Stock indexes gap down on jobs data

index0104.pngI didn’t post an update yesterday as there was not much to say, as the indexes seemed to waiting for the jobs data to be released prior to the opening today.
As you can see, the indexes gapped lower on the opening bell, and proceeded down for the rest of the session, creating a wide range bar. The upper graph of the QQQQ/Nasdaq 100 shows the low of November 12th taken out. This has obvious bearish implications. I’ve been pointing out for some time the extended divergence between the stock indexes and the broader advance/decline line. This has been the main reason for my bearishness, even as the indexes were driving higher into October. The longer term picture looks very bearish. I still leave the mechanical bull in the box, as this market seems to want to knock off traders trying to stay on for the ride either on the bullish or bearish side. The breakdown of the pivot where I drew the blue line, the gap, and the wide range bar makes it look obvious that the market will now continue down. It may not be that easy. This market is insidious enough to trap bears under that pivot, and then turn around to re-test the high pivots. I’m not suggesting that will happen, but it wouldn’t surprise me. What looks obvious, obviously eveyone else sees. The market rarely accommodates everyone. If short, I’d be careful of a reversal back above the blue line, especially if there is a washout first. There was generally increasing volume on the decline over the last few days, but the overall level of volume is still on the light side compared to the previous swings due to the holiday period.
The lower graph of the S&P etf shows the same low on November 12th with the blue dashed line. Today the open gapped below that pivot, however that pivot lost its importance when the S&P made a lower low on November 26th, where I drew the red line. Today the low held that point. It may well be taken out on Monday, but so far that pivot has held. It’s hard to find any bullish comment on this market, however if prices can manage a recovery early next week, some upside might allow enough of a move for a swing trade, and perhaps a good short entry. Also, wide range bars are often followed by smaller range bars, just as small range bars are often followed by wider bars. However, the gap looks ominous, especially after the extended consolidation of the last couple of months.
It will be interesting to see what happens next week when more volume should return.

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