We Could See Selling Either Way–Here’s Why

September 2, 2004
Chris Curran

Stock index futures opened Thursday’s session slightly
weaker after Q2 Productivity and Weekly Jobless claims were reported
weaker-than-expected.Â The range was pretty boring and thin for the
first 4 hours, but a couple of buy programs helped to break the range and never
look back as several levels of buy stops were hit. Volume on the moves up was
actually decent, and followed by light-volume pullbacks. Days like today are a
good example of why it’s important to throw your brain out the window, not have
an opinion on overbought/oversold conditions, and just trade what you see on the
chart.

The September SP 500 futures closed out Tuesdayâ€™s session with a gain of +5.00
points, while the Dow futures tacked on +50 points. Looking at the daily chart,
the ES blew through its 100-day and 200-day MAs, but is hitting weekly
resistance. On an intraday basis, price hit the reversal area on 60-min and
30-min bearish Butterfly patterns, giving a 1st target of 1109.50. The YM also
broke its 100-day and 200-day MAs and settled just under weekly resistance.Â In
the small-caps, the ER2 blew through its 100-day MA resistance to test its 61.8%
Fib retracement of the July/August down move, and is also hitting weekly
resistance.

September
bonds (ZB) were weak ahead of Friday’s report and right now, the downside
outweighs the upside potential. The Semiconductor Index (SOX) is still showing
relative weakness, and while it did follow the broad market up, it was unable to
get through Wednesday’s high.

Friday morning gives us the long-awaited August Employment report, with
estimates for an increase in Non-Farm Payrolls +128,000 new jobs to +150,000,
and for the Unemployment Rate to remain steady at 5.5%.Â The lower Productivity
number and higher Jobless Claims number may have been the writing on the wall
for the Employment report. Considering we didn’t get a pullback ahead of the
report to factor in any negativity, and any good news is probably factored in
now, we could see selling either way, with a really sharp reaction to any
downside surprise. President Bush will most likely have the key numbers of the
report already when he gives his speech tonight at the RNC. After his speech is
over, watch to see if there’s any action in the futures from market players who
think that he tipped his hand on the news (or thought that he was blinking to
them in Morse Code!)