OVERVIEW
Jobless Claims Down: Don’t Get Fooled

The usually routine jobless claims update turned heads yesterday because concerns about the job market are growing. Last week’s underwhelming job numbers had already set off alarm bells and contributed to recent market declines.

The latest figures showed there were 233,000 new jobless claims for the week ending August 3, down from 250,000 the week before and below what experts were expecting.

To break it down, a jobless claim, or unemployment claim, is when someone who’s lost their job applies for government financial help. This support is meant to assist them while they look for a new job and indicates how many people are currently receiving unemployment benefits.

This update is particularly noteworthy because the recent market drop was fueled by worries that the US economy might not be doing as well as hoped, with signs that the job market could be slowing down. In July, the US added fewer jobs than anticipated, and the unemployment rate unexpectedly rose to its highest level in nearly three years, climbing from 4.1% to 4.3%.

The report showed that 114,000 nonfarm payroll jobs were added in July, far below the 175,000 jobs economists had forecast. Nonfarm payrolls track the total number of paid workers in the US, excluding those in farming, government, and a few other sectors. This includes jobs in areas like manufacturing, retail, and services.

Released monthly by the Bureau of Labor Statistics, the nonfarm payrolls report is a key gauge of economic health, showing how many jobs were added or lost across various sectors over the past month.

So, what does this mean for today’s trading session?

In short, we don’t expect this report to change the overall sentiment or impact today’s session significantly. The technical indicators still look quite bearish, and the last three sessions seem like a low-volume bounce after a major sell-off in the major indices.

Nasdaq

The Nasdaq is showing a clear bearish setup right now. The QQQ has tried to move above its daily 10-EMA, but while it's managed to make a series of four higher lows, the trading volume has been dropping. This lack of strong buying pressure isn’t typical for a bullish move.

The visible range volume profile (VRVP) reveals a significant volume gap right above the $450 level (where the daily 10-EMA is) up to $457. If our analysis is off, we might see a quick push through this gap, but we don’t think that's very likely.

In any case, volatility is on the horizon, and the QQQ is likely to make a big move in either direction in the next few sessions.

Ideally, we’d like to see the QQQ trade sideways and consolidate. This would give everyone some time to cool off and could allow money to start flowing back into stocks.

S&P Midcap 400

The midcaps are showing a similar pattern with a clear divergence between volume and share price. The MDY did manage to break above its point of control (POC) at $531, which is a positive sign. However, the $537 level is a major resistance point. This level also aligns with the declining 10-EMA, and we’ve seen two previous rejections at this zone, so we're not very hopeful for a significant breakout above it.

Just like with the QQQ, we’re expecting a spike in volatility. The low trading volume suggests that the MDY is gearing up for a move. The visible range volume profile (VRVP) shows very low volume clusters both above the daily 10-EMA and below yesterday’s lows at $527.

Russell 2000

The small caps are also gearing up for a significant move, with volume decreasing—though not as consistently as in the other indices—and the price starting to stall. We’re seeing a range form between $207 and the $201 point of control (POC) and daily 200-EMA level.

It looks like a flag pattern or volatility contraction is starting to form, which is expected and could be a positive sign. For those familiar with market cycles, this might resemble a bear flag, which often leads to a decline following a period of reduced volatility after an initial drop.

However, this tight trading range also helps calm market emotions, and if there's going to be an upward move, this pattern is what we’d need to see beforehand.

DAILY FOCUS
We Still Think It’s Too Early To Enter

Volatility is contracting, and all major indices are running out of steam after a technical bounce, with declining volume and uncertainty about the market’s direction.

Now is the time to monitor stocks on your focus list that have shown relative strength. Watch to see if they begin to push higher with strong breakout potential, or if they fail and decline. We prefer to be a bit late rather than too early in sizing up risk following a market pullback.

We’d rather wait for higher-quality setups and for leaders to establish new bases. Based on our experience, it’s too early to enter new positions; it’s wiser to stay in cash and wait for clearer opportunities to emerge.

WATCHLIST
The Ones Holding Up

CVNA: Carvana Co.

• CVNA is one of the only growth stocks that looks like it’s actually holding up some type of a base and trading sideways during this recent sell-off.

• CVNA doesn’t have the revenue growth of a leader but it’s profitability has been improving exponentially over the last few years, alongside strong technicals.

• Not one to enter now, but definitely one to keep on your watchlist

ASTS: AST SpaceMobile, Inc

• ASTS continues to impress with a solid breakout yesterday after forming a flag pattern on its daily chart and a failed breakout attempt on Wednesday.

• Although the stock is approaching earnings, and despite the overall market conditions making it less appealing for new entries right now, ASTS is definitely one to keep on your radar.

• It stands out as one of the few momentum leaders that hasn’t been beaten down and is worth watching for future opportunities