Earnings and Economic Reports Take Over the Spa

AA and RTP both warned about current conditions/earnings and both stocks are down pre-market. Metal stocks will probably see some early pressure this morning. In addition, GS just reported earnings and the initial reaction is a slight drop, but there is still a lot of time before the open for traders to sift through data.

This morning also has several economic reports. Housing Starts and Building Permits, and PPI. The first stage of the reports just hit the market with a slightly positive reaction. But just as it's early with the GS earnings, it's also early with the economic reports. The market appears to be modestly excited about a much better than expected 583k vs. 500k Housing Starts. I will check back later and decipher the news and the reaction.

The SPX threw a Shooting Star yesterday, which has a probability of rolling over into a consolidation day today. Unless the news this morning is overwhelmingly positive, I would expect an initial consolidation to drop down to the 742 area intra-day, and if that level is breached then the next intra-day wiggle point is probably at 735. A move above 760 is a mild warning for exiting puts, and a move above yesterday's high is a drop dead line for puts.

9:00 am MT: Intra-day Update: The market has had every chance to rally hard off the much better than expected housing numbers, but traders are stuck in neutral. The counter to the stronger than expected economic data is the string of earnings warnings in the Metals (AA, RTP, and NUE all warned to the downside and are selling this morning). The market is fussing along the short-term resistance area established with yesterday's Shooting Star. I warned yesterday that traders would make more of a fussy short term top rather than a smooth rollover, which is still playing out.

Here is a current daily chart of the SPX for reference on the Shooting Star and short term resistance:
(click on image to enlarge)

Here is a current 60m chart of the SPX showing a potential intra-day bounce that might lead to a test of the 765 - 770 area:
(click on image to enlarge)

Think of the short term top as a three stage warning. The first warning that the upswing might be over was the Shooting Star right at the resistance cluster yesterday. The second warning will come if the SPX (market) makes an equal or lower high on the 30m - 60m charts and breaks down. The third warning and final confirmation would be a close below the low of the previous day.

The UVOL-DVOL is diverging from price and advancers right now, which raises the probability that the SPX will not make a higher high on the 60m charts. There are a number of stocks setting up for puts (although nothing has confirmed yet) like FPL, EXC, BNI, AMGN, FDX, the Q's and so on. Remember, again, and I keep warning of this, look for a shorter 2-3 day type of pullback and not a long 4-7 day pullback to new lows. The puts will likely be quick and to the point this week. Traders are still breathless over their blind date with the Banks and Government. Whether or not reality brings something new into focus only time will tell.....

9:13 am MT: Intra-day Update: The market continues to grind a bit, but the way price action is fussing, I'm not sure an intra-day bounce will be able to make it back to 770, but as always, we shall see.....

11:35 pm MT: Intra-day Update: There isn't much to say other than the market keeps pushing, and the reluctant topping action is still playing out. Traders are still very much in love, so there's no sense in fighting it until it's over and the market confirms a short term top. It's a bit risky to try and squeeze out some more call trades this far into a sharp upswing, so I'm basically sitting on my hands and waiting this out.