With the monthly “Jobs Report” coming in better than expected (the unemployment rate actually DECLINED in July, when the consensus was for an increase of anywhere from 0.1% to 0.3%), the market pushed higher from the open into what resembled a Trend Day. However, by mid-day, the S&P 500 challenged overhead resistance and a “Three Push” negative divergence pattern (as well as an Elliott Wave fractal) formed at the highs. Let’s take a quick look.
This time we’re taking a look at the @ES mini-S&P 500 futures contract (for September) so that we can see the upward surge from the better than expected Jobs Report announcement (which I mentioned last night could certainly be a market mover).
After the initial impulse to the upside, the bias should have been to the long-side with the possibility of a Trend Day on the horizon.
We then formed three symmetrical “pushes” into the afternoon highs which formed a “Make or Break” Pattern.
The 3/10 Oscillator showed a crisp and clean three-swing divergence (as each new price high was made, the oscillator formed lower highs, which served as non-confirmations of the afternoon highs). This was a sign of weakness, which should have put us in caution or “wait and see” mode to determine if bulls could keep pushing prices higher… they ultimately could not.
The “Three Push” pattern (as described in the Education Section) is a powerful reversal pattern with very low risk and high reward (opportunity) in the event that the final push does lead to the intraday high - which was the case today. A stop is placed just above the high and if you see bearish candles at the third peak, that’s even more evidence odds favor a reversal.
In this case, we saw a simple 5-min shooting star at the highs.
If you look closely, a bearish Cradle Trade formed into the close of the session (these times are in Central/Chicago Time).
I describe how to identify how the day developed, and note key opportunities/trade set-ups as well as how to manage them in today’s “Idealized Trade” Daily Summary report - please check out the link for subscription and additional information.
I also describe the Elliott Wave pattern I labeled above, as well as the Bearish Rising Wedge that terminated at the final high of the day.
The bullish report was favorable for the bulls, but I certainly expected the welcome news to produce a full Trend Day up all day long, squeezing shorts. As I mentioned last night, the two major resistance levels to watch are the 1,007 and 1,014 area… we closed right in the middle of these areas today.
To keep the bullish party going, bulls need to close firmly above 1,014 (preferably 1,020) and if not, then bears would certainly love to take some revenge against this powerful rally that began in early March!