Coolhand's Market Analysis

As I've been expecting for a number of trading days now, the market has hit fresh lows as the S&P 500 dropped another 0.97% to close at 1300.16. We have to go back to March 23rd for a lower close on the S&P, a day where it closed at 1297.54. Today's close puts the S&P right at my target area for a possible low, but I'm not so sure we have actually put in a low yet.

Just a few days ago it seemed like the market was cheering bad news as I posted in a recent blog. Now the market seems to be singing a different tune as this morning's employment report came in below what were already low expectations.

How bad were the unemployment numbers? May nonfarm payrolls saw a mere 54,000 jobs added, which is less than the 169,000 economists were looking for. And then the unemployment rate went up a notch to 9.1% to boot. The ISM Non-manufacturing Survey did manage to hit 54.6, which was a bit better than forecast.

But I still don't think it's about bad data as much as concern that QE2 is coming to an end. And with no word from the Fed on what their next move will be, risk is now being taken more seriously. And there's no guarantee that the market will cheer QE3 should the Fed decide to deploy another round of liquidity injections. Of course if they chose to begin tightening and pulling back all that liquidity, the market has no reason to cheer either. I'm thinking QE3 is the more likely choice for now.

Here's today's charts:



As expected, momentum took NAMO and NYMO lower today, which keeps them in sell conditions. And it looks like they could move lower still given the way this market likes to string together down and up days.



No surprise NAHL and NYHL also dropped and remained on sells.



Both TRIN and TRINQ moved to a sell condition.



BPCOMPQ dropped below that lower bollinger band and continues to point to lower prices. It is now back in a sell condition.

So all seven signals are on sells again, but the Seven Sentinels remain in sell condition regardless.

Our sentiment survey went to a buy today, which has often meant a rally is near, but I'm not so sure that will happen quickly. We could go lower first. And there's nothing in my charts to suggest we won't. I still think we are a couple of weeks or so away from the bottom, but no doubt we'll see some bounces along the way. That's my expectation unless my charts improve sooner rather than later. And a Fed announcement could do that if the market likes what it hears.

See you Sunday when I post the tracker charts.