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Upmove Meets Headwind
By Mike Paulenoff, MPTrader.com

For the day after a holiday weekend, this is a certainly a fairly uneventful session compared to what could have been given the attack on the Saudi Arabian oil facility over the weekend. That attack, as we mentioned to subscribers earlier in the day, pretty much took the strong seasonal propensity to move up the day after Memorial Day out of the market.

We came in lower, and the seasonal impact enabled the indices and the Qs to not go down very much more than they were in overnight trading,down 5 points in the E-mini June S&P and down 10-11 points in the E-mini June Nasdaq. Then the markets rallied into positive territory, but have not been able to sustain the gains or the strength, for that matter, and right now as we speak we're pretty much near the lows for the day, down 4 in the E-mini S&P and down nearly 9 in the E-mini Nasdaq.

The pattern that's been carved out over the last several hours looks like a fairly toppy pattern that extends back to last Thursday. It seems to be a rounding-type topping pattern that should continue to press prices lower.

For instance, if we look at the E-mini June Nasdaq, and look where the potential is on the downside, 1440 is the first real important micro support area and then 1429-30 would be the hourly objective after that.

In the E-mini June S&P, a similar rounded tops pattern has developed, and 1110-08 is the next support area. If 1108 breaks, then I think you could go down to 1102-1098. That would be a much more serious decline and one which would argue that the entire rally off the mid-May lows at 1075-76 is over.

So, while everyone got very much more bullish and optimistic at the end of last week because oil prices were coming down, and because the indices broke to the upside, what we've seen in the last several hours and really since Thursday is that the indices have run out of gas and oil prices are back up near $42 a barrel.

So, from a geopolitical perspective, and from an intermarket commodity perspective, the upmove is meeting and still will meet some serious headwind, and the price action for the next several hours could be key and we expect more weakness directly ahead before the markets make another attempt at the upside.

As the week extends, we have Intel coming out with its new quarter update on Thursday, and then on Friday you have the employment numbers. OPEC meets as well, and we'll find out from OPEC if it plans to increase production on Thursday.

So there's a lot of very interesting market moving events that are directly ahead, the most important of which is unemployment on Friday. A strong employment number would again raise the fear that perhaps the Fed has to raise sooner than later and more than expected in June.

On the other hand, like various other economic data that have come out in the last week or so, if the employment data are weaker than expected, then all bets are off on the Fed raising in June.

So, a very important day on Friday, but for now we think we're in a corrective move to the downside, with the corrections extending to somewhere near 1103-04 in the E-mini June S&P and 1440-30 in the E-mini June Nasdaq.

Looking at the QQQs, since Thursday the Qs have been trading in a range from 36.50-.60 on the high side to 36.15-.05 on the low side. While our work argues that more weakness should occur down to a minimum of 35.80, possibly 35.60, right now the Qs are just treading water, and there hasn't been a whole lot of serious damage that has been done to the upmove from the May 17 lows at 34.11.

So for now we're neutral in the Qs, looking for a breakdown below 36.06 to trigger additional weakness into the 35.80 area.

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