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Wednesday’s Morning Briefing | 28-JAN-2015

 

The late in the day rally up to 2038 continued higher in the overnight session. S&P futures rallied up to 2048, 24.50 points above the closing range pull-back to 2021.

The overnight rally encountered resistance at the lower edge of Monday’s trade cluster, and the S&P sold off 18 points, pulling back to 2028, before auctioning up 11.50 point to 2040 at the time of this post.

In the previous session, the broad benchmark S&P 500 sold off 41 points below the prior days high at 2062, pulling back to 2013, before auctioning up to 2036. The retracement was followed by a 15 point pull-back to 2021.

The month of January has witness increased volatility, with the S&P selling off below the 12-28-14 all-time record high at 2088, pulling back to 1884 on 01-06-15, auctioning up to 2062 on 01-08-14 only to sell back down to 1970 on 01-15-15, before re-test the 2062 high on 01-21-15.

While the global markets have been supported by accommodative monetary policy from the Central Bank, including a new QE program from the ECB, economic data continues to indicate slow growth.

Today the markets are likely to be extremely volatile as the Federal Reserve announces its latest policy guidelines.

The consensus is that the FOMC at its 2-day meeting that ends today will leave its interest rate and policy guidance unchanged.  There will be no updated forecasts released after today’s meeting and Fed Chair Yellen will not hold a post-meeting press conference. 

The FOMC at its last meeting on Dec 16-17 just switched its guidance to “patience” from a rate hike after a “considerable time” and there is not likely to be any change in that guidance for at least the next couple of meetings.

There are serval negative factors to consider. Yesterday’s data showed as unexpected decline in U.S. Dec durable goods orders by -3.4%. There are concerns regarding corporate earnings after disappointing results from Microsoft, Caterpillar, Procter & Gamble, and DuPont.

Thus, with no new insights expected from the Fed, there is little in the way of fundamental data to support at break-out above the January 2062 high.

The middle portion of the range is unstable. As we observed yesterday, the S&P can sell off 36 to 50 points at any time.

The January low at 1970, and the December low at 1960 is major support. Above the low the 1998-2000 price level is Key.

Support has also held at or near the 2012-2016 price level.

The overnight high represents minor resistance and is prone to short covering. The 01-07-15, 01-22-15 high at 2062 is the upside break-out point.

Coming into the open minor support is at the overnight low 2029; yesterday’s closing range low at 2022.  A break-down bel0w 2034 is likely to trigger a sell-off. If Support hold at 2034, short positions at the overnight high are at risk.

Tuesday’s Morning Briefing | 27-JAN-2015

S&P futures sold off from Monday’s high at 2055 during the overnight session and pulled back to 2025: 29.75 points (1.4%) below the closing range high.

On Monday, S&P futures traded back up into Friday’s trading range, filling the “gap” at Friday’s close 2042 and auctioning up to Friday’s high at or near 2057.  

While the outcome of Monday’s session appeared to place the S&P on the price trajectory to re-test the 01-07-15 high at 2062, selling pressure emerged during the overnight session and S&P futures sold back down to re-test Sunday’s Globex low.

The reversal during the overnight session raised concerns about the market direction ahead of a two-day FOMC meeting that gets underway later today.

Earlier in the month the broad benchmark S&P sold down to the 12-16-14 low at or near 1970. Friday’s rally up to the 01-16-15 high at 2062: 92 points (4.6%) marked a recovery attempt.

Yesterday, the U.S. markets appeared to ignore Sunday’s overnight selling sell-off. There was no re-test of the Sunday’s Globex low at the start of Monday’s session.

S&P futures pulled back to 2034 at the open and went on to re-test the high at Friday’s close.  The concern is whether or not the apparent recovery reportedly base on optimism about the EBC quantitative program was nothing more than short covering rally: i.e. an opportunity to exist positions before trading low.

The parameters of the January trading range are well established in as much at the two major lows: 1980 and 1960 have been tested and held.

Following previous 100 point declines the S&P has gone on to re-test the prior record high and has made a higher high. The all-time 12-28-14 record high remains un-tested. The current behavior has been less bullish.

The European markets traded lower on Tuesday after climbing to seven-year highs yesterday.

Asian stocks rose broadly on Tuesday. Japanese markets led the gains on a weaker yen.

Microsoft declined 7% in premarket trading the day after the Dow component reported earnings. The main engine of its historic earnings power, selling Windows and Office to big businesses, is showing signs of waning.

Weekly Market Recap, Monday’s Market Development | 26-JAN-2015

After “gapping” below Friday’s close at 2043 and selling down to the prior fractal highs at or near 2025 at the open of Sunday’s Globex session the broad benchmark S&P 500 close above Friday’s finishing the session at 2054.

On Friday S&P futures sold down below the initial retracement up to 2062 equal to the 01-07-15 high. The 16.25 point pull-back was approximately an average daily range. S&P futures traded up 11 points above Friday’s 2048 pull-back level, but “paused” at the high where the auctioned encountered buying interest waning.  Later in the day the S&P sold down from 2057, breached support below the opening range low 2048 and traded lower into the close 2043.

S&P futures traded about the 2025 “gap” low, auctioning up to 2035, before recovering back up to Friday’s close 2043, Friday’s low. 2047: 21 points above the overnight low.

At the open the market encountered a lack of buying interest above Friday’s low 2047 and the S&P sold down 12 points and pulled back to 2034, the price level where the S&P rallied off the low and “paused prior to filling the “gap” at the open.

During the mid-day session S&P futures had difficulty trading above 2048. However, late in the day buying interest returned and after pulling back to 2045, the S&P rallied up to 2054: 20.50 points above Monday’s opening range low.

While the S&P has not traded above January resistance at 2062 the price trajectory is arguably on the path to re-test Friday high; the 01-07-15 high at 2062. The remaining distance to the all-time record high 2088 is 26 points above Friday’s high.  A rallying up to the December high would be an extreme price excursion.

A retreatment to 2088 in the context of Tuesday session would represent an exhaustion short covering rally.

In the event S&P futures pull-back to the “late in the day” low at 2004, hold support and auction above Friday’s high at 2058, sellers at 2062 are advised to be cautious.

Sunday’s Globex sell-off was likely resulted as a reaction to Greece's Syria party sweeping victory in Monday’s election with prompted concerns that the Syria party would roll back austerity measures.

The election appeared to have no measurable material effect. European markets started the week extended the trading range to a seven-year high.

Optimism over central-bank stimulus program prevailed. With the ECB QE in place, a risk-on scenario is likely to dominate the euro-zone.

Wednesday's Market Structure, Thursday's Reference points | 22-JAN-2015

Wednesday’s Overnight Session

S&P futures traded higher in the overnight session, auctioning above the prior day’s high 2034 and rallying up to 2047, as of this post.

On Wednesday, S&P futures traded up to 2032, modestly above what had been near term resistance at 2024-2028. The rally lost momentum (lack of buying interest) and selling pressure resulted in price auctioning down 16.50 points to 2016.  A later in the day recovery was unable to auction price back to re-test the opening range high 2032 and price action stalled at or 2028.

The current overnight high at 2048 is 30.75 points above the closing range pull-back level 2016 and at this stage in the development represents minor range extension (14 points) above yesterday’s high.

In the broader context, on 01-08-15 S&P futures sold down from 2064 to close the session at 2033. The following day selling pressure continued with the S&P trading down to 2014, before short covering back up to 2052, the nearest high above the current overnight high 2039.

The 01-13-15 short covering rally up to 2052 was followed by a 68 points (3.3%) sell-off to 1984. On 01-14-15 another short covering rally auction S&P futures above 1980, up to 2027; 47 points ( 2.3%) only to see S&P futures sell back down below the 01-14-15 day session low and make a new low on 01-15-15 at 1870.

Measuring the current trading range based on the nearest low at 1960 (12-15-14) and the new all-time record high at 2089 (12-28-14) S&P futures is currently trading in a 129 points range.

The mid-point of the trading range is 2024. The upper quadrant (75%) of the trading range is located at 2058. The maximum value is the all-time record high at 2089.

The rally above the 2000 marked the beginning of the recovery rally from a technical perspective.

However, the economic conditions have not significantly changed and there is little in the way of rational to support the S&P trading above 2088-2100

However, the currently market condition indicates support at or near 20009-1998 and resistance at 2052.



Billy 

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