equity markets are trading higher this afternoon but remain rangebound. This
morning shorts tried to pressure the December E-mini S&P 500 after the
release of a weak manufacturing report.
The Institute for Supply Managementâ€™s Index
of U.S. manufacturing activity fell to 54.4 in September from 56.3 in August.
The number was not low enough to warrant fear of a double-dip recession, but
not strong enough for the Fed to remove the threat of Fed QE.
Investors bought the E-mini S&P 500 on
the break, thereby preventing a confirmation of Thursdayâ€™s daily closing price
Technically, on Thursday, the E-mini
S&P 500 formed a daily closing price reversal top at 1153.50. This came
after price squared time on a Gann angle which has moved to 1152.50 today.
The market broke until an uptrending Gann
angle from the 1032.50 bottom was tested. This angle moved up to 1136.50
today. This angle was penetrated
slightly this morning to 1134.50, but failed to attract big selling pressure to
push it lower.
Based on the current chart pattern, the
trend will remain strong as long as the market holds a series of bottoms. This
uptrend will have to be reaffirmed, however, on a breakout over 1152.50.
As far as the downside is concerned, a
break through the uptrending Gann angle
at 1136.50 with conviction will weaken the bullish outlook and put the
market on the bear side of the angle.
A trade through 1131.25 will take out
Thursday low and confirm the closing price reversal top. This pattern usually
means the start of a 2 to 3 day break of about 50% of the last rally. This
makes 1093.00 a potential downside target.
Those who remain bullish after the Gann
angle at 1136.50 is broken may have to take heat down to 1117.25, the last main
bottom and last weekâ€™s low. A break through this level will turn the main trend
The key to the rest of the day will be
whether the market can hold above 1136.50. Since this angle moves to 1140.50 on
Monday, I would have to say that a close above 1140.50 is more critical since a
close under this price on Friday will mean a steady opening on Monday will
place the market on the weak side of the uptrending Gann angle support. This is
usually a bearish formation.