Before talking about jobs lets see how the world has set us up this morning.
Asia
Japan is on fire. Despite the death or perhaps to honor the life of Tsutomu Yamaguchi the Japanese markets climbed up another 1% last night. If you don't know who Tsutomu Yamaguchi was you should read his amazing story of surviving two atomic blasts. China was slightly green also.
Europe
Europe is 100% green in a temperate trading session. Europe is paralyzed waiting for the US reaction to jobs at 8:30 am today.
Homeland
Jobs, job, jobs.
Waiting for 8:30 and our non-farm payrolls number. Can we get below the 10% number today? Last month we began the downward move so today will be the second data point and a trend doth make. For the last two months the unemployment rate has moved from 10.2% down to 10%. A number under ten will put a pivot in place a number above ten should be disappointing. For the market to rally there must a goldilocks number, one that is just right. If the jobs come in too hot we raise fed fears.. If the number is too cold we raise recovery doubt fears.. Somewhere in between there must be a just right number.
At 10 am we will get Wholesale inventories that will add or subtract a little momentum and then at 3 pm today we get to see how the banks are making all there money by contracting credit. No jobs in the morning and no credit at 3pm. Hmmmm...
Futures I won't put up since they were flat overnight and we are waiting for the jobs number.
Charts
40 DMA % Index
The 40 DMA % Index scores a +6 today (bullish). Yesterday's afternoon strength lifted all three indices and their components up over yesterday. The NYSE is now trading around 82% which although not a high is certainly in the overbought area. The RUT & NAZD recovered from yesterday's push down. The RUT remains close to its 20 DMA and a single bad close could issue us a sell signal on the RUT. This chart is still fragile for the bulls.
10 Day High - Lows
The 10 Day High - Lows have all three indices in weakening state. The NAZD and the RUT are now on multiday bearish signals. A bad day today and the RUT 10 day high - low could go negative. The momentum 5 day averages for the NYSE should be easy to maintain today, the RUT is the index to watch on this chart. If it rallies today along with the NADQ all is up in the air. Today's close will be important heading into OPEX. The overall score for the chart is -4, bearish.
52 Week New Highs.
All three indices have lower bars then their previous day, but none have them low enough to turn the momentum 5 DMA downward. This put this chart at neutral. Our charts are not in agreement as they are pointing in all different directions like a weather vane on a windless day.
To sum up; the 40 DMA % Index is +6 bullish, the 10 Day High - Low is -4 bearish and the 52 week new high are 0 or neutral. Adding the chart scores together and you get a +2 so we are just dancing around either a top that is turning or we are correcting in place. There is no momentum here just velocity in the markets from Monday's thrust.
Conclusion:
I did not do a good job keeping the ESh in a box yesterday. I was good until about 2pm when the market rallied to new highs. Since the January 4th thrust we have been in this expanding triangle so it order to contain price today I am going to expand the box. I am pulling the bottom of the box up to the 1127.25 area which appears to be a floor for our thrust. The ascending trend line on the highs has been making a great upside target so extending that out if we are to close on the highs and this trend line holds that up side target would be 1141.
Just to lighten things up.. I am calling for a close at that 1128 level so for those that are short (me) can have a good weekend. Next week looks to be cycling as a more bearish week as the momentum of new highs are waning and the history of new highs should cause the velocity to stall and the momentum to turn.
Hope to see you in the trading room if not in the markets.
Marlin aka RedlionTrader.
