Waiting for Unemployment Data Reaction; Euro Decline Shows Bears Still Have Life

Not much to report on a “do-nothing” day. Market participants appear to be waiting for the big unemployment number coming out tomorrow morning. So expect some volatility heading into tomorrow’s US market session. The internals today show a flat market on low volume and basically tell us we need to wait for tomorrow’s jobs report to get a better idea of short term direction. With the market so overbought and outstretched in price, optimism, the wave count, and momentum, the odds favor that volatility tomorrow will result in a downward move. However that’s just an educated guess at this point since there are no signs of the uptrend being broken in stocks just yet.

The wave count remains the same in that the S&P is in a Minor wave 5 that should be in its final stages. This is supported by the diverging momentum as shown by the RSI trailing downward while price continues higher, and the weaker internals on each rally with light volume mixed in, all suggesting the rally is tired. Now we’ve seen tired rallies before continue on and on and on upward for days/weeks, so jumping in short here is a risky move. I’ll leave that to the high risk speculators and day traders. But for swing traders like me, I’d like to see some evidence of a top with a clear and close stop loss level to control risk. I don’t have that yet, so I have to continue to wait. Perhaps tomorrow’s jobs report will give that to me.

Learn Elliott Wave Principle

Amazingly, the Nasdaq Composite still has not yet made new highs like the Dow and S&P. Normally I would consider this a very bearish development for the overall market. But as it sits right now, if the Composite were to decline from current levels it would mean a triple top was in place, and triple tops are extremely rare and shouldn’t be counted on at all in my view. So I’m not counting on that happening. This suggests at least one more upward pop before a top and reversal can occur. A failure to make that new high and then declining below 2677 would be extremely bearish in my view and suggest there is so much weakness in the Composite that it couldn’t even resolve the triple top affect properly before topping.

So in summary, it’s a waiting game until signs of a top enter the market and we can control risk with a high confidence short trade. I’m going to wait for the market to come to me and play into my setups, not try to impose my will and impatience on the market and get in too early. So I’m waiting.

Trendlines: How a Straight Line on a Chart Helps You Identify the Trend

The euro did exactly what it needed to do if the remaining bearish potential were to remain alive by declining hard today and closing near the lows on the day. The decline looks impulsive, but needs a few more new lows to make it more of a certainty. A daily close beneath 1.3569 would be extremely bearish in my view and get me to pound the short side Sunday night.

Let’s see what action follows the employment report tomorrow and see if there’s a play to be made…

PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.