Well that wasn’t exactly what we expected. When we posted yesterday’s outlook for the S&P 500 mini-futures (ESH5), the contract was trading just above 2022 in the overnight market, down 25 points from the high of the day.
By the time you read it Thursday morning, the contract was trading above 2044, fully 20 points higher – before the “official” market opened – and was well on its way to challenge the broad resistance area at 2050-56. The only significant events promoting the unending ramp-a-thon in the mini-futures were bad news in Europe and somewhat bad economic news in the U.S.
In Europe, the Greek debt crisis got worse. According to the Greek finance minister, the two sides were unable “to agree to disagree.” That was enough to send the ESH5 soaring overnight.
The rally continued in the US after the release of the initial jobless claims report in the pre-market, which, while the content was mediocre, managed to provide a classic demonstration of perception management.
To the relentless optimists at CNBC, the report was definitely a glass half full: Outlook improves as fewer Americans seek benefits” they cheerfully lied, as they acknowledged in the first paragraph: “The number of Americans filing new claims for unemployment rose less than expected last week, a sign that the labor market continues to strengthen.”
Using mostly the same data, the permanent pessimists at Zero Hedge headlined: Layoffs Surge 17.6% YoY, Shale State Joblessness Soars, Initial Jobless Claims Rise.
Of the two, Zero Hedge is closer to the truth, but it hardly makes a difference. The employment/unemployment numbers are ruthlessly manipulated by just about everyone with an agenda to promote, and we have arrived at a point where, in the markets as in politics, facts are irrelevant. Only perceptions matter.
What We Expect Today
Monday, the ESH5 traded below 1975. Yesterday (Thurs. Feb. 5) it closed at 2057.50, more than 80 points higher. The contract has now moved past the 2050-56 resistance area, but not in a very convincing fashion.
Today (Fri. Feb. 6) we have the Employment Report in the pre-market, and we may see some profit-taking and a little pullback. The 2020-17 zone will be a major support. As long as this zone holds up, the ESH5 is likely to move back up. We expect to see continued buying on the price dips.
Yesterday’s price action was bullish, and the momentum still favors the upside. However, this rally is a little suspect. A close above the intermediate-term wedge pattern will help resolve our doubts and prepare us mentally for a breakout of the 1975-2062 range that has confined the ESH5 for all of 2015.
- Support: 2020-18.50, 2007-09.50, 1988-86, 1975-74,
- Resistance: 2062.50-64.50, 2075.50-78.50, 2085-88.50
ESH5 Daily Chart Feb. 5, 2015
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