistance.  A break below 3890 would likely lead to a full retest of the 3660 June low, while a break above 4310 would likely trigger significant upside momentum given light positioning dynamics.  The two days preceding the June low included daily momentum divergences that often precede a 4-5 week-long reflex rally in the mid-teens.  Those two days also included weekly momentum divergences that have preceded 4 out of 4 major bullish inflections since 2009.  The recovery from the June low was also stronger and lasted longer than the average bear-market rally.  While very few bullish fundamental triggers are presently evident, these technical conditions leave us more open to the possibility of a break above 4310.