Traders Keeps Rowing the Boat

The market consolidation the past two days will be tested with a series of data this morning. The three key bits of data will be the GDP report, the Initial Jobless Claims report, and BBY's earnings. The first of the three data bits just hit, with traders buying the release of BBY's earning. BBY beat expectations and guided up, which is the double-whammy. BBY is set to gap up around 7% - 8% at the open if the early trading holds up. It's still way too early to get a sum total read on any of the data, but the pre-market futures are up on the first stage of news.

The market consensus will be known by about 7:00 am MT. Until then, reference the charts and information I posted at the the end of yesterday, which pertain to today's trading day. In addition, here is a 30m chart of the SPX showing a Broadening Pattern. The pattern of highs and lows will be a good reference for short swings today, if any form.

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

Currently, the futures are set to gap the market up, right to the 825 resistance area. If the GDP and Initial Jobless Claims reports add to the BBY tailwind then the Broadening Pattern may break to the upside, which will open the door for a run on the SPX to the 840 - 850 area. Next up are the economic reports.....

6:33 am MT: The economic data just posted and that whistling sound you just heard was the air coming out of the Frenetic Fundies balloons. The more experienced fund managers are probably nodding their heads and muttering to themselves, "that's about right." The GDP report came out -6.3% vs. -6.6%, which was slightly better than expectations, but way off what the news manipulators and the Top Gun Traders thought would be the number. Pre-market futures have immediately dropped on the report. I can't even get started on these Top Gun Fundies anymore, I guess I must be the guy just shaking my head and muttering about their goofy expectations. I suppose losing the Ferrari, Upper West Side condo, and the Limo service can make a Top Gunner a little goofy.....

In addition to the GDP report, which is actually a lagging indicator and really not that important (except to the press and to the amateurs), the more timely (and more important) Initial Jobless Claims reported 652k vs. 650k expected, which is roughly in-line with consensus. The jobs environment continues to bleed out, and with the IBM layoff announcement yesterday as a current litmus test, the employment situation in America is not rebounding yet. In fact, continuing claims are at a new record high for recent history.

6:50 am MT: Pre-market futures are still up, but off the highs. The SPX is set to gap up a little, but stay range-bound inside the Broadening Pattern on the 30m charts. There doesn't appear to be a momentum trade this morning, although their appears to be a Frenetic Fundy Frustration Trade, which could be a buying spurt from those fundies who are stubbornly angry about not getting their way with the economic reports this morning. So watch for signals that the fundies are trying to push the market on a last leg up in the current trend - economic data be darned.....

6:58 am MT: I imagine the rose colored glasses just got strapped on, the microscope was zoomed in to the bottom of the glass, and the stubborn refusal to see anything other than the recovery of their 2006 lifestyle was just forced on to their frontal cortex, because the the fundies are pushing the pre-market futures back towards the highs of the morning.

The market is still set to gap up, somewhere near the highs of yesterday. It's possible we see another leg up, and a continuation move today. I think the probabilities are still slightly higher that the market tries to push up one more time, and the current trend is not ready to roll over yet. There are still some battles out there, but the first move looks like a gap and test of the two day resistance to see if the market can make one more push. If the same fund managers (presumably mostly mutual fund managers) come in and sell again, like they have the past two days, then the consolidation will continue for awhile longer.

11:50 am MT: The SPX finally pushed through the two-day short term resistance. However, watch this area (830) as the top of the Broadening Pattern I drew for you earlier. The market is trying to make a push, but traders are also getting a little tired. How the market holds, builds, or consolidates on the break will be important as to whether or not traders have a move to 840 - 850 still in them, or if some of the buying euphoria is starting to wear off.

Here is a 30m chart of the SPX showing the top end of the Broadening Pattern I pointed out pre-market (where the market is having a mini-consolidation right now):
(click on image to enlarge)

The internals are showing a slight positive for the Bulls. So the market could continue to shimmy and saunter towards the next resistance. For now, calls are still in play. If the SPX falls back below 825 it's a warnings sign, and a drop below 820 is a drop dead area for calls. Traders are content to keep rowing the boat, and enough sellers are on the banks of the river watching the boat go drifting by that the market could continue to float along for awhile.

12:55 pm MT: The SPX turned back right off the top of the Broadening Pattern I warned of earlier. The key to this pullback (especially since it pierced 825) is to hold and be fairly orderly, like a Bull Flag.

Here is the current 30m chart of the SPX:
(click on image to enlarge)

A drop below 820 and I want to be out of calls for now and perhaps waiting for another opportunity tomorrow. If the market comes back and finishes strong into the close, we may see another push tomorrow before any profit taking hits just before the weekend.

1:48 pm MT: The SPX held 821 and rallied back to the top of the Broadening Pattern. If the market can finish strong then look for the possibility of a little follow-through tomorrow before traders lock profits ahead of the weekend.

2:15 pm MT: Market Wrap: The SPX did close near the highs, which was also right on the resistance line of the Broadening Pattern. Tomorrow's market calendar is pretty bare, so I'm looking for a residual push from the Top Gunners and then some profit-taking by the fund managers going into the weekend.