It's never a bad thing to see a market unwind from overbought conditions, especially in this particular environment, because the market is tougher and tougher these days, thus, the concept of buying at overbought is very tough indeed. Removing some of the risk to our souls is not a bad thing which equates to buying closer to, or at, oversold on those short-term, sixty-minute charts. While there's no guarantee we will ever get to the old highs at S&P 500 2134, but we still have a decent shot, since there's still no evidence of a topping pattern long-term. Understand that there's no particular requirement for that to take place, but it usually does. There is usually some type of hints being thrown our way, such as overbought with negative divergences on multiple time frames, or a massive gap down on higher volume.
Since nothing classic is taking place with regards to a topping situation, we still have to give the bulls the edge. The bears have the onus on them to ultimately remove the number one area of key support at 2020. ONLY when they can take that level away will they have officially taken control of the market. That said, 2020 is still decently far away, thus, you can get hurt just simply back-testing support, which means that you should not be over playing, even if we get too oversold on the short-term charts. Play some, for sure, but nothing aggressive. The risk reward just isn't there. We won't be getting any positive divergences to buy in to any time soon. A very tough environment, indeed, so please be aware of that and adjust accordingly. The best times are behind us.
So now we turn our attention to that very important, Fed-watching, ISM Manufacturing Report out tomorrow morning, thirty minutes into the trading day. The number expected is a very weak 50.5, after a 50.1 reading last month. Any number below 50.0 is a number reflecting an economy in recession. Hard to believe all that's expected is a half point above that recessionary level. Talk about cutting it close. The services number out later this week has been far more impressive, thus, we're an economy that's changing its stripes. The market lately is more focused on services. Still, it wouldn't be great if we’re in recession. It may cause a hesitation from the Fed Yellen to raise a lousy 25 bp's.
If that were to occur the market would be VERY UNHAPPY. Let's hope we have any number above 50.0 tomorrow. I think that would be very acceptable for the market as it'll then turn its attention to the services level, which was approaching all the way up towards 60 last month. Then, once we finish off those economic numbers, we turn our attention to this Friday when we get the Jobs Report. If all of these reports come in fine, then we'll get our first rate hike in December from a reluctant Fed, but one that'll finally give in under the pressure to get going on some hikes.