Thursday, April 1, 2010

Maybe the jobs report?

Well, the market once again put us right in the middle. It could just as easily shoot up from here as melt down from here. While the news doesn't drive the market (in my opinion), but I do believe it triggers what the market is ready to do anyway. For example, let's say the market is ready to sell off. The jobs report comes out on Friday with a +200k job creation. The market sells off anyway. The media will report that the market went down as most of the jobs were seen as temporary hiring from the census. Or instead, the number is +20k. Then the market sells off and the media says the market sold off due to a disappointing jobs number.

Now, lets say the market is not ready to sell off. Well, the +200k number comes out and the media reports that the market is up on outstanding job growth. If the number is +20k, the media reports the market shrugs off disappointing jobs number as recession is ending.

Anyway, you get the picture. It is not possible to predict the market's reaction to the news. Sometimes, the wave patterns give you the clues ahead of time. This time it has not. We will either gap up on Monday in a wave 3 or we will gap down on Monday in a wave 3. The reality is that the market did not confirm anything perfect.

Why? Here are the technical bullish reasons:

(1) the market did not break the new supporting trendline
(2) the market found support at the .786 retracement
(3) the market rallied strongly into the close

Now the bearish reasons:

(1) the market was rejected at a double top
(2) Technology and the russel significantly underperformed the SPX
(3) the market is overbought on all long time frames with divergences on the daily chart

You see, it is a coin flip. Myself, well I guess I should have gone flat at the close but being the aggressive trader I am, I left my puts on the table knowing that I can take a chop on the chin on Monday, but it was only a 1/4 position, so the pain won't be all that bad. However, if we drop on Monday, then I have a solid place from where I can add to my short position as our weekly reversal will be here.
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