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Surprise Positive Data Saves Market From Major Break

The hand of "GOD" or maybe just the Plunge Protection Team

The markets were looking ugly this morning, hanging onto a master trend line support on the daily chart that would dictate whether the Hindenburg Omen would play out in a crash scenario.  Yesterday, the markets gave up almost all the gains from the Friday rally, a very bearish signal. A move lower today would have sealed the fate of this market, the SPDR S&P 500 ETF (NYSE:SPY) headed towards $101.00 and then $95.00 easily. As of now, the hand of "GOD" or maybe, just maybe the Plunge Protection Team saved the day.

First, at 9:00am ET, the Case Shiller Index was released.  The Case Shiller Index for June rose 4.23%. Analyst had expected 3.1%. This gave the futures a small bid off their lows but the markets remained weak. Then at 9:45am ET, the Chicago PMI was released and again surprised analysts. Chicago's Purchasing Managers Index was reported at 56.7 for August. This again was taken as good news and sent the markets up a little more. Each piece of good news not quite enough yet to move the markets to the positive side.  Then finally, at 10:00am ET Consumer Confidence was released.  Consumer Confidence came in at 53.5 after analysts expected a number at 50.  The markets surged yet again and have since moved nicely into positive territory.

Three key pieces of good news have saved the market today.  Suspicious? Most likely. Are these numbers actually legit real numbers? I will leave that to each one of you to decide for yourselves. To understand the keys to this market being saved one must look at the timing. We are entering the lightest time frame of the year.  Why is that important?  Because if you are going to save the market, it is easiest to do it on light volume. Next, understand why the market would need to be saved.  To do this, note the chart below showing the master trend line.  Should this line break, the markets have a solid chance of collapsing quickly and ferociously. In addition, the powers that be have an incentive to save the market prior to the Labor Day holiday weekend. This is a three day weekend when families go on vacation and spend money.  If you let the markets collapse prior to this weekend, families, consumers will not be in a jovial mood to spend, spend, spend.

The next few days should be very interesting in this market. It is looking more and more like they want to keep this market floating prior to the holiday weekend as to get the best spending out of the consumer they can.

As long as the markets hang above this key trend line, oil should hold up in this lower range. The United States Oil Fund LP (ETF) (NYSE:USO) is lower by 0.20 to $32.82 (-0.61%).  The dollar is slightly weaker with the PowerShares DB US Dollar Index Bullish (NYSE:UUP) down 0.06 to $24.08 (-0.25%). To get more hardcore analysis, guidance, swing trades and education, join the Research Center.

Gareth Soloway
Chief Market Strategist

This SPY chart shows the low from March 2009 connected to the recent pivot lows.
This is everything in terms of the market breaking down or holding up.