“Yesterday seemed to be more of a sellers strike with just small buying and today there does not seem to be much buying,” said Rick Fier, director of equity trading at Conifer Securities LLC in New York. “If anything, it’s been selling all day after JOLTS number pointing to higher rates.”

U.S. data today showed job openings surged to a record in July, as hiring cooled, a sign employers are having a hard time finding qualified workers amid tightening labor market. The number of positions waiting to be filled jumped by 430,000, the biggest gain since April 2010, to 5.75 million. Economists surveyed by Bloomberg forecast 5.3 million openings.

Equities earlier joined in a global rally as China’s markets climbed amid optimism that more government stimulus is on the way, while stocks in Tokyo staged the biggest rally since 2008 amid speculation a selloff that drove valuations to an 11-month low was overdone.

“The market is trying to consolidate from a huge move we had yesterday,’’ said Jeffrey Yu, head of U.S. single stock derivatives trading at UBS AG in New York. “We’re sitting in a range. It’s just that it’s very volatile within that range.”

Eoin Treacy's view

At the low on August 24th sentiment was pretty bearish but improved steadily as the market rallied. Yesterday’s strong close narrowed the overextension relative to the trend mean even further and it was tempting to conclude it was back to business as usual for all those who have been buying the dips since 2010. 

However to make that conclusion would be to ignore the damage done to sentiment by the largest pullback in at least four years which also has Type-2 top formation characteristics. In such circumstances if someone has been stopped out the temptation is to buy back in as soon as the market bounces but then a stop would logically have to be below the low. The further away the market moves from that low the less compelling the argument to chase it. This is particularly true as it approaches the first area of potential resistance which is likely to be the region of the 200-day MA, the lower side of the overhead trading range or a big round number. One the supply side, those who have had their resolve shaken by the decline will be looking for a favourable opportunity to reduce exposure. 

The fact the massive reaction against the prevailing trend is met with uncertainty helps explain why a range so often follows a type-2 top. This allows the bulls to marshal support if the uptrend is to be reasserted and the bears to express their opinions. The touchstones for the overall market are then whether a move up into the overhead range can be sustained by the bulls or a move to new lows can be sustained by the bears and this can take time to figure out. Right now it looks like the 2000 level on the S&P 500 is being viewed as point to liquidate positions rather than a point to open them.