S&P 500 Faces Critical Resistance As Jobs Report Looms

I wanted to do a quick update on the broader technical structure of the S&P 500 (^GSPC) in advance of Friday morning’s potentially market moving “Jobs” report.  Let’s take a look:

(Click for Full-Size Image)

The blue horizontal line reflects the resistance at the 1,007 level from the November 2008 highs.

The red Fibonacci lines are drawn from the 1,576 high of 2007 to the 666 low of 2009 and we see the 23.6%, 38.2%, and 50% Fibonacci retracements to the upside of the entire bear market so far.

The important levels to note in this chart - from a technical perspective - are the 1,007 high (which price has not overcome yet) and the 1,014 high (38.2% Fibonacci level).  Also, bearish candles seem to be forming at these confluence resistance levels.

It’s important to note again that the July “Jobs” (Employment) Report will be released at 8:30am EST, an hour before market open.  A better than expected result will likely blow price through these technical levels, while an in-line or weaker than expected number is likely to produce a downward inflection off these levels - locking in technical resistance.

There’s a low-risk (tight stop), high potential reward trade that can be made off current levels particularly if we have a weak open or negative price action stemming from the report.

According to Bloomberg.com’s Economic Calendar, the general consensus is for a loss of 300,000 jobs (the consensus range is from a loss of anywhere from 190,000 to 375,000 jobs) with the unemployment rate rising to 9.7% (but could range from 9.5% to 9.8%).  These are the parameters to watch for unexpected surprises.

If it were as easy as looking at a chart, drawing in lines of expected resistance, and then watching price inflect down simply off these levels, we’d all be rich.  We deal in probabilities and structure, and are at a known level of expected resistance.

Let’s see how the Jobs report will affect the dominant technical structure in play.

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