TheSlayer's Market Thoughts

SPY June 3 2013

During the overnight session, the futures faded at first when the Europeans started trading, then bounced back later. The same phenomenon happened when the US markets opened, but on a much grander scale. A huge morning pullback bottomed at 1620.75 on the futures, then it was off to the standard grind higher after having scared out as many Bulls as possible.

While the market still could roll over, and could do that at any time for any reason anyway, there were numerous positive developments today. SPY remains solidly in its longer-term uptrend channel, and the move back down into that channel has to be considered healthier for long-term market health than going parabolic above it. The SPY also is back in its sideways channel.

The Japanese appear to be trying to do something to stop the Nikkei 225 from continuing its free-fall, with government pressure on pension funds to support the market. That news seemed to help lift the US markets late in the day. The Nikkei drop has been the one thing the Bears can point to as a real market problem, fixing that will restore a lot of investor confidence.

The late SPY rally broke to new highs right before the close. SPY remains above the important moving averages, with the 30-day moving average providing support today. For those who like Japanese Candlestick analysis, the daily candle today formed a bullish Hammer. Such a pattern suggests that sellers exhausted themselves during the course of the day, leaving the road open to buyers later to take control back from them. Closing near the highs after a big dip is a Bullish sign, candlesticks or not.

The major support lines we discussed over the weekend remain important, but the risk appears to have shifted back to the upside, as they say. Tuesdays have been Bullish this year, and traders may have been anticipating that a bit late in today's trading.

We look for at move back into the upper 1640s tomorrow. If this rebound gains steam, more and more shorts lured into shorting by the big dip will have to cover and send the averages even higher. QE remains in place, though every day, it seems, yet another Fed Governor has to shoot his mouth off about what he thinks should happen with it. Today, it was Dennis Lockhart of the Fed Bank in Atlanta. He didn't say anything new, but any talk about the future of QE sends shivers down spines across the country. In a way, that's good for Bulls, because the repetitions gradually dull that sensitivity each time it happens.

If you attempt to fight the primal forces underpinning this market's move higher for more than a short swing or scalp, you are just looking for trouble, though, yes, you also might get lucky one of these days. Action such as today's isn't really pleasant for anyone, but those who adhere to the underlying trend have been better off this year.