Market outlook for Aug. 5th: Still bound by upper resistance levels!

Initial Jobless Claims rose unexpectedly to 479,000 this week compared to an expectation of 450,000. Continuing Claims came in at 4.537 Million, while expectations were of 4.500 Million. Before the numbers were released the Dow Futures were up 10 points and after the number the Futures were down -28 points with Fair Value up 3 points. The Initial Jobless Claims are at the highest level since April. This should have an impact on the markets and has already on European markets going lower than they were. But you never know in this market whether people will just shrug off the news as they have in the past. Why the market is still as high as it is is still confounding because the data is pointing very strongly that we are in a Deflation period which is accelerating.

The chart of the S&P 500 above shows that on Tuesday we formed a Hammer Pattern. This pattern marks a reverse in the previous trend. While yesterday's closing was not down, today's should be to fulfill the Hammer pattern reversal. Watch the S&P 500 today as it should lead the market over the Dow, which often gives confusing signals, because there aren't many stocks in the Dow Index and fewer stocks can be manipulated more easily.

The chart above from Haver Analytics was last updated on July 29th, so it doesn't include this week's data but as you can see 479,000 is clearly a trend in the wrong direction and alarming to many, especially the long term unemployed, often referred to as the 99ers. Those are individuals out of work longer than 99 weeks and get no benefits currently and are living on a string, as an article on the front page of the NY Times said on Tuesday, describing a 49 year old woman who moved out of NY with only a few hundred dollars and drove to Brattleboro, VT and plans to live in her car and try and find some work.

Revisions to the previous week's data were made from 457,000 to 460,000 Initial Claims. Tomorrow the Unemployment rate for July will be released and it was already expected to rise to 9.6% from 9.5%, but with these Initial Claims rising steadily, it could go back up to 9.7% or higher.

Stay tuned and return during today's market action for any Updates which will be posted below.