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Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
Trading: CL, NG
Posts: 1,038 since Jul 2010
Thanks Given: 1,713
Thanks Received: 3,863
The last few days have seen some short covering with today and last night being a classic professional gap up. If you were trying to trade this chop, it was most likely an interesting day for you. Nice move at the cash open but just went sideways from there.
I'm noticing that price could not get higher than 1296.25 despite several attempts. Looks like we're hitting some resistance up here which tells me price is getting sold into every time it reaches the high's of the day. The 50 day MA is sitting up there and 1304 - 1292 appears to be a half way back from the high's of 1343 which is where we could see more selling coming in. I think this is a crucial level and will need to watch this closely. If the bulls can't push this back up, expect to see the trend down continue with a potential target area being around 1217's or even a run for the 200 day MA. If they (bulls) break through this area, we could potentially see new high's.
One thing to note, the USD is continuing to fall apart making new lows on a daily basis.
The market closed unched today on what was another relatively low volume day, although bid/ask volume has returned on an order flow level and liquidity has improved. From the market profile chart we can see that the market is accepting the low to mid 1290's level as value, but from the daily chart we can see the (yellow) 20 EMA and the (magenta) 50EMA is in danger of crossing, and could end up being the proverbial "line-drawn-in-the-sand." A failure from this level would embolden the bears and propel the market to test the recent lows and lower, and a rally up through the MAs would have the bulls going for the 1325-30 area, and possibly higher. As PB stated in his last post the market keeps testing the 1296 area where there is a confluence of the 20 EMA, the monthly S1, technical resistance, and VAh. In any case I think the market will bounce from the 1280-1293 value area, and test the 1296 level(and perhaps, slightly higher) one more time. The question that remains is whether the rally will serve to trap more bulls and shake out more weak shorts before it heads south, or whether it's a precursor to new highs.
Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
Trading: CL, NG
Posts: 1,038 since Jul 2010
Thanks Given: 1,713
Thanks Received: 3,863
Looks like the POMO machine isn't giving up yet! I expect them to throw all they have at trying to keep this farce alive! ES is right on the 50 day MA and butting up to the 61.8% level from the high's of 1343. But to compliment this dismal volume move, the USD is falling through the floor.
I seriously doubt that this POMO buying. To date, the majority of POMO buying has been concentrated in high-beta tech stocks. The current rally has been led by the small cap sector, while the techs have lagged far behind, and have actually been the weakest sector.
Foreign capital may be flowing into the small caps and the current headline risk in the Middle East , North Africa, and Japan may be the reason, as money moves out of the emerging markets and back into the U.S. As you pointed out, the dollar continues to weaken and is in danger of making new lows. An increasing growth of dollar-denominated assets means an increasing growth of the supply of U.S. dollars, thus depressing it's value.
What is surprising however, is when foreign money comes into the U.S. markets, it generally flows first to large-cap stocks and not to small caps. But the market may be favoring stocks that aren't perceived to be exposed to European, Japanese, and MENA risk. Small companies are generally less tied to the global economy than are big U.S.-based conglomerates, and are less risky in that sense.
Combine this "flight-to-quality" with the value that a cheap dollar affords the foreign investor, and you may have the reason why the market is rallying, and small caps are leading the way.
I had expected an up move today. Reason was yesterday's extremely low reading of the ISEE index (put/call ratio) in combination with an upclose. This showed that
- there was fear and uncertainty
- the market moved up in despite of that uncertainty
There was an increasing probability for an upmove today. Consequently the price stayed above the pivot range during the night session and only briefly tested the Asian range after the RTH session opened.
Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
Trading: CL, NG
Posts: 1,038 since Jul 2010
Thanks Given: 1,713
Thanks Received: 3,863
Just read this on Zerohedge (sorry for the caps locked, copied it right off the site): "TODAY TWO LARGE MACRO FUNDS OVER HERE HAVE GONE WILDLY LONG S&P. NOT LONG. WE TALKING 250% NET LONG. IT LOOKS LIKE CONCERTED ACTION ON GDP DGRADES FROM GS AND BOFA ARE THE LETTER DELIVERED TO BEN ON QE3. HUGE DIRECTIONAL BET WITH NEW CAPITAL PUT AT WORK. MOST LIKELY THE TWO INSTITUTIONS ARE COORDINATING ACTION WITH OFFICES IN CONNECTICUT. CHECK INFLOWS OF BLUE CHIP HEDGE FUNDS IN JAN FEB. APPLY 2.5 LEVERAGE. WE ARE TALKING ABOUT SOME 40-60BN PUT AT WORK PRIMARILY ON EMINIS AT THE MOMENT. WHETHER SOME EXTERNAL FORCE WILL LEAVE THEM HIGH AND DRY I DON'T KNOW. BUT IF ANYTHING SEEMED TO BE AT LEAST NOT TOO IRRATIONAL UP TO NOW, IN THIS THIRD WAVE, BE READY FOR REAL ROCK AND ROLL."
If this is true and the Fed is given the green light on QE3, we could definitely see new high's. Either way, I don't trade on rumors.
Well I would say if Friday doesn't bring 1280's then prior resistance around 1295-1305 may now turn into support, and we will see short covering as we head into 1320's and 1330's.
ISEE sentiment jumped from 74 yesterday to 173 today.
Yesterday the index had the second lowest value of 2011 (after March 10) , today it has the fourth highest (after January 5, January 18 and February 8).
It was definitely "risk on" today as the bulls picked up the ball and continued to run with it up through 1296 area, pausing briefly at the 1304 level, before breaking higher to test the monthly PP and previous month's TPO at 1314.00. With leadership coming from the small caps and large caps the ES rallied through and closed above it's 20 and 50 day moving averages, once again paying little attention to negative economic reports and negative headlines. While the bulls appear to be in firm control, the major indices are not quite out of the woods yet. Neither of the major indices have made a higher high or closed above the previous months close, and while the TF and YM are exhibiting good relative strength, the NQ is lagging far behind signaling a bearish divergence, and may end up being the market's Achilles Heel. The ES must close above the VAh at 1320.75 and descending trend-line and accept, if the bulls are going to punch it through the 1327.75-1328.25 level to new material highs.
