It’s been a wild day today. Problems with the weaker of the EU economies set the stage for the weak jobless claims number, which in turn raised fears about a weak NFP report tomorrow morning. Looking at the chart, today’s move shouldn’t have been a surprise (although the extent of the break wasn’t expected).
Looking at the eMini SP Futures, this week largely followed a Taylor Method script. Last Friday put in the low of the selloff, putting in a low at 1066.50. Tuesday saw a follow through on a Sell day, as the TT would predict. Actually, Taylor would have looked at Tuesday as a Breakout day, as Monday was an inside day. Tuesday’s rally stopped in the vicinity of last week’s double top at 1103. The daily chart for March eMini Spoos is below.
click to enlarge
By the Taylor Method yesterday would have been the Sell short day. We didn’t get much action yesterday, and ended with a clear breakout setup- an inside day, doji, and the narrowest range of the previous seven sessions. The breakout setup meant we were looking for a directional move today; using Wednesday’s high and low as breakout points.
The 10 minute chart below shows today’s structure. They spent much of the early morning hanging around yesterday’s low, and then fell off sharply after the jobless claims report. 1084.00 was a 50% retracement of the rally off last Friday’s low; I like to watch the 50% retracements for price objectives for retracement moves. You can see that that level held as support for a bit before falling to test last Friday’s low.
click to enlarge
Tomorrow we get the January NFP report; what should we expect for equities? I would make a couple of points, subject to change depending on what we get for the rest of today’s session.
- As I often preach, breakout moves often create the ‘excess’ that marks the end of a move. This would argue for a Buy day tomorrow.
- Last Friday’s low is a pivot point. A rally from there means lower prices were rejected for now; held trade below there means the market has bigger problems.
- If we get a rally, that same 1084 area will be roughly the midpoint of the selloff and would serve as a rally objective and resistance on the way back up.
Stay tuned!
This is a sample of the analysis from my Swing Trader’s Insight advisory service. For information on STI, and to sign up for a free two week trial, visit here.
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