Jobs and JPM Boost the Bulls

JPM beat earnings estimates and said all the right things, and Initial Jobless Claims came in lower than expectations at 610k vs. 663k. Both reports boosted the pre-market futures and have set a bullish tone to the morning. The Naz is set to outperform at the open, and the SPY will gap up and then probably test the highs of Tuesday early in the day.

If the SPY (and the market) are going to make another reach to new highs, today is probably the best opportunity. The trend is so far beyond extreme that I'm not going to even comment about sanity anymore. Nor am I going to say anything about the upward revision to last weeks Initial Jobless Claims to 663k. And I'm going to leave alone any comments about Housing Starts (510k vs. 540k), and Building Permits (513k vs. 549k). I'm just going to say, look for a surge this morning on the market, look for the SPY to test the 86.50 area, look for the possibility of the 87.50 area later in the day if the gap from this morning holds in an orderly fashion, and have a nice day.

I mentioned yesterday that the other earnings reports, in aggregate, would also be a mover and shaker today. HOG, ITW, NOK, and FCS are all trading in the green right out of the gate (CY and LUV are not). So the tone could not be any better for the bulls today. Eventually the old "take the profits after the news hits" game will probably come back, but the fundies may still be playing the "buy ever bit of news that even sounds remotely good" game. So, once again, if the gap from this morning holds in an orderly fashion, look for another attempt at least for new highs. Early in the day we are getting a bit of a gap and wiggle.

7:40 am MT: The SPY is wiggling a bit after the gap. It looks like it wants to test the bottom of the gap, which was yesterday's close:
(click on image to enlarge)

You can see the resistance zone is 86.50 - 88.00, which means the market could reach into the 87.00 - 87.50 area fairly easily.

I have two things to say about the market today, and it centers around what I mentioned above. Eventually the bulls will start playing the "buy the rumor and sell the news" game again, which is usually reserved for bull markets. However, many fundies are probably on cloud 9 and have been dancing in their offices for the past three weeks, so perhaps, in their minds, everything is bullish again, the economy is healed, government policy decisions are perfect, and the whole world is going to flow with rivers of gold. So it's possible, because they are thinking like bulls again, that they are going to play the "sell the good news" game today.

7:52 am MT: The wiggle and gap test right out of the gate has gone from orderly to more serious profit-taking. Traders are starting to act like they want to play the "sell the news" game. If the SPY doesn't hold the 84.75 - 84.90 area this morning, then the possibility of a rally to 86.50 or beyond diminishes severely.

7:57 am MT: The SPY just put in a Hammer on the 5m charts. If the Hammer fails and the SPY falls down through 84.75, then the market will probably see consolidation and profit-taking on and off throughout the rest of the day.

Continuing the comment from above, here are my two thoughts: The first is that the bulls got everything they could possibly want today. JPM said what they wanted, Initial Jobless Claims came out with the right number, especially if you put on blinders for the revision, a number of other companies reported good earnings, and the Bull Flag on the SPY broke to the upside. So the bulls have their absolutely perfect scenario for new highs, and a reach for the 87 - 88 area, which would complete Excalibur's sword, and bring harmony to universe.

If the bulls decide not to take this absolute gift, then they are sending a key signal to technical traders. Remember, they've been buying earnings and economic numbers a lot worse than this for over a month. They've strapped on the rose-colored glasses, zoomed the microscope on any rays of sunshine on the bottom of the glass, and bought every bit of news with a freneticism like it was 1999 (or 1938). So now, here's the big gift, JPM announces that the banks are healed, they can walk again, it's a miracle! If the market can't buy today, then the uptrend will be sending some key signals that it may be about to end for awhile.

The second thought needs some charts to give us numbers to watch for clues on the first thought.

Here is a current 15m chart of the SPY:
(click on image to enlarge)

Here is a current daily chart of the SPY:
(click on image to enlarge)

On the 15m chart you can see the first short term support area is the 84.75 - 84.90 zone I mentioned earlier. A breach of that support zone would open the door for a drop to the 83.75 area. A break of that area and you will want to switch to the daily charts to note two things. The first is that the next support down would be the 81.50 - 82.50 area, and the second is that it would be the first lower low since the uptrend started, and the trend would be over and headed towards consolidation.

If the SPY (market) can bounce off the 85.00 area intra-day, then the first target would be the 86.25 - 86.50 area, and if the market can push through that resistance, then it opens the door to 87.50 - 88.00. We shall see how this all plays out.....

12:20 pm MT: The SPY held and bounced right off 84.75, which opened the door for the move into the low to mid 86's. It took several hours, but the SPY finally made it to new highs. The intra-day rally is getting a little gassed out, so if you played the bounce off 84.75 earlier, you should take partial profits right here in the 86.00 - 86.10 area, which is just above this morning's gap.

Here is a current 15m chart of the SPY:
(click on image to enlarge)

The 86.25 - 86.50 area is still a possibility, so you can keep part of the position to see if the market will run a little more today before locking and walking on the rest.

12:37 pm MT: The SPY is pushing right into the 86.50 area, so get ready to lock down another 1/3 or so of your profits from the bounce this morning, and pull up your stops some more.

12:42 pm MT: You can get a feel for how close fund managers are to completing Excalibur's sword by viewing the 2hr charts.

Here is a current 2hr chart of the SPY:
(click on image to enlarge)

The bulls may try to push through to the 87.50 - 88.00 area in the last hour today or try again tomorrow. Like I said this morning, today was the absolute perfect scenario for the fundies to make the move, so if they were going to get close to completing Excalibur's sword, today was the ideal day.

12:45 pm MT: The SPY (market) hit 86.50, so you should have taken another 1/3 of your profits and be sitting on the final third (with tight stops) for any possible push to get close to or complete Excalibur's sword.

12:51 pm MT: Traders are attempting to push into the final resistance right now. The last profit target area on the day is anything in the 87.50 - 88.00 area. There's almost a buying panic going on right now with the bulls, like a climactic surge, so this could get a little interesting.....

Here is a current 2hr chart of the SPY:
(click on image to enlarge)

We'll see if Excalibur's sword gets done today.....

Tomorrow morning, GE and C report earnings, so I speculate that some of the Fast Money and Googly-Eye fund managers are almost desperate to get to resistance today, ahead of what might be some fairly somber earnings reports tomorrow morning. Perhaps GE and C will surprise us all by reporting something that at least isn't horrific and crazy-catastrophic, in which case the Googly-Eyes will have the fuel to finish Excalibur's sword tomorrow. But I can understand the buying panic going on right now, like I said above, it's pretty interesting to watch, and fun to trade.

1:24 pm MT: I want to give you a good visual on what I mean when I sense almost a state of panic to the buying right now.

Here is the 10m chart of the SPY:
(click on image to enlarge)

The move is just not sustainable at that angle and that length, at least not on the 10m charts. It's a very extreme, short-term climactic move. Traders are in a mini-buying panic right now, and hysteria is always, always a great time to sell and scale out. Perhaps we will see one more consolidation and one more push just before the close, but this is getting late enough in the day that traders may simply run out of time to try and consolidate and push once more.

1:28 pm MT: There is the first consolidation candle on the 10m charts, so the market may have topped out at 87.11 on the day. Maybe there will be a quick momentum pullback and one more attempt at new highs, but if I'm playing the odds, I'm locking just about everything now.

1:33 pm MT: In know these updates are coming fast and furious right now, but it's a fast and furious market. The pullback on the 10m charts is staying fairly orderly, so there's a decent chance that if the SPY (market) can hang around the 86.70 - 86.90 area for the next 10m - 15m or so, then traders may try one last climactic gasp in the final 10 minutes - buying into the close.

1:44 pm MT: It's done.....traders reached a little early, which means the bulls had very little gas in the tank to push beyond 87.11. The SPY pushed to 87.15 and it was done. There might be another push just before the close, but I doubt it goes above 87.15. What all this is telling me is that the low 87 area is the gas-out area on the day. It was a big run this afternoon, almost a panic run, which made for some decent call trades today.

2:01 pm MT: Market Wrap: If I was a savvy fund manager I would have done the exact same thing, lock some profits ahead of the GE and C earnings tomorrow morning. Why take the risk that those two companies will surprise us to the upside? There's not much to say about the day that the title of the post doesn't already tell us. And there's not much to say about the bit of profit-taking before the close other than these four words: resistance zone, GE, C.

The DIA and SPY both finished with Spinning Top candles, but the Naz performed a little better, as I speculated early in the day.

We'll see what the earnings tomorrow morning do to the market. Will it be a continuation of the Bull Flags bounces or a roll over on some Spinning Tops? Another day, another trading opportunity.