Bears Defending in Wake of Weak Consumer Confidence Reading

Last Tuesday the Consumer Confidence reading dropped to 92.2 from a revised 97.8 in January.  The number was well below the 97.3 forecast.  Sellers pounced after the reading and drove price lower.

This move was a key piece of my expectations, as laid out in last Sunday’s Exodus Strategy Session:

I. THESIS FOR THE WEEK

Raul’s bias score 3.30, Medium Bull*. Look for a bit of buying momentum to follow through into early next week. Then expect sellers to reemerge after the Tuesday morning Consumer Confidence reading at 10am. Sellers then become initiative and work the market lower. Be aware of the GDP data set for release Friday morning and look for it to provide market direction into the weekend.

Everything was going according to expectation until that huge rally took hold yesterday which is now forcing me to consider an alternative scenario.  Yesterday was the fifth major ‘risk on’ push [mash] we’ve seen this year.  Click here for a brief history on the other four.

As we head into the afternoon, price is consolidating just below where sellers aggressively came in on Tuesday, right about 4200 on the March NASDAQ futures contract:

Sellers have responded twice today at this level.  Each test weakens their ranks.  If we see a sustained push above 4200 into the close, we’re likely to squeeze higher overnight and into Friday’s GDP reading, and ultimately into the weekend.

So while the Thesis from last weekend’s Strategy Session was bang on initially, it makes sense to be flexible and open to the idea that this key context could be a pivot in the opposite direction.  If you look close, there is a nice air pocket above 4200 that price can rip through fast.

It’s that simple, 4200 is your pivot.  Smoke’em if you got’em.

 

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