New Closing Low

This was a new closing low for this move. I know it has been a pattern for the market to gap up after selling off hard on a Friday, but one of these days that pattern will not work and we'll have a big gap down. I don't think we can keep going under 1070 and bounce back higher. Eventually we'll stay under 1070 and bust through 1040.

Low Volume Selloff

I know its not what the textbooks say, but I think low volume selloffs are more bearish than high volume selloffs. Today is a low volume selloff and instead of fear and panic, the selling is just dreary and slow. If we close below 1067, that makes it a new closing low for this month long selloff. We could have panic next week if we bust through 1040.

No Time to Sell

Weak markets don't give you much time to sell after rallies. Strong markets will give you all the time in the world to sell but very little time to buy. The more I see this market trade, the more I see this as a market that gives you plenty of opportunities to buy low but very few opportunities to sell high. The likelihood that we close near the lows is high. It looks like a trend day from my viewpoint.

Currency Crisis

Euro has no bid. This is turning into a currency crisis, and a cascade decline cannot be ruled out. Playing the long side is extremely dangerous except for deep oversold buying. Since the past 2 days have been up, I think we have a lot of room to go down now. The bears have reloaded. I see 1020 and perhaps 990 by the middle of the month.

Further Weakness Ahead

This is bad price action after a big gap down. Add to the fact that it is a Friday and we're weakening, I see a possibility for further downside today to 1070. This is an extremely weak market that can't string together much of a bounce even after falling so much the past several weeks.

Total Collapse or Back to Even

I put the odds of a total collapse today at about 10% and the odds of getting back to the flat line at over 50%. The rest of the scenarios I see will put this market higher than the open but not quite filling the gap. Hungary problems are in the news, and the euro is getting pummelled again. Europe will be a potential threat to any rally at anytime, which makes going long so dangerous. But for today, the market should be able to shrug it off as it has shown strength the past 2 days. The nonfarm payrolls is always hyped up but I think traders are more focused on Hungary and the euro than jobs. Look for an intraday rally today.

Nonfarm Preview

I am not going to come up with any forecasts but I've noticed that nonfarm payrolls usually mark a short term top or bottom. Since we are heading up into the report, it is more likely that we form a top on the number than continue to trend higher. My gut tells me we rally when the number is released. I will look to sell a pop on the jobs number tomorrow.

Recurring Pattern

After the up day, we get weakness the following day and collapse around mid day. We are following that schedule, but this market is stronger than it was late last week. It is these drops out of the blue that are warning signs that the bull firepower is absent. I don't think we'll collapse today, but the odds intraday are in the bear's favor on most days. After the nonfarm payrolls on Friday, I don't see any bullish catalysts for this market.

Two Consecutive Up Days

We have not had 2 consecutive up days since late April. I think we are due for consecutive up days. I would wait to short this market and only the nimble should attempt to buy today. The ADP number slightly disappointed, and we've priced in a very strong nonfarm payrolls number with yesterday's rally. I expect early weakness followed by strength later in the day. Tomorrow looks like the day to put on short positions.

Going to 1110

This market has found solid support at 1070 and we're likely to test the upper bounds of the new normal, which I believe is around 1110. I think we're likely to continue this strength into tomorrow as bulls get excited and get ready for a blockbuster nonfarm payrolls report (consensus 500K). I don't think we can go much above 1110. Any shorts taken from 1105 to 1110 should be comfortable to hold for the next few weeks.

Give the Bulls Today

I don't think this market will drop much today. The market has spent too much time above 1078 intraday. I am waiting to sell any rallies that take this market to 1105-1110. This market can drop at anytime so I feel uncomfortable buying anything but deep selloffs.

Quiet Trade

I don't expect anything dramatic today, we should stay close to the flat line.  The move in energy stocks will be digested along with the general weakness in Europe.  This market should test the 1060s today but I don't think we'll be going down dramatically.  Traders will start lining up for the nonfarm payrolls on Friday which will limit the downside.

Weak

The gains from the big rally on Thursday have been taken back in 2 days.  Even the positive first day of the month couldn't stop the bears from taking this market down.  The bulls have to be petrified after today's action, looking good early and then fading when it counts at the close.  A gap fill on the futures at 1061 seems inevitable, and I wouldn't rule out a revisit of the lows from last week.

Automatic Money

There is money that comes in consistently every month that is done automatically, regardless of price.  That is what happened at the open today as we had that automatic money piling in and inflating prices quickly in the first hour.  That effect should fade away soon. 

Don't Get Fooled

We will have ISM data coming out for May at 10:00 AM.  Don't believe the hype.  The economy was stronger last month than it is now.  Same with the nonfarm payrolls coming up on Friday.  Look through the windshield, not the rear view mirror.  I think we will be weak all day today and probably close near the lows.  Target prices are 1067 and then 1062.