Spinner Day Spins Away

For the first time in a number of days traders will have a chance to react to some economic data. Durable Orders is due to be reported in about 5m. In addition, New Home Sales will be reported 30m after the open. Pre-market futures are relatively flat, so traders are sitting and waiting and pondering the realities (or fantasies) of the current economy.

The market charts to reference for today are at the end of yesterday's post. The 2hr chart on the SPX is noteworthy, and I pointed out some possibilities for today. Of course, much of it depends on the data that is just about to report.

6:35 am MT: Durable Orders reported at +3.4% vs. -2.5% expected, which is a much stronger than expected. The report is being parsed and contemplated as I type. The initial reaction to the report was a modest jump in the futures, but not as much as I expected for such a big positive. There must be something in the report that traders think is a statistical anomaly. For now, it looks like the market is set to wiggle a little to the upside, but nothing powerful, which keeps the consolidation on the 2hr charts still in play. I'll watch and see how the futures jump around a bit on this report, but so far, traders haven't taken the big positive to the bottom line yet.

7:00 am MT: Pre-market futures continue to hang around the slightly positive area. The trader reaction to the report is more muted than I would have expected, so another consolidation day in the market is still on the table.

8:10 am MT: The New Home Sales report beat expectations, which is giving the early wiggle a push to new highs. The February, and especially end of February economic data has been coming out largely better than expected. The SPX may attempt to run towards the 850 area, with a wiggle in the 840 area along the way. The key to the move will be how the market handles the first intra-day consolidation after the spike. If this is just an end-of-upswing short covering then the SPX (market) will probably not hold 815. If, however, the SPX holds the 815 - 818 area intra-day and bounces, then there is the potential for another bullish leg up towards 840.

The pattern on the 2hr charts is done and out of reference now, the news changed the inside structure of the charts. I am now watching the 10m charts for the little pullback off the spike, and I'm watching the 30m charts for the overall intra-day structure and support areas.

As I type this, the 10m charts are showing a Dark Cloud Cover, which means the news spike is probably going to consolidate for a short while. If the consolidation is orderly, and the price action maintains it bullishness, then I may look for calls on a bounce. We shall see.

8:35 am MT: Here is the bounce on the 10m charts that could start another push. At the very least it's defining the area I speculated on before as potential intra-day support. I was looking around 818 and the SPX held 820. If this will continue to hold and push, it may be worthy of some call trades. I paper traded a part of the position I wanted on the pullback.

8:39 am MT: The market just pushed to new highs, so the calls are already working. I want to see the move hold and price action to continue to form strongly so I can add more calls to my current position.

8:53 am MT: The price action is a little too loosey-goosey right now. The market really needs to show some tight strength in the next 30m or so, otherwise this could go back to consolidation and the push off the economic data was just short-covering. Traders have had every opportunity to go frenetic and panic buy off the much better than expected economic data. They have certainly been panic buying the past two weeks. So the price action right now is a little sloppier than I would expect for such "good news" on the day. I will keep a sharp eye on things and see if this tightens and builds or loosens and fades.

11:25 am MT: The market went through some min-chop intra-day off comments by Cleveland Fed President Sandra Pianalto who stated that the economy should stabilize by year-end and start to recover in 2010. Evidently some fund managers thought this was news, so there was some funky gyrations in volume after the comments. Since that time, the market has resumed its consolidation, which I was guessing might happen after the early loosey-goosey price action. So toss out Pianalto's comments, it's typical market news manipulation that only briefly put a blip on the radar screen. The market is headed for a consolidation day again, like yesterday. If it holds up in an orderly fashion, then perhaps tomorrow or Friday it may make one more push to 840 - 850 on the SPX. A drop below 800 today would put the orderly consolidation at risk and create a bit more hesitancy on the part of traders.

12:05 pm MT: The fade is getting deeper. The 2hr chart scenario from the end of yesterday's post is back on the table. The SPX may be headed more towards 785 - 790, especially if it can't hold the 800 area. Regardless of how deep the fade goes, the market is in full-on consolidation mode and unlikely to come back to new highs today. I speculate that we may see at least 795 before the end of the day.

1:10 pm MT: The 2hr chart scenario continues to play out as the SPX hit and passed 795, and is headed into the 785 - 790 area. This is the original consolidation I speculated last night (before all our news bogeys put some wiggle into the market). That's why I was interested in ferreting out the truth to see if the wiggle was real or fake. So the move I was looking for is back on track and playing out as I type.

6:30 pm MT: Market Wrap: There was all kinds of goofball price action intra-day today, but in the end the market did what it was most likely to do, which was consolidate. The wide wicks and small body on the market ended in a Spinning Top candlestick, but the pattern doesn't mean much right now, other than there was some manipulating, maneuvering, and gyrating going on all day. The media is getting the headlines it wanted to sway the American public, so I'm happy for them. But in reality this economy has a long way to go before it truly stabilizes, which the American public is going to figure out soon enough despite the headlines that are being vended to them right now. The price action was a little too loosey-goosey today, which contributed to the wide wicks, but overall the upswing/trend are holding bullish. The SPX could still reach for the 840 - 850 area in the next day or two, and the Dow could reach for the 8,000 - 8,200 area. The GDP number will get a lot of press tomorrow, and there are enough amateur fund managers to buy or sell whatever the GDP tells them to do, but the two most important bits of data tomorrow morning are actually the Initial Jobless Claims and BBY's earnings. If the data lines up bullish, then expect a gap up in the morning, and at least an attempt by traders to reach for the next (and probably final) leg up in the current swing/trend.

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


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

Like the SPX, I don't expect the Dow to make it all the way to the next resistance level even if the data comes out bullish, but rather to peak out around half way into the zone (8,000 - 8,200 area). A drop below 7,500 on the Dow and the bullish consolidation is likely headed for a stronger pullback instead of another leg up. A drop below the 785 - 790 area on the SPX and the same thing goes, the upswing is likely headed for a bigger pullback and the market might not make it back above today's highs on the current move. I will reference these charts in the morning for tomorrow's price action.