Bulls Give Way to Common Sense

Pre-market futures are up slightly on the Jobs Report coming out about in-line with expectations. Non-farm payrolls showed -524k, which was close enough. Those of you following me on VC last night heard me state that it would probably take -650k to -700k to get the SPX to drop down into the 880 area and continue the downswing. I also stated that an in-line number would probably float the market a little today, possibly as far as 920. I don't think the report is strong enough to drive a move to 925 or above, but it is enough to get the Bulls to hang around and hope for the big earnings reports next week. As long as the earnings reports next week, in general, are less than horrific, then the Bulls will take another desperate leg up in hopes that "catastrophic" and "deep recession" have already been priced into the market.

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

You can see that the 918 - 920 area is the first short term resistance. The next short term resistance is the 927 - 930 area. As I stated above, the Bulls have enough ammo now to try for the first area, but maybe not enough to get to the second. I've been stating for several days that puts are going to be quick plays unless we get an end-of-the world scenario from the Jobs Report and the earnings reports. We are in the first couple of days of the Second Stage Consensus with the transition out of Earnings Warning Season into the Jobs Report and then into Earnings Season. I don't expect a drop through yesterday's lows, but if the Bulls did decide to sell, then the first area to look for today would be 890 (89 on the SPY), and then 880. It would probably take a nasty news bogey to get the market down in those areas ahead of the epicenter of Earnings Season.

7:45 am MT: Intra-day Update: The Rounding Bottom / Rectangle on the SPY 15m charts tried to confirm to the upside this morning on the little gap at the open but failed. Price action collapsed back into the base, which creates the risk of a drop through 89.75

7:51 am MT: The Bears pushed the market through 89.75 and it now looks headed towards the 89.00 area.

The price action this morning is a lot faster and sharper than I would have expected. The Bulls really took a step back at the open, which is surprising to me. If they don't reacquire the 90 - 91 range again on SPY fairly soon then the market is at risk for continuing the downswing.

7:54 am MT: It looks like the downswing has been continued.

8:10 am MT: The Bulls may have come to their senses just a little and decided not to get too exuberant about the "end of the worst of the recession" scenario. I thought that buying the market up sharply ahead of earnings was a bit premature on the part of the Bulls. I actually think this is the logical thing for the market to do, which is to at least stay range-bound on the SPY between 85 - 92 until Earnings Season gives the market a reason to buy or sell. It's one thing to speculate ahead of everyone else on the potential changes in economic trends, it's another thing to fixate on the 3% of the glass that's actually full.

Here is a 30m chart of the SPY:
(click on image to enlarge)

The big bearish long body coming out of the gate should hold the mid-point if the market is going to stay under pressure and continue the downswing today into the 88 area. That means that 90.00 to 90.25 is resistance. If the SPY goes above that area then this was a one-candle wonder and the market goes back into intra-day consolidation. The next target down is 88, with one more wiggle at 89 possible. This has been a pretty whippy morning so far, so don't get too heavy with your trading today.....

10:10 am MT: Intra-day Update: The market is consolidating a bit off the first big drop out of the gate. So far, the 90 - 90.25 area is holding on the SPY. It may be that the market becomes ambivalent for the rest of the day, but if the early momentum to the downside has a chance to carry through on a second leg into the close then the market should roll over again within the next 60m - 90m. If we don't see the rollover in that time then we could be in for wispy, consolidating, and floating price action for the rest of the day.

11:10 am MT: Intra-day Update: The market is getting a little long in the tooth with the intra-day consolidation, but the price action is still within the realm of my time frame. Right now, there is still a better than 50% chance that we get another leg down intra-day.