A neck brace and hammer may have been a trader's most used tools in today's session as a jolt higher at the open on better than forecasted weekly jobless claims shook a hesitant bear out of a bearish trade in both the S&P 500 Index (SPX.X) 981.60 -0.7% and Dow Industrials (INDU) 9,112.51 -0.88% in the first hour of trade, but given more room, bears may have shown some sign that they are beginning to try and build a line of defense at SPX 1,000 and Dow 9,300.
The bulk of the morning's gains were put in place in the first hour of trade on some economists' rethinking that despite the drop below 400,000 and lowest reading since February 8, 2003, the better than forecasted jobless claims report was due to seasonality.
It continues to amaze this technical analyst (Jeff Bailey) how a group of economists can forecast a potential outcome, but then create an excuse that explains the errant forecast on something they "knew" was going to create an opposite result.
I'm not being critical of economists, as trying to predict a weekly or quarterly economic number is difficult. However, don't give the MARKET a number, then when you're off, tell the MARKET about certain seasonality patterns that may have created the "surprise" (up or down)."
Had I (Jeff Bailey) not "rethought" things from a point and figure chart perspective, I probably wouldn't have been needed a neck brace and spent an hour looking for a hammer when stopped out on the move higher, when a level of recent resistance found willing sellers again today.
A rather large sell program at 02:22 PM EST found the SPX breaking lower from the 995.5 WEEKLY pivot, where the SPX had hovered for the better part of the session. From there, it was lower to the close, with the SPX then triggering a bearish profile I re-established in the indexes at SPX 983.00.
Here's a quick look at tomorrow's pivot matrix where INDU/DIA WEEKLY R1 came close to being traded, but wasn't, and may have been the most "meaningful" level in play today if bears were going to show a more aggressive stance toward the establishment of a resistance level.
Pivot Analysis Matrix
There was no further technical damage done today than may have been done in early July, but if we're going to see any type of weakening trend begin, then bears need to break a bull's will and get some type of bearish continuation to the downside. I'll make it short and simple in tonight's point and figure charts.
Dow Industrials Chart - Daily Interval
The reason I'm a "cautious bear," but still bearish the Dow Industrials at this point is the double-bottom sell signal at 8,900 and inability at this point for the Dow to have set a higher high. My "caution" comes from the higher lows since the July 1st trade at 8,900.
What had me lowering a stop in this morning's 09:00 pre-market update was that Treasuries saw a pickup in selling (free up cash) and the U.S. Dollar Index (dx00y) 95.32 -0.12% was rebounding from its overnight lows on the jobless data.
I was surprised at the rather steep fall-off in weekly jobless claims, and yes, while there may have been some "summer seasonality" in the numbers.
A bar chart of the Dow Industrials shows it closing right on its 21-day SMA (9,108.2) and rising 50-day SMA is currently rising at 9,000.12, which I would tie in with the above PnF chart, where a trade at 9,000.00 would be a second consecutive sell signal.
To try and prevent being "shaken" out on the Point and figure chart, I'd suggest bears place a stop at 9,350 to prevent a potential "bull trap" pattern.
Today's trade saw no net change in the very narrow Dow Industrials Bullish % ($BPINDU). Still "bull confirmed" at the bullish cycle high reading of 86.67.
3M (NYSE:MMM) 139.45 +0.43% and Eastman Kodak (NYSE:EK) $26.26 -2.23%.
S&P 500 Index ($SPX.X) Chart - Daily Interval
Neck brace? Yeah, there was some intra-day volatility, however I was looking for a hammer to take my frustrations out on something when the sell program hit and SPX gave up the 995 level in rather quick fashion into the close.
To make sure I wasn't being emotional once the decline was underway, I tried to "make the SPX get me bearish again" and set a bearish entry point back at 983.00, which was triggered at 03:52 PM EST.
There's a saying that "the third time is a charm," and while bears met the challenge today and got a push back lower to the close, it will take a third sell signal at 975 to make for a lower low after the recent rebound from 985.
If this were baseball, it would be my view that the bulls are still at bat, with the bears pitching. Full count at 3 balls and two strikes, and the pitcher is winding up.
I think "strike 3" is about to be called.
Today's trade saw no net change in the broader S&P 500 Bullish % ($BPSPX) and stays at "bull correction" at 76.2%.
S&P 100 Index ($OEX.X) Chart - Daily Interval
"Overlapping" resistance of 502 was violated to the upside by 1.12 points and getting stopped above that level is enough to create frustration if a bear from yesterday was stopped out. Only alternative was to sulk a bit, or get back on the bike and ride if analysis for weakness was still in play.
BIG wedge forming and while bears may have defended at 502, bulls may now be tested back at 492 as the convergence of supply and demand builds pressure.
Today's trade saw no net change in the narrower S&P 100 Bullish % ($BPOEX). Still "bull confirmed" at the bullish cycle high reading of 84.00%.
I wanted to show the OEX bar chart to also make note that the OEX and SPX are the two major indexes at this point, which are closest to their 50-day SMA support, which will draw market technician's attention. Some consider a close above or below this average on a DAILY interval basis as being either bullish or bearish. Some consider a FRIDAY or weekly close above or below as having more weight.
I have little input on as to which is more important, but with the bullish % levels at such high levels right now, I'd expect the 50-day, which served support on the recent July 21 and July 22 lows to be a moving average that will draw some attention and a close below that level will undoubtedly draw some negative commentary, if not reaction from technicians.
INDU has 50-day SMA at 9,002. SPX's 50-day SMA at 978, NDX 50- day SMA at 1,217 and QQQ 50-day SMA at $30.25.
NASDAQ-100 Tracking Stock (QQQ) - Daily Interval
I was rather "focused" on the SPX/SPY this morning and missed the action early after the QQQ pulled back to an early morning low of $30.72, which was 2 cents above a pullback entry point I discussed in the 09:00 pre-market commentary. When the SPX moved above the WEEKLY pivot, the QQQ's had come back to a session high. Certainly shorts would cover and push the QQQ to a euphoric move back to $32.40. Stopped from that bullish profile at $31.56.
I've added what I consider an "aggressive bearish trend" in the QQQ, which I've attached to today's highs. If bears are determined, this trend should hold resistance.
Today's trade saw a net loss of 1 stock to a point and figure sell signal in the narrow NASDAQ-100 Bullish % ($BPNDX) and slips back to 76%. It would take a reading of 74% to reverse back into "bull correction" status and a reading of 72% for "bear confirmed."
My thoughts for adding the aggressive bearish trend is if we should see the QQQ turn "bear confirmed" at these high levels of bullish %, then that aggressive trend may indeed be in play.