The wholesales data that "popped" the market was an increase in sales by 1.6%, while inventories were up 0.1%. Although inventories were less than anticipated, the increase in sales was welcomed, although the jump in the market that followed was exactly what the market needed to create yet one more bull trap to complete the Momentum Reversal (TM) pattern that triggered shortly thereafter.
S&P 500 (Figure 2)
The weak action following the morning's data was not the only reason the bulls would have to be concerned that the 30-minute upside breakout is still without a solid foothold. As we saw on the premarket charts in the S&P 500, a series of slightly higher highs following a stronger rally can lead to rapid corrections that can wipe out a large portion of those gains in a fraction of the time it took to establish them.
The daily charts of the indices are forming this same pattern with momentum shifting. The strongest upside began on December 20th, but the first high on that rally was made on the 28th. This was followed by a second slightly higher high last Tuesday. Now the formation of a third is under way.
The weekly charts still have some room to move before striking resistance more solidly on the upside, even though the daily charts suggest hesitation. The 10-day moving average is serving as the support for the current move on the daily time frame. In order to avoid a stronger daily pullback, we want to see that support level hold. Unless the upper channel from the past several weeks breaks to the upside over the next several days, however, I will be using a great deal of extra caution on long positions, particularly in the indices, and will be focusing on smaller time frames for setups in that direction.