Market Pauses and Bounces

Earnings Season is winding down, although the market received a heavy batch of reports this morning. The earnings trends are finally getting priced into the market and it's interesting to note that the Naz and many Financials are actually in a Bull Flag sitting at the gap from last week.

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

Here is a chart of the Financial Sector ETF XLF:
(click on image to enlarge)

You can see the Bull Flags pulling back to the bottom side of the gaps. If today turns into a Pauser Day (market consolidates and holds) then it's likely that traders want to hang around for the ADP report tomorrow and the Weekly Jobless Claims on Thursday. The Bulls (as usual) will be hoping for better than expected employment numbers from those two reports and the big Jobs Report on Friday. If the ADP complies with their wishes, then tomorrow could see a pivot and turn back into an upswing. Watch for the possibility of a pause today, especially after I warned you of the change in momentum on the SPX 30m charts yesterday.

Interestingly enough, the XLF becomes a good barometer for the market today, along with the SPX. If the XLF can push above 9.50 some time today then the beginnings of the short-term momentum shift could be coming. If the XLF fails below 9.00 then the Bulls aren't ready yet.

7:32 am MT: Early Update: The XLF gapped up and reached for 9.40 briefly.

If the market is going to turn around short term then the SPX is going to have to move above 831. A stronger confirmation would be a close above 835 today, that would open the door for a move back to the 860 - 870 area. We'll see if the market holds or fades today.....a fade would take the market back down to the 805 area. For my overall market cues today, I will be most interested in the 30m chart structure on the SPX, and the daily chart structure on the XLF.

9:05 am MT: Intra-day Update: I speculated that the market might pause and even shift momentum today, and so far the probabilities are growing for just that scenario. The Naz is confirming a Reverse Head and Shoulders on the 30m chart, and the SPX is confirming a Double-Bottom on the 30m charts (as I type). The XLF is lagging right now, so I'm focused on the Naz and SPX for my cues, although it would give me a confirming probability for a stronger upswing if the Financials would come along for the ride. Stocks like NUE, IBM, and UNP (along with the SPY and Q's) are on the move in to an upswing. We'll see if it holds, but as a speculator, I'm speculating that the probabilities are weighted a little more to the upside right now - just as I warned pre-market.

11:55 am MT: Intra-day Update: The market seems to be battling with 830 on the SPX and 8,000 on the Dow simultaneously. Overall, the intra-day momentum is still pushing up the right side of a base. We've had a Pauser Day so far, but there's still a possibility that momentum shifts all the way up. A close above 835 on the SPX and about 8,050 on the Dow would get the momentum shifting enough to keep the Bulls excited about tomorrow (at least until we get the ADP report). If the market does move enough that your call positions are profitable before the end of the day, I would consider locking part of the trade down. We've had a nice Pauser so far, and a possible Bounce, but don't forget that we are still in a day to day market.

3:30 pm MT: Market Wrap: In the end, the market was a combination Pauser and Bouncer today, which was the direction I was leaning into as I analyzed and paper traded it all day. It wasn't a supremely strong bounce, and we still have day to day risk with news like the ADP Employment report due out tomorrow morning, but it was a nice pause and bounce. I picked up IBM "paper" calls early in the day and ran them for a 10% gain intra-day. I also noted a number of bullish movers which I liked.

Here is a list of Bullish Movers that might be interesting if the market carries through tomorrow (stocks in parenthesis are interesting but either too weak or too extended):

Tech: IBM, HPQ

Railroads: UNP, BNI

Healthcare/Biotech: MHS, GENZ, BCR, WLP, (GILD, HUM, MYGN, UNH, BAX)

Also: CVD, CL, (AMZN, UPS, ADP, DHR, NKE, KSS)

There were other movers here and there, but those were some of the stronger areas today. Remember, I'm still taking this day to day.....so we'll see what the ADP Jobs report does tomorrow morning. If it's less than catastrophic (like the ISM, which was a horrible number but still less catastrophic than expected), then the market might catch a little follow-through on the bounce. We shall see.....