Squawk Evening Update: BLS Report Should Set Direction

It is hard to imagine that a day which  got off to such a dramatic start would be so boring.  The Euro hit upside targets we discussed this morning and then fell sharply.  The fall was dramatic and it drew 30 minute EWO below the 140% level suggesting that fives waves up Tuesday’s low are likely complete.  However, there are reasons to be cautious when looking downward:

1. Today’s move ended at roughly the 38.2% retracement of the move up from Tuesday’s low.  So even though the rise may be complete, an entire correction may have already taken place.
2. The move down could be counted as five-wave structure, but it could also be in three waves.  In fact, it has many similarities to the move down from Sunday’s high that fooled us into thinking it could be a five.
3. The intermediate-term count remains difficult, so all we are relying on to look for a possible turn is multiple Fibonacci targets and the end of a small-degree, five-wave move up.

Perhaps overnight action will shed additional light on the situation.  If so, we’ll have something to write about the Euro tomorrow morning.

The DJIA and S&P 500 also put in a new highs this morning and then sold off.  Clearly the more corrective structure in the S&P 500 yesterday was telling us something important.  Today’s move down in both indices looks to be in three waves.  At the same time, the afternoon strength has overlapped the bottom of the first wave down raising the likelihood that today’s move down is just a correction and the move up will continue.  There are alternatives that would allow the down move to continue so long as we stay beneath 10,977 in the DJIA and turn down hard.  We’ll cover those tomorrow in our briefing.

Tomorrow morning we get the Nonfarm Payroll report before markets open.  It is likely that this will set the tone.  A break of 30-60 points one way or the other in the DJIA is likely enough to set the near-term direction.