There is not much change on the charts as we head into the employment report. This is kind of like a Fed announcement, expect most action occurs before the NYSE and Nasdaq actually open. The report is issued at 8:30 AM ET and the stock exchanges open an hour later. Bond, Dollar, Stock, Gold and other futures have already reacted to this report by the time exchange stocks officially open for trading. This pre-market action often leads to a gap on the open.
On the 60-minute chart, SPY gapped up and surged to a 52-week high on Monday and held its gains the last few days. The gap and the gains are holding, which is bullish. Yesterday's dip established a reaction low upon which to base the first support level. This is confirmed by the upper end of the gap zone. Even though a break below 129.5 would be negative, I will hold out for a support break at 127 before considering the short-term uptrend officially reversed.
The 10-day SMAs for Nasdaq Net Advances ($NAAD) and Nasdaq Net Advancing Volume ($NAUD) both moved above +100 to turn bullish again. These two moved into bear mode with declines below -100, but these signals were not confirmed by NYSE Net Advances ($NYAD) or NYSE Net Advancing Volume ($NYUD). To recap: I set buffers or bullish-bearish thresholds for signals. Simply relying on a cross above/below the zero line results in too many whipsaws. Therefore, these indicators are bullish after a cross above +100 and remain bullish until there is a cross below -100. This reduces the number of signals and the number of whipsaws. These thresholds, however, do not completely eliminate whipsaws or bad signals. All indicators experience whipsaws. Subscribers can click these charts to see the settings and save them to their favorites lists.
Key Economic Reports:
Thu - Feb 03 - 12:30 – Bernanke Speaks
Fri - Feb 04 - 08:30 - Employment Report
Charts of Interest: Tuesday and Thursday in separate post.
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This commentary and charts-of-interest are designed to stimulate thinking. This analysis is not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise). We all need to think for ourselves when it comes to trading our own accounts. First, it is the only way to really learn. Second, we are the only ones responsible for our decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. Among other things, this includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios BEFORE making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.
