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Bulls Rebound As Market Ends Mixed

Bulls Rebound as Market Ends Mixed

9:00am (EST)

We mentioned yesterday we were expecting a flat market on Wednesday (and today) but the bulls were down and looked out for the count as we were doing our midday update. The talking heads were feeding off the slick talking pros that continue to call for a selloff and are betting on the bears but the market rebounded instead of selling off in the final hour and something we said to watch for.

We mentioned this could be a good sign for Friday's action but it is still too early to say if the Nonfarm Payrolls report will be a backbreaker for the bulls or a gift from the market gods for the bears.

The Dow dipped 25 points, or 0.2%, to close at 15,889. The blue-chips traded to a high of 15,960 shortly after the open but didn't have the energy to make a run at resistance at 16,000. The pullback off the high reached a low of 15,791 as the 169-point swing tested the next layer of support at 15,800 and a level we have talked about all week. The bulls held but there is further weakness to 15,600 on a close below this level.

The S&P 500 lost 2 points, or 0.1%, to settle at 1,792. The index came into the session under 1,800 and made a run at resistance to 1,799.80 before falling to a low of 1,779. We have been saying to look for 1,775 to stick as there would be further risk down to 1,750 on a close below this level and it did. A break back above 1,800 would be bullish.

The Nasdaq gained a point to end at 4,038. Tech made a higher high than Tuesday after trading to 4,051 but also a new low for the week after kissing 4,004. We mentioned there could be risk to 4,000 and then 3,950 on continued weakness this week but support held and the bulls are still looking to push fresh highs up to 4,200.

The Russell 2000 gave back 2 points, or 0.2%, to finish at 1,121. The small-caps made a run past resistance at 1,125 to 1,128.97 but fell nearly 2% to 1,111 before rebounding into the close. Near-term support at 1,110 held but there is risk to 1,100 and a close below this level could get ugly. However, if the bulls can reclaim 1,025-1,030 there could be another run to all-time highs and our fluff target of 1,150 that nearly triggered last week.

The S&P 500 Volatility Index ($VIX, 14.70, up 0.15) surged past 15 and reached a peak of 15.71 before settling below 15. If you flinched we owe you 2 punches because we have been saying not to unless the VIX closes above 15. We went through this exact scenario in late October when the VIX made a phantom spike to 21 but still closed below 15. We mentioned that day that some financial sites were showing a surge past 20 while others didn't. The charts we use don't show the chaos but Yahoo's Finance site quotes a VIX reading of 21.26 on October 30 as a high. We didn't see those shenanigans yesterday but we remember the drama and will have our guard up for the next 24-32 hours, or through Friday's close.

We have added a couple of earnings trades for today and tomorrow and if we take action they will be quick in-and-out plays that will be closed by Friday. With December options expiring in 2 weeks, the near-term call and put options are great ways to play a 5%-10% move in a stock based on earnings results. If we take action, it will likely be during our midday update but if we decide to pull the trigger early we will send out a New Trade Alert.