Daily Commentary: September 06, 2023

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Important Economic Release After the Open

Posted by Peter Stolcers on September 06

Over 80% of our economic activity is tied to the services sector. A weak number could spark more selling and it will be released 30 minutes after the open.

PRE-OPEN MARKET COMMENTS WEDNESDAY – There was not a lot of news overnight. Services PMIs were a little “light” across the globe. The bearish reaction to a “Goldilocks” jobs report and follow through yesterday and this morning reminds us that sellers are never far away. Global markets were down a little and there are stagflation fears in Europe.

China supported property developers and that has stabilized credit fear for the time being.

From a technical standpoint, this is a critical juncture. Bulls want to see a small drop that does not quite get down to the 50-day MA and that bounces. That would leave a bullish hammer above that support level and it would indicate that buyers are aggressive. It would set the stage for a nice rally that could test the 52-week high. Bears will be looking for a drop that does not bounce and that breaches the 50-day MA. That would confirm resistance and it would result in a lower high double top. If this scenario plays out, we will test the 100-day MA.

August and September are seasonally weak months so that favors the short side. The Fed has stated that they do not believe they can tame core inflation without an economic slowdown. I believe the greatest market threat is a weak round of economic data points. Investors will worry that the Fed has gone too far. Higher interest rates are going to curb consumer spending and they will take a toll on big ticket items.

I am market neutral. One thing is for sure, which ever direction prevails, it is going to be a stubborn move with lots of retracement and mixed overlapping candles. Buyers and sellers are engaged. There is no need to guess the outcome. Wait for a breakout or a breakdown and then favor that side.

ISM Services will be released 30 minutes after the open. More than 80% of our economic activity is tied to services so this is an important number. We saw a negative reaction to a “soft” jobs report. If ISM Services comes in below 52, we could see some selling. The Beige Book will be released this afternoon (not typically a big market mover, but look for signs of softening economic growth).

We are going to take out the low from Tuesday right away. 1OP is spiking and it will have a bearish cross soon. If the last part of this bullish cycle can’t get us off the deck and if ISM Services is weak, we will make a new low of the day and we will have an entire bearish cycle to work with. I don’t know that this will play out, but I will be watching for it. I am still expecting sluggish action today as traders get back into the swing.  

One takeaway from the price action Friday is that “bad news might actually be bad news”. That was a perfect number and the fact that the market did not rally tells me that recession fears could be looming.

The 50-day MA is very significant. That level is also AVWAPQ, horizontal support and it is the halfway point for the long green candle from last week. A strong bounce off of it would be bullish and a convincing breakdown would be bearish.

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