Headwind Gathering Above The Equity Markets

Good Wednesday Morning, MPTraders!  January 8, 2025-- Pre-Market Update:  Earlier this AM, economic data from ADP-- The Employment Change data for December-- showed a below-estimate increase of 122,000 workers compared to forecasts of 140,000 and November's 146,000. Based on the knee-jerk upside reaction in stock index futures (ES), equity traders (algorithms) considered the jobs data to be relatively weak ahead of this coming Friday's Unemployment Report for December (8:30 AM ET). On the heels of the ADP report, Weekly Jobless Claims declined substantially by 201,000 compared to expectations of 215,000 and the previous week's 211,000, which The Street considers ongoing, perhaps surprising, strength in the labor market...

My attached Hourly Chart of ES shows the "ADP knee-jerk bounce" off of this AM's pre-market new three-day pullback low at 5926.50 to 5961.50 so far but to regain bullish traction ES needs to chew through nearest resistance from 5975 to 6000 (Grey Box on my chart), which will trigger a higher rally projection to challenge much more consequential resistance from 6050 to 6100. The inability of ES to chew through the "Grey Resistance Zone" keeps ES vulnerable to downside continuation to confront critical support lodged from 5900 down to 5866... Ahead of the opening bell, the equity indices are circling unchanged, vulnerable to downside continuation ...

From a Big Picture perspective exhibited by my attached Daily ES Chart, the most salient feature of my setup work is Monday's (1/06/25) rally FAILURE to take out resistance at the down-sloping 20 DMA, now at 6033, which remains THE MAJOR IMPEDIMENT TO A BULLISH OUTLOOK. As long as ES trades beneath the 20 DMA, my BIG Picture TREND setup work is Neutral... Last is 5953.75..

Finally, 10-year YIELD popped above 4.70% this AM despite the weaker-than-expected ADP Report. Bottom line from my attached Daily Chart argues that unless YIELD reverses and breaks below 4.60%, YIELD points immediately higher to 4.77%-4.80% next, perhaps in reaction to Friday's forthcoming BLS December Jobs Report. The power of the post-September advance from 3.60% to 4.71% (today) reflects the initiation of a new, powerful upleg within the larger bull phase for 10-year YEILD that commenced at the Pandemic Low at 0.40% in March 2020, and that points to 5.35% as an intermediate-term optimal target zone. 

Add longer-term rising YIELDS to headwind gathering above the equity markets...