By Mike Paulenoff, MPTrader.com
Very interesting morning, indeed. Initially, at 8:30 this morning Eastern we had the GDP come out, and it blew everybody away by indicating that the economy in the third quarter grew 7.2%. Most expectations were anywhere from 6 to 6 , percent. Consumption skyrocketed basically without inflation.
The question now with the market having rallied since last March into a test of the highs established this morning is: Did all that upside work culminate in the news that we received this morning?
The short answer could be maybe. The long answer is much more involved and that is for another time. However, suffice it to say at this point purely from a technical perspective, the way the indices reacted to the excellent economic news -- in that after the thrust to the upside this morning they about-faced and gave up all their gains, and right now are only up marginally as we speak mid-day -- that suggests to me that at least on a short-term basis the indices are overbought and have digested this particular series of economic data.
The key will be where we go from here. If the indices can manage to grind to new highs and take out today's highs and sustain above those highs -- for instance, at 1055 in the E-Mini S&P and above 1445 in the E-Mini Nasdaq -- then I think there'll be considerably more acceleration in the first few days of November.
However, and this is more in keeping with what my micro technical work is telling me: The decline from this morning's highs in the indices to the first-hour lows has unfolded on the 5- and 15-minute charts in a particular stair-step fashion that leads me to believe there's more selling pressure ahead after the mid-day grind is complete.
If my work is right about that, then later this afternoon or tomorrow morning we will find ourselves breaking the first-hour lows from today. Those first-hour lows are 1042