S&P Futures Update for Aug 6, 2012

While the S&Ps continue to trade within a 8-month Balance - they are 1-timeframing up on a monthly basis - see graphic above. The Weekly Chart below shows the same.

Last week -  when the S&P's closed below the 1375-76 area, I viewed it as a breakout failure and thought the destination trade would be the 1320 area. However, what I failed to take into account was that the monthly trend was up - Aug took out July Highs. Also, the weekly bar showed the S&Ps 1-timeframing up. This shows the importance of always keeping an eye on the Monthly/Weekly bar charts during the week to keep a longer term perspective.

Back-to-back gaps are unusual in Equities; when double gaps do occur the correction, very often, has a dynamic conclusion with a final rapid rise followed by a break. Perhaps, that is what we witnessed last week. Thursday - was an excess low followed by large Gap higher on Friday. The cessation of a directional one-timeframing mode is, very often, the beginning of a reversal. Gaps are also frequently the precursor of a more significant, directional auction. An Excess Low followed by a Gap is the most potent combination for reversal.

 

Following a gap, which is usually considered excess, markets mostly sprint higher. Friday's POC is very prominent and Friday's high was poor. For Monday, I will be looking for higher to overlapping higher Value. The 1400 level is a key psychological level and may act as resistance. 1384.50 was the afternoon Pullback Low and is a key reference / support to the downside.

S&P Morning Update for Aug 3, 2012

The Jobs number has rallied the market overnight. Overnight Inventory is almost all long. If we Open now - we would Gap higher. 1380 (prominent merged POC), 1382.5 (last week's close) and 1387 (3 day high) remain key references to the upside and 1375-76 - breakout level are key to the downside. If the Gap is filled to the downside - see if Value can get to unchanged - if Value cannot get to unchanged the odds of late day rally are high.

S&P Futures Update for Aug 3, 2012

Following the ECB announcement, the S&Ps gapped open lower, filled the Gap above and then sold off to 1349.25. Value was clearly lower, however a late day short covering rally closed the S&Ps in the top third of the daily range. Treat Wed's low as resistance above. After settling below 1375 for 2 days in a row suggests that we continue lower - the 7 point Gap starting at 1346.50 becomes the destination. Gap's are another form of "Excess" - Treat the bottom of the Gap 1339.50 as support.

Thursday's Profile (above) left several Anomaly's - which are often revisited the following day or two. Employment data is due out tomorrow and will set the tone for the day. Question is do we Open in or out of Balance relative to Thursdays Value.