The April non-farm payrolls report came in significantly lower than expectations this morning sending the markets on a wild ride of selling and then buying and then back to selling. The ES traded down almost 9 points in 2 minutes but quickly recovered and moved back up 10+ points to test the overnight high in the following couple of minutes. The ES has since sold back down.
This morning's economic data was important because the markets were trading at key support. Breaking down below the 1386 support on the ES following the non-farm payrolls miss suggests there is further downside ahead.
What I'm watching for today:
I want to see if the current low at 1378.25 ES can hold this morning. The fast reversal from earlier could have been a shake-out of some longs and signal that a move back to the upside is coming.
If we make a lower low today (which is highly likely), the next level I will be watching is 1375 ES, which is the 61.8% retrace from the May 1st high to the April 23d low. We need to close above this level today to consider that a reversal back up to 1400 ES and possibly a double-top could still be possible in the near term.
So its all about seeing how price action responds to the support below in what is currently a weak trading environment. I will be considering long entries only if it looks like there is some solid buying coming in at support levels. This could be the beginning of a move lower, but too early to tell just yet... We'll see if the market can find support within the first hour of trading.
Levels to watch today on the ES:
Resistance above at 1383-1384, 1389-1390
Support below at 1375-1376, 1370-1371
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