Traders Feel the Gap

I stated yesterday that the default setting for traders today would normally be down because of the Bear Gap. Pre-market futures reflected that sentiment as the market is set to open down near the lows of Monday, and that was before the ADP Employment Report came out with numbers of -742k vs. -663k expected. In addition, ADP's February's data was revised down. The Googley-Eyes are in shock this morning. This is just not possible to them, it can't be. They were given all the "good news" by the banks and the government just three weeks ago. They drank the Kool-aid, it tasted sweet, it's just not possible, there's no way - no way in the world. I mean, they locked arms with each other, formed a big circle around the NYSE, and did their best Broadway version of Colm Wilkinson singing "This is the Moment" just three weeks ago - just three weeks ago! "That was the moment, darn all the odds, that day or never, they would sit forever with the......" How can this be?!! There's no way that the job situation could be getting worse!

The initial move this morning will be down. Look for the Googley-Eyes to pause before the ISM reports 30m after the open. They are still clinging to the hope that the ADP Report is an anomoly, and the ISM will rescue them. They may even hope that Friday's big Employment Report contradicts the ADP Employment Report.

The ISM will move the market, so you should be ready in case there is a much better than expected report. However, it's more likely that the report is not wildy wonderful, and today ends up being a down day in the market. We'll see what the next set of numbers brings.....

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

The numbers from the end of Monday's posting are still good targets for today. The 767 - 770 area didn't go completely away, despite Barney's best efforts yesterday. Speaking of news bogeys, expect one tomorrow if the ISM is horrible today and the market sells off down to the next support or lower. If we don't get a bogey tomorrow, it's only because the bogarters are waiting for Friday's employment data to come out before they believe that they need to go into plunge prevention mode again.

8:15 am MT: The ISM came out slightly better than expected with a 36.3 vs. 36.0 reading. The market popped a bit on the data. In the bigger picture, the news really isn't "good" news. However, those traders zooming in the microscope on the bottom of the glass looking for any drops of sunshine are buying the hope. There's no sense in fighting them just yet. Look for pattern developments on 15m and 30m charts on the SPX or SPY before deciding on puts. For now, there are a few drops in the bottom of the glass, so up we go.

The ISM may be enough to put the market in a holding pen until Friday's Employment Report. So be nimble today. The range that is starting to appear on the SPY in the very short term is about 78.00 - 81.00. The move to the top of the range right now is pretty extreme. So probably some Shorts are screaming and some Googley-Eyes are partying. Again, wait for something clear to form, there's no sense in over-analyzing what they're doing this morning.