The bad news is mounting and the 200-day MA is within striking distance.

PRE-OPEN MARKET COMMENTS WEDNESDAY – Now the selling pressure is becoming more sustained. The market is spending more time below the 100-day MA and it almost touched the 200-day MA yesterday. The negative news is piling up and this morning we learned that 77K new jobs were created in the private sector in February. This is the lowest number ADP has reported in over a year and 141K new jobs were expected.

After the open, ISM Services will be released. The Flash PMI services reading from two weeks ago was dropped into contraction territory and I believe the number will be weak. Last Monday, ISM Manufacturing stayed in expansion territory (barely), but manufacturing prices spiked to 62.4. That is going to keep the Fed hawkish. Two days ago the Atlanta Fed lowered it’s GDP forecast for Q1 to -2.8%. That is a huge drop. Initial jobless claims have been rising and that does not bode well for Friday’s jobs report. The Fed is stuck between a rock and a hard place. Inflation is rising and jobs growth is slowing. Central banks around the world are more concerned with the decline in economic activity than they are with inflation so they have been cutting rates.

The market wants to hear from the Fed that they are going to cut rates. Until it does, we are going to see bearish price action.

It’s difficult to trade from either side on a swing basis. We needed to spend just a couple of days at the 50-day MA and that would have given us a chance to enter bearish swing trades at an excellent level when resistance was confirmed. The market barely touched that level Monday and it backed right off. We were able to catch the drop on a day trading basis, but the train left the station. I am in day trading mode and the moves both ways have been fantastic. Don’t get married to one side or the other. If you see a big move one way that looks “climaxy” (stacked long candles), take gains and watch for signs of a reversal (contra engulfing candles). If you don’t know what that looks like you can see it off of the low and the high from yesterday on an M5 chart.

Given the timing of the current move, I believe that the economic data will be weak and the market will test the 200-day MA. Bull markets die hard and I believe that support will hold. At some point we can expect a bounce and that is likely to come during the FOMC Statement in two weeks when the Fed softens its rhetoric.

If this timing “syncs up” there will be a tradeable bounce for day traders. Longer-term swing traders should wait for that bounce to stall. Given the recent selling pressure, the next best entry point for a swing trade will come on a failed bounce that struggles to get back to the 100-day MA. I know it is frustrating to wait, but that’s how I see this playing out. We were really close to having that great entry point the last two days if the market had spent an extra day or two trying to get above the 50-day MA. That did not happen for us and the market was instantly smacked down. The snap back rallies after a big drop can be violent as we have seen the last few days. I would NOT suggest taking longer term bearish swing trades at this level.

ISM Services will be released 30 minutes after the open. A reading below 50 would be bearish.

Support is at the 200-day MA and resistance is at the 100-day MA.