Service companies in the U.S. expanded at a faster pace than projected in September, indicating the economic recovery is picking up heading into the fourth quarter.
The Institute for Supply Management’s index of non- manufacturing businesses, which covers about 90 percent of the economy, rose to 53.2 from 51.5 in August. The gauge, in which readings greater than 50 signal growth, averaged 55.3 during the six-year expansion that ended in December 2007.
The improvement at services providers from management companies to wholesalers and retailers, combined with fresh efforts by the Bank of Japan to spur growth, sent stocks and commodities higher. Even so, the pace of recovery is not fast enough to bring down unemployment, which is projected to average more than 9 percent through 2011.
“This paints a little bit more encouraging picture,” said Conrad DeQuadros, a senior economist at RDQ Economics LLC in New York. “The risks of sliding back into recession are very low. It’s consistent with a moderate rate of economic growth.”
Stocks climbed after the report and on speculation central banks will join the BOJ is taking additional steps to revive the global economy. The Japanese central bank today cut its benchmark interest rate and announced it will create a fund to buy bonds and other assets. The Standard & Poor’s 500 Index rose 1.6 percent to 1,155.38 at 11:16 a.m. in New York. Treasury securities were little changed.
$SPX: Yesterday I stated the intraday was open to a variety of potential structures. One of those was the (abc) pattern down finishing yesterday and a push higher, which we got big today.
The market has pushed towards the upper Bollinger Band while keeping the MACD from rolling over. I’ve added some new resistance areas. We have price resistance at roughly 1,177, which is also about where the middle trend line on the pitch fork is in a 1-2 days.
At today’s closing, what I’ve labeled as ABC, wave A equals wave C on a 1 to 1 basis. However, the RSI has room to support more price moving higher into the end of the week, right into the jobs announcement and the resistance area at 1,180.
Art Cashin: Markets Could See 'a Real Reversal'
“The markets are at a very critical juncture,” Cashin told CNBC. Cashin said 1,150 to 1,160 is going to be the “key resistance area” on the S&P 500. “And if they try one more time and fail, we could get a real reversal,” he said.I couldn't agree with those comments more and since we closed the day at 1,160 we should know very soon.
$SPX 60 Minute: What's interesting about the intraday chart is the large gap and run today is identical to one a few days ago, which did not lead to anything significantly higher. So, we need to watch how price behaves the rest of this week. Will it continue to trade higher or get tired and roll. We are still in No Man's land but at important junctures.
IBM and JNK: The reason I keep showing these two is they have correlated very well with the markets. Their strength coincides with the market, and they keep grinding higher. That’s bullish until it changes.
$VIX: Rolled over and looks to test the bottom trend line. Nothing bullish in the $VIX.
XLF: A break higher out of the flagging pattern. That’s bullish near term for the financials. However, price is still stuck between the 50 and 200 day MA, which should be resolved soon. Both the MACD and RSI are trying to turn higher, which is also a bullish development if it continues.
$TRAN: Solid bounce back and RSI has room to support price moving higher. But it still needs to clear resistance.
$COMPQ: Set to move past price resistance and test the next level of resistance and the upper Bollinger Band.
Summary: Today was a bullish day no doubt. For me, it's been a tough market to find charts and trading ideas partly because the market is still in No Man's land, partly because it's hard to find anything that looks good, and partly because it's the momentum stocks that are performing the best. Frustrating, but it is what it is for now.
That being said, the markets are at key price levels. Mr. Market has done what is always does, which is to push price into a price zone that has bulls and bears on edge. For me, the price structure still looks like an ABC pattern up, but without solid confirmation it's very difficult to get aggressive with bearish trades.
The bearish view of wave 2 up finishing has very little time and price left before that's null and void, so we need to keep our eyes on price and form this week on all time frames for clues. Above 1,177-80 and that view is probably cancelled.
My Watch List: What a difference a day makes. For the time being we can take the bearish trades down even if it turns out to be temporary. I've really got nothing I like chart wise that I would put fresh money on. So, it's time to wait. The last thing I want to do is try to make a chart look tradable and being early has only created frustration.
From My Trading Desk: Today was a tough day for our fractionalETF going the wrong way. That's not what they were designed for given the leverage.
J.D. Rosendahl, Rosey