Another Day Another Gap

Stock market futures are down pre-market again. Traders have gone both ways with a gap down the past week. Some of the gaps have led to sell-offs (Monday), and some have been overcome by the Bulls (yesterday). In such a newsy environment it's almost irrelevant why the futures are down, but it is important to keep in mind that traders will probably do their last pricing-in of employment trends before the big Jobs Report tomorrow.

The trend in fundamentals is down, so the trend in the market is down. Companies continue to slash earnings and jobs. The latest downward guidance in earnings came from ADBE, MRK, T, DD, and NOK. The latest job cuts announcements came from T and CS. Speaking of jobs, the weekly Initial Jobless Claims number was actually better than expected, but still a pretty ugly number of 509k. Futures dropped sharply on the news, which means (as I suspected) that the bump the past two days has been a technical bounce, and a sour Jobs Report hasn't been fully priced into the market. That means that any type of strong rally today is probably at risk for late day selling as traders push and shove and position themselves ahead of tomorrow's report.

I know I keep saying this, but stay nimble today.....

Here is a chart of the SPY:
(click on image to enlarge)

You can see that a min-Reverse Head and Shoulders may be forming. In the short run, traders may stay trapped in a range ahead of the Employment Report. There is resistance at both sides of the gap at 87.50 and 88.50 (875 and 885 on the SPX), and 88.50 is also the area of the sloping neckline. A move above 90.00 would be fairly bullish and could open the door for a continued move up to the 100.00 area. The first short-term support is the 85.00 area and then the 82.00 area.

As always, we shall see.....

12:00 pm MT: Intra-day update: This is a key area intra-day. The Dow is trying to build off a 3rd Stage Bounce on the 30m charts. If the Dow exceeds the 8,630 highs then it will have succeeded. If it rolls over and drops through 8,470 then it will fail and traders could be induced into some Employment Report selling.

12:10 pm MT: The Dow is making the run to 8,600 as I type. I'm still not that excited about the convergence of the 4-Day price pattern on the Daily Charts and the Employment Report tomorrow. I speculated that today would be a range-bound day, which often leads to a Narrow Range Bar or Doji. Well, so far that's exactly what were getting.

Here is the chart of the Dow:
(click on image to enlarge)

I'm just not that enthusiastic. There really weren't any good intra-day swing setups this morning unless you were playing the 5m charts and were being extremely nimble. That's the nature of range-bound days. We are getting a mini Double-Bottom on the 10m charts and a Bull Flag bounce on the 30m charts, so there is the possibility of a small call play right here, but I'm not super excited about it given the Daily Charts and the Employment Report. We'll see what happens next.