Strong Jobs Report Supports Rates, Dollar & Stocks

A better than-expected US jobs report buoyed stocks to new 2023 highs and rescued interest rates and the US dollar from weakness ahead of the Friday's non-payroll number. While the recent underperforming Dow Jones Industrials outperformed on Friday, the E-mini S&P 500 highlighted a clear breakout and NQ (Nasdaq 100 futures)made a marginal new year-to-date high. Once again, we face another situation of a huge move ending at the day and week's high. This represents a possible (buying) exhaustion of sorts that tends to mark potential near-term tops on the charts. Also, the rotation into recent under-performing sectors on Friday in itself is another reason to be cautious with stocks going forward as well. Another potential headwind for stocks could be rising interest rates and a stronger dollar. Although, both were down last week, both have been trending higher together over the past month. Renewed strength in either could further highlight weekly bullish continuation patterns and would strenthen headwind . That said, speculators sold ES futures heading into the jobs report once again, reaching another record short position according to the CFTC last week. Among the important technical levels to watch next week is whether the US 10-year yield will hold 3.70% and potentially break through 3.716%, the latest range midpoint. A succesfull break above could trigger a move in yields into the upper half of the May 26th to June 2nd range towards the recent 3.861% high).