Bulls Are Battered in Front of Jobs Report

The pennant is a technical pattern that forms when price becomes narrower and eventually breaks to one side or the other. The expectations are that price breaks in the direction of the general trend, which over the past few months has clearly been lower.

The pennant break did not disappoint, as it broke support and almost returned to the January lows. A late-day rally on Wednesday kept the bulls in the game, but they continued to be battered and bruised.

The rally tried to get the price back inside the former pennant, but stopped just short of that level. Futures this morning are lower ahead of the jobless-claims number, and now that the Texas and Ohio primaries are over with, all eyes will be on the Friday employment data.

The worthless ADP report showed worse levels, which sparked some unhappiness in the broader markets, but the Friday employment report is the meat on the bone for this week's economic data. I suspect that the majority of the positions ahead of the report have been built and the Friday numbers will create a lot of activity.

Retail same-store sales are coming in better than expected for some of the major retailers, but futures are not reacting all that positively against the news, which shows me that we have some opening residual nervousness.

I'll be looking for the first half-hour of the trading session to move lower and test the Nasdaq 100 (NDX) 1740 level. If it can hold in the first half-hour, then I'll be looking for the bulls to push the index back to the 1770 resistance from Wednesday. The ultimate goal for the bulls today needs to be the unfilled gap from the last two days of February at 1790.

If the bears are to press the bulls further in the near-term, the January lows of 1693 will need to be taken out on a closing basis. Intraday breaks of this level probably won't do as much damage, but a close below that level would certainly send a lot of long exposure to the sidelines, creating even further price deterioration.

I am going to reserve this scenario for now, as I believe the bulls still have a little fight in them in the short-term time frame, and they will try to push the index back to the gap-fill level from last week at 1790 first.

Uptrends continue to fail miserably, so any move back to 1790 in the next several days is something to be taken near that level. Expecting any stronger moves than that based on the last couple of months of price action in the backdrop of continued uninspiring economic data would definitely be a lower probability.

I'll be looking for long exposure today off of 1740, with a first profit target near 1770 for partial profits and 1790 as an ultimate profit target. Depending on where the index opens today, taking short-exposure on a break of the five-minute range with expectations to touch NDX 1740 would be the open setup. A break of 1735 today negates long exposure and a move over 1800 in the next few days exceeds expectations of another weaker short-term uptrend move.

---

At the time of publication, Schumacher had no positions in the stocks mentioned, although holdings can change at any time.

Chris Schumacher is a financial trader, speaker, writer and co-author of Techniques of Tape Reading. While Schumacher cannot offer specific investment or trading advice, he appreciates your feedback; click here to send him an email.