The First Time is Not Likely the Charm

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Heading into tomorrow morning’s jobs number, we have seen a 90 point move in the S&P 500 since the final hour of Tuesday’s trading session. The S&P has not come in direct contact with its sharply declining 50 day moving average since July 28th. A knee-jerk spike higher tomorrow morning as an initial reaction to the jobs number could easily see us testing that elusive 50 day m.a. up at 1180.

Simply put, when you go this long without so much as touching such a widely watched intermediate-term reference point on the daily chart, the first test of it in a virtual straight line is likely to offer up a high probably short-term short trade, probably lasting no more than a day or so. It is highly likely to take a lot of work to flatten out and then turn back up that 50 day moving average. To be sure, I would not short the second, third, or fourth touch of that reference point, but the first touch in a straight line morning gap higher is what short-term shorts want to see.

Also note that such a scenario playing out would actually be preferable for bulls looking for a multitude of loose and sloppy charts to firm up, in the hopes of eventually offering higher probability entry points for longer-term swings. There is a lot of work to be done for that to happen, but a back-and-forth tussle in a lower volatility environment than what we have seen over the past several months would be considered progress.

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