TRAN called the action yesterday best, as I suspected when I proposed it as my confirmation index yesterday morning. TRAN hit the ascending triangle target at the opening high, then retraced to retest broken falling channel resistance, then rallied for the rest of the day. The next obvious target is a retest of the highs and possibly making the second high of a larger double-top there. TRAN 60min chart:
ES has been walking up since the low yesterday morning into the NFP number being released shortly, and is already close to retesting the current high. Obviously it may continue up from there but as with TRAN, ES/SPX may be putting in the second high of a larger double top. ES 60min chart:
Is there any reason to think that we could see another significant move up start today? Some, as the retracement on Dow has taken the form of a gently declining channel with only a limited retracement. This could be a bull flag, though there isn’t much support for that on other indices, and considerable reason to think that there is still unfinished business on the downside. Dow 60min chart:
Support and resistance at the least is very clear here. If we see a strong decline on SPX today then the daily middle bollinger band is at 1818, at the 38.2% fib retracement of the move from the taper announcement, and the 50 DMA is at 1799, at the 61.8% fib retracement. Resistance is at the daily upper band, currently at 1868. SPX daily chart:
I would much prefer to see a strong move down today, with a target in coming days at a test of the 1800 area for the current retracement. That would be technically tidy and set up the next wave up nicely. Life is often not so tidy however. What I would say is that there are technically valid possible larger double-tops now formed on SPX, TRAN, COMPQ and NDX, so if we see the current retracement lows taken out in the wake of this NFP number then I’d expect it to run further.
It’s a funny old world we live in for news nowadays. Yesterday the expected strong NFP number was going to boost equities because it would be additional evidence of US economic strength. Today after the very disappointing numbers were released I was reading that the bad number would boost equities because it would give the Fed a reason to delay further tapering. We shall see.
