Hamzei_Analytics
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kriesau said:
SPM is the large S&P 500 Futures Contract for June Delivery. Its value is five times that of ES.
Fari
Brad Sullivan's Morning Commentary
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SPM is the large S&P 500 Futures Contract for June Delivery. Its value is five times that of ES.
Fari
Hamzei_Analytics
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Posted 08:55 CST
Equity Index Update
Wednesday April 5, 2006
The index markets shook off Monday afternoon's late selling and staged a solid rebound in yesterday's session. In general, the mega cap issues performed well, with XOM, GS and GOOG settling on session highs and underpinning a strong bid as the SPX is seemingly holding ground in anticipation of new 2006 trading highs.
I pointed out in yesterday's comment that the indices needed to hold short term support in order to help the psychological makeup of the current index trade. The fact that the indices were able to bounce off early lows at minor support zones is critical as we move forward in this uptrend. Velocity continues to be the only thing hampering the index trade, as players continue to be a little spooked by the lack movement at higher trading levels. This is the potential "fly in the ointment" for the upside. Simply put, the indices need something to make players want to take higher prices and bid them. So far, we have not seen that magic piece of news. The obvious play on the news front is the idea that as the FED discusses the end of its tightening policy, the indices will stage a significant rally - upwards of 5 to 8% in the SPX. This scenario cannot be dismissed completely, however, given the rally into this potential news, it seems to me that the actual trading returns upon the FED announcing completion of its cycle will be more muted than many anticipate.
Today's session will be marked by any attempt to push the SPX through the 1310 level - and whether or not the markets are able to hold this bid. In addition, the NDX is approaching a key psychological number of 1725...that level is not unusual (the 25's in NDX) for profit taking to occur. Any settlement above this level is important, however, a weekly settlement above 1725 in NDX is more beneficial from a technical perspective. If this scenario plays out, look for 1775 before this move ends.
Good Trading to all,
Brad
Equity Index Update
Wednesday April 5, 2006
The index markets shook off Monday afternoon's late selling and staged a solid rebound in yesterday's session. In general, the mega cap issues performed well, with XOM, GS and GOOG settling on session highs and underpinning a strong bid as the SPX is seemingly holding ground in anticipation of new 2006 trading highs.
I pointed out in yesterday's comment that the indices needed to hold short term support in order to help the psychological makeup of the current index trade. The fact that the indices were able to bounce off early lows at minor support zones is critical as we move forward in this uptrend. Velocity continues to be the only thing hampering the index trade, as players continue to be a little spooked by the lack movement at higher trading levels. This is the potential "fly in the ointment" for the upside. Simply put, the indices need something to make players want to take higher prices and bid them. So far, we have not seen that magic piece of news. The obvious play on the news front is the idea that as the FED discusses the end of its tightening policy, the indices will stage a significant rally - upwards of 5 to 8% in the SPX. This scenario cannot be dismissed completely, however, given the rally into this potential news, it seems to me that the actual trading returns upon the FED announcing completion of its cycle will be more muted than many anticipate.
Today's session will be marked by any attempt to push the SPX through the 1310 level - and whether or not the markets are able to hold this bid. In addition, the NDX is approaching a key psychological number of 1725...that level is not unusual (the 25's in NDX) for profit taking to occur. Any settlement above this level is important, however, a weekly settlement above 1725 in NDX is more beneficial from a technical perspective. If this scenario plays out, look for 1775 before this move ends.
Good Trading to all,
Brad
Hamzei_Analytics
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Posted 08:50 CST
Equity Index Update
Thursday April 6, 2006
The index markets continued to drift higher yesterday in moderate volume. The SPX was able to close above the 2006 intraday high at 1311.56, while the NDX benefited from further money flow rotation to begin the quarter and the index is closing in on the intraday 2006 high of 1761. It appears as though the indices have continued to find money flow to begin this quarter - not a unusual pattern as I pointed out in my Monday comment that the SPX has rallied around 1.5% the past 3 years the first Monday through Thursday in April trading. The question now becomes can the indices build upon this momentum and carry themselves higher?
This morning has been pretty busy as far as news is concerned. MMM guided higher and is up about 4%, MRK is down about -4% on a trial loss, the retailers came in with a mixed back on their same store sales. In addition, the global commodity rally continues to push forward as Gold crossed above 600 in the front month contract last night. In addition, Crude Oil continues to move significantly higher and is trading around a multi week high at 67.80. Continuing on the energy front, front month gasoline has been on a tear and is nearing $2 per gallon. The long end of the bond market continues to struggle with the 30 year future lower by -13 ticks at 108 '27. All of these add up to some headwinds for the indices today.
The program related trading we have seen the past few sessions has been nothing short of astounding as far as I am concerned. There is little question that the impact on a day trader is large as the markets become a bit more difficult to read due to the velocity of some of the price movements. Typically, today will mark the last session in which the programs dominate the overall action. Finally, the market will begin to look towards the employment report tomorrow...all told there seems to be some external resistance facing the market today, however, it may not be enough to do any noticeable damage given the underlying strength we have seen this week. All told, keep it pretty close to the vest.
Also, I included a chart that depicts just how quiet the trading is in the SPX for 2006. Included are the daily 2006 closes in the index along with its % difference from the 20 day MA. Interestingly, we have not seen the differential move to +/- 2% this year.
Good Trading to all,
Brad
Equity Index Update
Thursday April 6, 2006
The index markets continued to drift higher yesterday in moderate volume. The SPX was able to close above the 2006 intraday high at 1311.56, while the NDX benefited from further money flow rotation to begin the quarter and the index is closing in on the intraday 2006 high of 1761. It appears as though the indices have continued to find money flow to begin this quarter - not a unusual pattern as I pointed out in my Monday comment that the SPX has rallied around 1.5% the past 3 years the first Monday through Thursday in April trading. The question now becomes can the indices build upon this momentum and carry themselves higher?
This morning has been pretty busy as far as news is concerned. MMM guided higher and is up about 4%, MRK is down about -4% on a trial loss, the retailers came in with a mixed back on their same store sales. In addition, the global commodity rally continues to push forward as Gold crossed above 600 in the front month contract last night. In addition, Crude Oil continues to move significantly higher and is trading around a multi week high at 67.80. Continuing on the energy front, front month gasoline has been on a tear and is nearing $2 per gallon. The long end of the bond market continues to struggle with the 30 year future lower by -13 ticks at 108 '27. All of these add up to some headwinds for the indices today.
The program related trading we have seen the past few sessions has been nothing short of astounding as far as I am concerned. There is little question that the impact on a day trader is large as the markets become a bit more difficult to read due to the velocity of some of the price movements. Typically, today will mark the last session in which the programs dominate the overall action. Finally, the market will begin to look towards the employment report tomorrow...all told there seems to be some external resistance facing the market today, however, it may not be enough to do any noticeable damage given the underlying strength we have seen this week. All told, keep it pretty close to the vest.
Also, I included a chart that depicts just how quiet the trading is in the SPX for 2006. Included are the daily 2006 closes in the index along with its % difference from the 20 day MA. Interestingly, we have not seen the differential move to +/- 2% this year.
Good Trading to all,
Brad
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Posted 08:45 CST
Equity Index Update
Friday April 7, 2006
Not too hot, not too cold...this seems to be the trading theme index investors are playing this morning after the employment report came in pretty close to the consensus estimates. Some good news was gleamed from the lack of movement in the average hourly earnings component. Accordingly, the indices have put on their rally caps and are trading above the weekly and 2006 trading highs in the SPM contract. Still, for all the good news, the bond market remains in negative territory as the report seemed a bit unconvincing for players to push yields lower...it sure seems as if 5% on the 10 year note (currently around 4.90%) is a chip shot. The key question will be whether or not this has any impact on the equity market?
So far this morning, the answer seems to be no, but as I write this, the bonds continue to move lower and the SPM is beginning to take notice...it would not surprise me to see a strong opening sale in the index markets that finds a bottom in the first hour of trading. If the opposite occurs, and equities rally off the snap, I would be wary of a potential afternoon break from higher levels. Given the absolute lack of volatility in recent weeks, I suspect we may be in store for some 2-way trading in the near term, which would be a welcome change for the day trading community.
One key aspect of this trend higher has been the inability to "catch" players stuck the wrong way, that is a large part of the reason we have traded in such a quiet pattern the last several weeks. Today, given the selling in the long end, there is a potential to catch too many day traders on the short side of the parade because of the bond market. I have talked about this over the past couple of months, and the bottom line seems to be that the equity market has already priced in 5% on the 10 year and only a move that is disjointed would have a severe impact on the index markets. Thus far the uptick in yields has been very orderly and not produced any type of pressure - other than day trade related - on the indices. This could all change today of course, but, I would be very wary of selling short dips in this market. If you want to get short, sell the bounce.
Good Trading to all,
Brad
Equity Index Update
Friday April 7, 2006
Not too hot, not too cold...this seems to be the trading theme index investors are playing this morning after the employment report came in pretty close to the consensus estimates. Some good news was gleamed from the lack of movement in the average hourly earnings component. Accordingly, the indices have put on their rally caps and are trading above the weekly and 2006 trading highs in the SPM contract. Still, for all the good news, the bond market remains in negative territory as the report seemed a bit unconvincing for players to push yields lower...it sure seems as if 5% on the 10 year note (currently around 4.90%) is a chip shot. The key question will be whether or not this has any impact on the equity market?
So far this morning, the answer seems to be no, but as I write this, the bonds continue to move lower and the SPM is beginning to take notice...it would not surprise me to see a strong opening sale in the index markets that finds a bottom in the first hour of trading. If the opposite occurs, and equities rally off the snap, I would be wary of a potential afternoon break from higher levels. Given the absolute lack of volatility in recent weeks, I suspect we may be in store for some 2-way trading in the near term, which would be a welcome change for the day trading community.
One key aspect of this trend higher has been the inability to "catch" players stuck the wrong way, that is a large part of the reason we have traded in such a quiet pattern the last several weeks. Today, given the selling in the long end, there is a potential to catch too many day traders on the short side of the parade because of the bond market. I have talked about this over the past couple of months, and the bottom line seems to be that the equity market has already priced in 5% on the 10 year and only a move that is disjointed would have a severe impact on the index markets. Thus far the uptick in yields has been very orderly and not produced any type of pressure - other than day trade related - on the indices. This could all change today of course, but, I would be very wary of selling short dips in this market. If you want to get short, sell the bounce.
Good Trading to all,
Brad
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Posted 08:40 CST
Equity Index Update
Monday April 10, 2006
Institutional selling overwhelmed the indices on Friday as a variety of factors weighed on the equity market. The employment report, which registered a +211k increase, portrayed continuing expansion in the labor market. However, wage pressures declined on a year over year basis from 3.5% to 3.4% in February. So why did the bond market fall out of bed? One of the reasons being floated is the talk of a further unwinding of the global carry trade that has been so prevalent over the past few years. The 10 year note is now yielding just under 5% at 4.963% and giving equity players thoughts about potential credit crunching in the money supply. Yet, for all of this fear on the yield front, the equity market tends to move on a couple of other key factors...first and foremost are earnings. This week marks the beginning of earnings season and should produce a clearer picture of the economy. If the earnings are strong, it stands to reason that the equity market will begin to discount further rate hikes - so long as they do not continue throughout all of 2006. Another key factor in terms of equity movement is anticipation. Where the market could potentially have some trouble would be a scenario in which players have already gone long the market in anticipation of strong earnings, a friendlier FED and tame inflation. Couple these factors with another key - which is the external event idea - and one has to see a potential downside scenario that could be quick and painful. Similar to other corrections we have had in this ongoing bull market.
Today's index action will prove critical. Can the shorts build on Friday's decline? If yes, Friday's reversal lead to a substantial correction in the neighborhood of -7% or greater? Keep in mind that we are entering a historically volatile period for indices - around tax time. However, the month of April typically ends higher, so the question in light of all these cross currents is pretty simple...over the next 2 weeks will index prices be marked lower or higher? Given the long liquidation we witnessed on Friday, I would argue that there remains overhead supply and the most likely path is lower into option expiration.
On Friday it is worth noting that two major houses were lead sellers in the SPM contract, GSachs' desk sold an estimated 1,500 contracts all session and MStanley's desk sold a similar amount throughout the day. Pit traders will take their cue today from these houses and see if anything more is coming down the pike.
Support in the SPM contract resides between 1302.50 and 1299.50...if this zone is broken on a 30 minute closing basis it should be a green light for further selling throughout the day and target an eventual move towards 1280. On the resistance front, key spots in the contract are 1305.50 to 1306. Above this zone 1307.50 to 1308 and finally 1310 will be psychological resistance.
Good Trading to all,
Brad
Equity Index Update
Monday April 10, 2006
Institutional selling overwhelmed the indices on Friday as a variety of factors weighed on the equity market. The employment report, which registered a +211k increase, portrayed continuing expansion in the labor market. However, wage pressures declined on a year over year basis from 3.5% to 3.4% in February. So why did the bond market fall out of bed? One of the reasons being floated is the talk of a further unwinding of the global carry trade that has been so prevalent over the past few years. The 10 year note is now yielding just under 5% at 4.963% and giving equity players thoughts about potential credit crunching in the money supply. Yet, for all of this fear on the yield front, the equity market tends to move on a couple of other key factors...first and foremost are earnings. This week marks the beginning of earnings season and should produce a clearer picture of the economy. If the earnings are strong, it stands to reason that the equity market will begin to discount further rate hikes - so long as they do not continue throughout all of 2006. Another key factor in terms of equity movement is anticipation. Where the market could potentially have some trouble would be a scenario in which players have already gone long the market in anticipation of strong earnings, a friendlier FED and tame inflation. Couple these factors with another key - which is the external event idea - and one has to see a potential downside scenario that could be quick and painful. Similar to other corrections we have had in this ongoing bull market.
Today's index action will prove critical. Can the shorts build on Friday's decline? If yes, Friday's reversal lead to a substantial correction in the neighborhood of -7% or greater? Keep in mind that we are entering a historically volatile period for indices - around tax time. However, the month of April typically ends higher, so the question in light of all these cross currents is pretty simple...over the next 2 weeks will index prices be marked lower or higher? Given the long liquidation we witnessed on Friday, I would argue that there remains overhead supply and the most likely path is lower into option expiration.
On Friday it is worth noting that two major houses were lead sellers in the SPM contract, GSachs' desk sold an estimated 1,500 contracts all session and MStanley's desk sold a similar amount throughout the day. Pit traders will take their cue today from these houses and see if anything more is coming down the pike.
Support in the SPM contract resides between 1302.50 and 1299.50...if this zone is broken on a 30 minute closing basis it should be a green light for further selling throughout the day and target an eventual move towards 1280. On the resistance front, key spots in the contract are 1305.50 to 1306. Above this zone 1307.50 to 1308 and finally 1310 will be psychological resistance.
Good Trading to all,
Brad
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Posted 08:10 CST
Equity Index Update
Wednesday April 12, 2006
Sellers dominated the trading session as each of the major indices slid into negative territory for Q2. The market continues to be under heavy long liquidation pressures since the early employment report bounce last Friday. The most glaring example of the selling is being seen in the belle whether index for momentum players, the Russell 2000. This index has dropped -4% since the high print Friday morning and continues to be well offered at former support zones. Last week I made mention that this index is overdue for a correction of 10% as it has rallied over +23% from its October '05 trading lows. In fact, a -10% correction in this index would essentially bring the index towards its 200 day moving average. During this bull market for the Russell 2000, each year we have had at least 1 correction of 10% and each came after prolonged periods of the index being overly extended from its 200 day moving average. In addition, these corrections typically take place in the spring and summer, adding another potential leg for the sellers to stand on. I have included 2 charts which show the extensions for 2006 between the index and its 20 day and 200 day moving averages. Note that since 2003, the index had not spent more than 5 consecutive sessions with a differential above +10% from its 200 day moving average...while I did not include that data on the chart, it is worth using from a broader technical picture.
Overnight the indices have traded in a narrow range, defined by yesterday afternoon's boundaries. The SPM is currently at 1294.50, up fractionally on the session...European markets are lower and Asia finished with losses. Crude Oil remains at elevated levels, just under 69 per barrel and today's DOE stats at 9:30 should provide plenty of market punch. There is no question the oil prices are impacting equities, however, the larger picture suggests that the fixed income market continues to lead the way in reasons for longs to exit the market. That being said, the long end of the curve is trading slightly higher, but below session highs. The dollar is moderately stronger on the heels of a slightly better than anticipated trade balance report.
Today's session will be dominated by a combination of things, the most important of which should be psychological in nature. In other words, how much lower will prices have to go before longs wish to liquidate a portion of their holdings? Certainly a moderate bounce is not out of the question, however, the name of the game remains sell the rally. Until that is proven incorrect, there is no sense in fighting this tide. One note to mention is the different characteristics seen during long liquidation periods. Typically, these sessions produce a consistent offer at lower pricing throughout the session...one thing the trade does not have much of is volatility. Instead, it resembles a classic one way street. Keep this in mind as it rarely pays to sell the dips or to buy the rallies in these sessions because of their nature.
Good Trading to all,
Brad
Equity Index Update
Wednesday April 12, 2006
Sellers dominated the trading session as each of the major indices slid into negative territory for Q2. The market continues to be under heavy long liquidation pressures since the early employment report bounce last Friday. The most glaring example of the selling is being seen in the belle whether index for momentum players, the Russell 2000. This index has dropped -4% since the high print Friday morning and continues to be well offered at former support zones. Last week I made mention that this index is overdue for a correction of 10% as it has rallied over +23% from its October '05 trading lows. In fact, a -10% correction in this index would essentially bring the index towards its 200 day moving average. During this bull market for the Russell 2000, each year we have had at least 1 correction of 10% and each came after prolonged periods of the index being overly extended from its 200 day moving average. In addition, these corrections typically take place in the spring and summer, adding another potential leg for the sellers to stand on. I have included 2 charts which show the extensions for 2006 between the index and its 20 day and 200 day moving averages. Note that since 2003, the index had not spent more than 5 consecutive sessions with a differential above +10% from its 200 day moving average...while I did not include that data on the chart, it is worth using from a broader technical picture.
Overnight the indices have traded in a narrow range, defined by yesterday afternoon's boundaries. The SPM is currently at 1294.50, up fractionally on the session...European markets are lower and Asia finished with losses. Crude Oil remains at elevated levels, just under 69 per barrel and today's DOE stats at 9:30 should provide plenty of market punch. There is no question the oil prices are impacting equities, however, the larger picture suggests that the fixed income market continues to lead the way in reasons for longs to exit the market. That being said, the long end of the curve is trading slightly higher, but below session highs. The dollar is moderately stronger on the heels of a slightly better than anticipated trade balance report.
Today's session will be dominated by a combination of things, the most important of which should be psychological in nature. In other words, how much lower will prices have to go before longs wish to liquidate a portion of their holdings? Certainly a moderate bounce is not out of the question, however, the name of the game remains sell the rally. Until that is proven incorrect, there is no sense in fighting this tide. One note to mention is the different characteristics seen during long liquidation periods. Typically, these sessions produce a consistent offer at lower pricing throughout the session...one thing the trade does not have much of is volatility. Instead, it resembles a classic one way street. Keep this in mind as it rarely pays to sell the dips or to buy the rallies in these sessions because of their nature.
Good Trading to all,
Brad
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Brad Sullivan Daily Market Commentary
Posted 08:10 CST
Equity Index Update
Monday April 17, 2006
The index markets participated in a quiet session ahead of the holiday weekend on Thursday. The small cap Russell 2000 index recovered some of their recent declines with a nice rally above the 755 level in the futures contract. In addition, the NDX was able to attract buyers and continue to settle above the key 1700 level. The large cap SPX finished largely unchanged with the market unable to generate any buy side interest at current levels. Typically, this would set the tone for further downside probing before buyers are willing to step up their allocation to the market.
Overnight we have had sharp moves in a variety of markets. On the commodity front, Crude Oil hit $70 per barrel before falling back slightly and currently finds itself at 69.80 on the session. In addition, the metals continue their rapid move higher as Copper, Gold and Silver are all trading at new highs for this current move. The dollar is under severe pressure after another Chinese official discussed the need for China to liquidate some of its U.S. Treasury holdings. The Euro, Pound and Swiss Franc are all higher by more than 1% against the dollar.
This week marks the beginning of the earnings parade...Citigroup reported earnings that were better than anticipated and is trading modestly higher. With so many companies reporting this week, today may play out as a setup type of session. However, the index markets has - historically speaking - produced some volatile one way streets on the day the tax man cometh. I suspect we may see some upside probing in the morning, but, sellers into the afternoon based on this pattern. All told, the SPM contract has traded between 1299 and 1289.50 since the plunge lower last Tuesday morning. I suspect this range may continue to hold, with minor adjustments on the outliers. In other words...1299 may stretch to 1302 on the upside and 1289.50 may move towards 1285.
Good Trading to all,
Brad
Posted 08:10 CST
Equity Index Update
Monday April 17, 2006
The index markets participated in a quiet session ahead of the holiday weekend on Thursday. The small cap Russell 2000 index recovered some of their recent declines with a nice rally above the 755 level in the futures contract. In addition, the NDX was able to attract buyers and continue to settle above the key 1700 level. The large cap SPX finished largely unchanged with the market unable to generate any buy side interest at current levels. Typically, this would set the tone for further downside probing before buyers are willing to step up their allocation to the market.
Overnight we have had sharp moves in a variety of markets. On the commodity front, Crude Oil hit $70 per barrel before falling back slightly and currently finds itself at 69.80 on the session. In addition, the metals continue their rapid move higher as Copper, Gold and Silver are all trading at new highs for this current move. The dollar is under severe pressure after another Chinese official discussed the need for China to liquidate some of its U.S. Treasury holdings. The Euro, Pound and Swiss Franc are all higher by more than 1% against the dollar.
This week marks the beginning of the earnings parade...Citigroup reported earnings that were better than anticipated and is trading modestly higher. With so many companies reporting this week, today may play out as a setup type of session. However, the index markets has - historically speaking - produced some volatile one way streets on the day the tax man cometh. I suspect we may see some upside probing in the morning, but, sellers into the afternoon based on this pattern. All told, the SPM contract has traded between 1299 and 1289.50 since the plunge lower last Tuesday morning. I suspect this range may continue to hold, with minor adjustments on the outliers. In other words...1299 may stretch to 1302 on the upside and 1289.50 may move towards 1285.
Good Trading to all,
Brad
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Posted 09:00 CST
Equity Index Update
Tuesday April 18, 2006
The indices recovered ground from a late morning sale that pushed the SPM contract to new lows for the current downdraft that begin on the employment Friday reversal session. The market is now squarely focused on the earnings front, today's release of the FED minutes and tomorrows CPI reading. With this as a backdrop, it becomes important to focus on the drivers - or potential drivers in any session. This morning's PPI release was on the tame side, but with tomorrow's more important inflation reading it will be background noise. Crude Oil continues higher, currently trading at 70.55 in the overnight session - yet, the market does not seem to be focusing too much on these higher prices. After the close of trading earnings releases from IBM and YHOO will be in focus...until then I suspect the indices may try and stretch a bit higher in anticipation of dovish FED comments this afternoon. I typically find that most of the action will come after the minutes are released this afternoon, hence the shorter than normal commentary. However, I did include 4 % differential charts showing continued support in the indices. We are getting pretty close to a make or break level for the markets. The longer the indices stay below Tuesday mornings breakdown levels, the more negative it is in the longer term.
Good Trading to all,
Brad
Equity Index Update
Tuesday April 18, 2006
The indices recovered ground from a late morning sale that pushed the SPM contract to new lows for the current downdraft that begin on the employment Friday reversal session. The market is now squarely focused on the earnings front, today's release of the FED minutes and tomorrows CPI reading. With this as a backdrop, it becomes important to focus on the drivers - or potential drivers in any session. This morning's PPI release was on the tame side, but with tomorrow's more important inflation reading it will be background noise. Crude Oil continues higher, currently trading at 70.55 in the overnight session - yet, the market does not seem to be focusing too much on these higher prices. After the close of trading earnings releases from IBM and YHOO will be in focus...until then I suspect the indices may try and stretch a bit higher in anticipation of dovish FED comments this afternoon. I typically find that most of the action will come after the minutes are released this afternoon, hence the shorter than normal commentary. However, I did include 4 % differential charts showing continued support in the indices. We are getting pretty close to a make or break level for the markets. The longer the indices stay below Tuesday mornings breakdown levels, the more negative it is in the longer term.
Good Trading to all,
Brad
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Posted 13:05 CST
Equity Index Update
Tuesday April 25, 2006
The index markets traded at lower levels across the board yesterday, however, the sell side was never able to take control at lower levels and afternoon buy orders crept back in. Day trade short covering was the name of the game in the closing 30 minutes of trading in the large cap SP, NDX and DJIA. However, the biggest story of the day was the selling witnessed in the Russell 2000. Rumors circulated around desks that a hedge fund is in the process of unwinding a long Russell 2000 / short SP 500 position. Whatever the reason, the ER2 was clearly for sale at and above the 770 level.
In today's action, I would pay close attention to the ER2 and specifically the 770 to 771.50 zone of resistance. If the index can close above this zone on a 30 minute basis, it should alleviate some of the selling pressure left from yesterday. The most probable scenario in this index, particularly as we are called to open around 770, is an early failure and test of yesterday's low zone between 765 and 767. The most interesting situation regarding this index will be its performance versus the large caps today. When we have seen dollar flows out of small caps over the past couple of years, it typically lasts for a few sessions. If today, the small caps outperform the large caps I think the rumor about a fund taking off its position yesterday will have merit.
One other thing worth keeping a close eye on today...the deteriorating picture found in the breadth of this updraft. Simply put, the indices need to widen beyond energy related issues for the broader market to advance from these levels.
As for the SPM contract...CRITICAL SUPPORT IS FOUND BETWEEN 1209 AND 1207.50...any settlement below this zone puts 1295 back on the board. On the upside...resistance is found between 1315 and 1317.50, with critical resistance stretching from 1320 to 1325. Overall, this index seems stuck in a pretty tight range. Bids seem to be resting below 1310 and offers are scale up above 1315. This action is typical of long liquidation.
Good Trading to all,
Brad
Equity Index Update
Tuesday April 25, 2006
The index markets traded at lower levels across the board yesterday, however, the sell side was never able to take control at lower levels and afternoon buy orders crept back in. Day trade short covering was the name of the game in the closing 30 minutes of trading in the large cap SP, NDX and DJIA. However, the biggest story of the day was the selling witnessed in the Russell 2000. Rumors circulated around desks that a hedge fund is in the process of unwinding a long Russell 2000 / short SP 500 position. Whatever the reason, the ER2 was clearly for sale at and above the 770 level.
In today's action, I would pay close attention to the ER2 and specifically the 770 to 771.50 zone of resistance. If the index can close above this zone on a 30 minute basis, it should alleviate some of the selling pressure left from yesterday. The most probable scenario in this index, particularly as we are called to open around 770, is an early failure and test of yesterday's low zone between 765 and 767. The most interesting situation regarding this index will be its performance versus the large caps today. When we have seen dollar flows out of small caps over the past couple of years, it typically lasts for a few sessions. If today, the small caps outperform the large caps I think the rumor about a fund taking off its position yesterday will have merit.
One other thing worth keeping a close eye on today...the deteriorating picture found in the breadth of this updraft. Simply put, the indices need to widen beyond energy related issues for the broader market to advance from these levels.
As for the SPM contract...CRITICAL SUPPORT IS FOUND BETWEEN 1209 AND 1207.50...any settlement below this zone puts 1295 back on the board. On the upside...resistance is found between 1315 and 1317.50, with critical resistance stretching from 1320 to 1325. Overall, this index seems stuck in a pretty tight range. Bids seem to be resting below 1310 and offers are scale up above 1315. This action is typical of long liquidation.
Good Trading to all,
Brad
Hamzei_Analytics
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Posted 08:55 CST
Equity Index Update
Wednesday April 26, 2006
The index markets continued their recent downdraft yesterday as the indices focused on the sharp rise in long dated treasury yields. All told, the large caps felt the brunt of the pain, while a large buy program near the close of trading brought unchanged readings for the Russell 2000 and Midcap 400. Today's action should be dominated by the current downdraft in the long end of the curve after a much stronger than anticipated reading in March Durable Goods orders. The reading sent the bonds significantly lower...even after a bounce back from the trading lows, the 10 year and 30 year are trading at yields above yesterday's highs. In addition, the market will look at New Home Sales, the DOE stats and at 1:00cst the Beige Book.
The indices clearly seem to be at a crossroads given their recent divergences. The NDX is barely holding above 1700 and has been unable to gain any ground back from Friday's vicious selling. On the flip side...the large caps remain below Friday's highs, but, have been able to hold their bid at lower trading levels. Seemingly there has been some rotation out of the small caps over the past couple of sessions. Yet, it remains unclear as to whether that money is being put to work elsewhere or is moving to the sidelines. The answer to this question will determine our next leg in this market.
The breadth over the past two sessions has been bad...not as bad as a quick glance at the NYSE UP/Down readings would have you believe due to the amount of fixed income issues that are listed on the exchange. That being said, we have seen moderate deterioration in the operating company only breadth readings - however, nothing to be overly concerned about given our current levels. As I wrote earlier...crosscurrents.
At current levels, it appears to me that the market is ready to make another move to the upside into the end of April...however I have lots of lingering doubts and the simple fact is this - this has not been much of a dip to get long into, which begs the question - can we go lower and produce a better entry? The answer of course is yes or who knows...but, it seems to me that at current levels, the crowd is behind the market and looking for more upside. It seems hard to fight liquidity and when you factor in all the negative headline news over the past few sessions the market remains firm.
Good Trading to all,
Brad
Equity Index Update
Wednesday April 26, 2006
The index markets continued their recent downdraft yesterday as the indices focused on the sharp rise in long dated treasury yields. All told, the large caps felt the brunt of the pain, while a large buy program near the close of trading brought unchanged readings for the Russell 2000 and Midcap 400. Today's action should be dominated by the current downdraft in the long end of the curve after a much stronger than anticipated reading in March Durable Goods orders. The reading sent the bonds significantly lower...even after a bounce back from the trading lows, the 10 year and 30 year are trading at yields above yesterday's highs. In addition, the market will look at New Home Sales, the DOE stats and at 1:00cst the Beige Book.
The indices clearly seem to be at a crossroads given their recent divergences. The NDX is barely holding above 1700 and has been unable to gain any ground back from Friday's vicious selling. On the flip side...the large caps remain below Friday's highs, but, have been able to hold their bid at lower trading levels. Seemingly there has been some rotation out of the small caps over the past couple of sessions. Yet, it remains unclear as to whether that money is being put to work elsewhere or is moving to the sidelines. The answer to this question will determine our next leg in this market.
The breadth over the past two sessions has been bad...not as bad as a quick glance at the NYSE UP/Down readings would have you believe due to the amount of fixed income issues that are listed on the exchange. That being said, we have seen moderate deterioration in the operating company only breadth readings - however, nothing to be overly concerned about given our current levels. As I wrote earlier...crosscurrents.
At current levels, it appears to me that the market is ready to make another move to the upside into the end of April...however I have lots of lingering doubts and the simple fact is this - this has not been much of a dip to get long into, which begs the question - can we go lower and produce a better entry? The answer of course is yes or who knows...but, it seems to me that at current levels, the crowd is behind the market and looking for more upside. It seems hard to fight liquidity and when you factor in all the negative headline news over the past few sessions the market remains firm.
Good Trading to all,
Brad
Hamzei_Analytics
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Posted 08:50 CST
Equity Index Update
Thursday April 27, 2006
The index markets were unable to build on a strong opening bid and settled mostly around the unchanged levels. The lone exception was the DJIA, which finished higher by +0.6% at 11,354, establishing a new closing high for 2006. The key question regarding the industrials is this...are we witnessing the peak of the earnings cycle? The answer of course will be unveiled in the future, but, it is worth considering that historically the DJIA's best performing month is April.
This morning the index markets are called to open below the weekly trading low in each index, save the DJIA. The earnings front appears to be a bit light in terms of some of the oil issues, most notably XOM. In addition, the markets were dealt another blow when China raised its benchmark interest rate by 25 basis points overnight. Certainly, this adds to the global yield pressure that the markets are beginning to see as a potential negative. Domestically, the long end of the U.S. interest rate market remains soft and trading near the high yields of yesterday's session. Obviously all of this could change in a flash with FED Chair Bernanke's testimony before congress this morning. The chair will discuss the economic outlook and should once again give a hint as to the end of this current rate cycle. At this point it is clear that the equity market and fixed income market are trading at different view points on the economic front, today's testimony should give clues as to which side has pegged the future correctly.
As with all event trading days, I would expect some quick and volatile action in the immediate response to the headline release of Bernanke's testimony. The market should slow down once we move into the Q&A portion, finishing up with a busy afternoon once the testimony is complete. The key for the index markets will be for the SPM to HOLD ITS SHARP RALLY DAY WITNESSED LAST TUESDAY. Any settlement in SPM below 1295 is a sharp negative and should produce long liquidation at lower levels over the next couple of weeks.
Good Trading to all,
Brad
Equity Index Update
Thursday April 27, 2006
The index markets were unable to build on a strong opening bid and settled mostly around the unchanged levels. The lone exception was the DJIA, which finished higher by +0.6% at 11,354, establishing a new closing high for 2006. The key question regarding the industrials is this...are we witnessing the peak of the earnings cycle? The answer of course will be unveiled in the future, but, it is worth considering that historically the DJIA's best performing month is April.
This morning the index markets are called to open below the weekly trading low in each index, save the DJIA. The earnings front appears to be a bit light in terms of some of the oil issues, most notably XOM. In addition, the markets were dealt another blow when China raised its benchmark interest rate by 25 basis points overnight. Certainly, this adds to the global yield pressure that the markets are beginning to see as a potential negative. Domestically, the long end of the U.S. interest rate market remains soft and trading near the high yields of yesterday's session. Obviously all of this could change in a flash with FED Chair Bernanke's testimony before congress this morning. The chair will discuss the economic outlook and should once again give a hint as to the end of this current rate cycle. At this point it is clear that the equity market and fixed income market are trading at different view points on the economic front, today's testimony should give clues as to which side has pegged the future correctly.
As with all event trading days, I would expect some quick and volatile action in the immediate response to the headline release of Bernanke's testimony. The market should slow down once we move into the Q&A portion, finishing up with a busy afternoon once the testimony is complete. The key for the index markets will be for the SPM to HOLD ITS SHARP RALLY DAY WITNESSED LAST TUESDAY. Any settlement in SPM below 1295 is a sharp negative and should produce long liquidation at lower levels over the next couple of weeks.
Good Trading to all,
Brad
Hamzei_Analytics
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Posted 08:30 CST
Equity Index Update
Monday May 15, 2006
The index markets suffered through another day of liquidation on Friday. The Midcap and small caps were hit the hardest as momentum players bailed out of these issues. Large cap technology remained for sale as the NDX settled in negative territory for the year and a fraction above its intra day low for 2006. The 2 day market plunge has been discussed at length by many over the weekend, some blame inflation fears, others put the onus on the FOMC. In my opinion, the action has been dictated by expectations in the marketplace. In other words, the indices were bid higher on expectations of the FED putting to rest the current rate cycle. As that chance became data dependent, instead of carved in stone, players liquidated their long positions. When will the liquidation stop? That is the question at hand...given the global decline, these things have a way of carrying farther than one usually imagines...no sense in catching the knife at these levels.
Overnight action was absolutely crazy as volatility seems to be reintroducing itself to the one way street party we have traded with for so long. The dollar opened sharply lower, only to reverse all of those losses and is now trading substantially higher - particularly against the European currencies. On the commodity front, the markets are getting hammered as the metals are trading sharply lower, with Gold below 700. In addition, Crude Oil is trading lower by -2.7% at 70.05. As for the index markets they opened soft and have remained on the defensive, with the exception of the high prints made after the European open. The overnight range for the SPM contract is 1296 to 1285.40...that is substantial given our current low volatility environment. What does it all mean for today? Quite simply, expect a sharp increase in price discovery with a severe drop in the number of contracts being bid and offered at the tick. The reason is simple, many of the trading programs that have flourished over the past few years are predicated on mean reversal type of trading. This trading does extremely well in low volatility trading sessions, due to their nature of soaking up the order flow then driving the market back a few ticks. These programs will step away when volatility trades at or above a certain level...accordingly volume at the tick will be a bit lighter and price discovery a bit wider.
I have included a chart the shows the differentials between the 20 and 200 day moving averages in each major cash index. As you will be able to see, the sharp decline in the differentials we have witnessed over the past few sessions has clearly put the ball of worry into the buyers court. Historically, when we move from elevated levels in the extensions the trend continues. In other words, the odds are for lower index prices over the next few weeks.
Good Trading to all,
Brad
Equity Index Update
Monday May 15, 2006
The index markets suffered through another day of liquidation on Friday. The Midcap and small caps were hit the hardest as momentum players bailed out of these issues. Large cap technology remained for sale as the NDX settled in negative territory for the year and a fraction above its intra day low for 2006. The 2 day market plunge has been discussed at length by many over the weekend, some blame inflation fears, others put the onus on the FOMC. In my opinion, the action has been dictated by expectations in the marketplace. In other words, the indices were bid higher on expectations of the FED putting to rest the current rate cycle. As that chance became data dependent, instead of carved in stone, players liquidated their long positions. When will the liquidation stop? That is the question at hand...given the global decline, these things have a way of carrying farther than one usually imagines...no sense in catching the knife at these levels.
Overnight action was absolutely crazy as volatility seems to be reintroducing itself to the one way street party we have traded with for so long. The dollar opened sharply lower, only to reverse all of those losses and is now trading substantially higher - particularly against the European currencies. On the commodity front, the markets are getting hammered as the metals are trading sharply lower, with Gold below 700. In addition, Crude Oil is trading lower by -2.7% at 70.05. As for the index markets they opened soft and have remained on the defensive, with the exception of the high prints made after the European open. The overnight range for the SPM contract is 1296 to 1285.40...that is substantial given our current low volatility environment. What does it all mean for today? Quite simply, expect a sharp increase in price discovery with a severe drop in the number of contracts being bid and offered at the tick. The reason is simple, many of the trading programs that have flourished over the past few years are predicated on mean reversal type of trading. This trading does extremely well in low volatility trading sessions, due to their nature of soaking up the order flow then driving the market back a few ticks. These programs will step away when volatility trades at or above a certain level...accordingly volume at the tick will be a bit lighter and price discovery a bit wider.
I have included a chart the shows the differentials between the 20 and 200 day moving averages in each major cash index. As you will be able to see, the sharp decline in the differentials we have witnessed over the past few sessions has clearly put the ball of worry into the buyers court. Historically, when we move from elevated levels in the extensions the trend continues. In other words, the odds are for lower index prices over the next few weeks.
Good Trading to all,
Brad
Hamzei_Analytics
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Posted 07:00 CST
Equity Index Update
Tuesday May 16, 2006
The index markets staged a late session recovery to settle moderately higher in the large cap contracts - SP and DJIA. The ND, Midcap and Russell 2000 finished with moderate losses as sellers continue to focus on selling the momentum issues. It is worth noting that in the past three trading sessions, the Midcap 400 and Russell 2000 futures contracts have both dropped around -4.8%. Typically such velocity based selling runs dry over the next few sessions as players digest the move...I would normally anticipate this pattern to continue - however, given the release of PPI today and CPI tomorrow, there is a pretty good chance that these markets will not find stability until sometime next week.
The breadth readings improved yesterday in the SPX and NDX, particularly in their top weighted issues. Yet, the damage that was done from the previous two sessions remains overhead and yesterday acted like nothing more than a quiet short covering bounce off the trading lows. Over the past three years we have seen this pattern of a sharp index sell off, followed by a consolidation, then a rally to new highs. Is this time different? Only time will tell, however, with the breakdown in the NDX and the nervousness in the momentum sectors it certainly seems as though the longs are fearful of losing profits at this juncture. Typically, these type of situations have a way of snowballing into something larger...remember, since this bull move began in spring of 2003, the Russell 2000 has had a -10% correction each year. Another -5% from the current levels would produce what some would say is needed for continued longer term advancement.
I have listed 2 charts today, one of the NDX cumulative breadth for 2006, the other for the SPX's top 20 weighted issues cumulative breadth. Interestingly, the top 20 SPX issues have held serve thus far above the yearly lows...is it enough to produce a solid bounce?
Good Trading to all,
Brad
Equity Index Update
Tuesday May 16, 2006
The index markets staged a late session recovery to settle moderately higher in the large cap contracts - SP and DJIA. The ND, Midcap and Russell 2000 finished with moderate losses as sellers continue to focus on selling the momentum issues. It is worth noting that in the past three trading sessions, the Midcap 400 and Russell 2000 futures contracts have both dropped around -4.8%. Typically such velocity based selling runs dry over the next few sessions as players digest the move...I would normally anticipate this pattern to continue - however, given the release of PPI today and CPI tomorrow, there is a pretty good chance that these markets will not find stability until sometime next week.
The breadth readings improved yesterday in the SPX and NDX, particularly in their top weighted issues. Yet, the damage that was done from the previous two sessions remains overhead and yesterday acted like nothing more than a quiet short covering bounce off the trading lows. Over the past three years we have seen this pattern of a sharp index sell off, followed by a consolidation, then a rally to new highs. Is this time different? Only time will tell, however, with the breakdown in the NDX and the nervousness in the momentum sectors it certainly seems as though the longs are fearful of losing profits at this juncture. Typically, these type of situations have a way of snowballing into something larger...remember, since this bull move began in spring of 2003, the Russell 2000 has had a -10% correction each year. Another -5% from the current levels would produce what some would say is needed for continued longer term advancement.
I have listed 2 charts today, one of the NDX cumulative breadth for 2006, the other for the SPX's top 20 weighted issues cumulative breadth. Interestingly, the top 20 SPX issues have held serve thus far above the yearly lows...is it enough to produce a solid bounce?
Good Trading to all,
Brad
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Posted 08:45 CST
Equity Index Update
Thursday May 18, 2006
The index markets were so thoroughly battered yesterday that there is nothing substantive I could possibly add in terms of color. The fact were simple as breadth and volume figures were in line with those of a "puke" in nature. The job at hand now is what to make of the carnage and how to profit from it. Players continue to discuss this move as a correction and a healthy one at that...only time will tell if this is correct or something greater.
Given the decline over the past few sessions, a bounce higher seems to be the play at hand...typically though, in this type of environment, when everybody is looking for something, it usually does not happen. I would be extremely cautious over the next couple of sessions from the long side...my feeling is this : if you are looking to get long, wait until the close on Friday. With expiration two days away, lots of things can happen if somebody's hand gets forced. What I mean by that rather cryptic line is that the market has had a very difficult time with expirations.
This morning will bring plenty of FED speak, from Bernanke to Lacker, Guynn and Poole...in addition we have LEI and Philly Fed. As for the indices, the SPM closed at a substantial discount to fair value yesterday at 1269.50...expect a rebound in the early trade, but 1280 to 1283 is tough resistance. In addition, there appears to be a flight to quality bid in the long end of the curve this morning and the dollar is back on the defensive.
I have included a few charts, specifically looking at MA differentials. These charts show just how far we have moved in the past few sessions.
Good trading to all,
Brad
Equity Index Update
Thursday May 18, 2006
The index markets were so thoroughly battered yesterday that there is nothing substantive I could possibly add in terms of color. The fact were simple as breadth and volume figures were in line with those of a "puke" in nature. The job at hand now is what to make of the carnage and how to profit from it. Players continue to discuss this move as a correction and a healthy one at that...only time will tell if this is correct or something greater.
Given the decline over the past few sessions, a bounce higher seems to be the play at hand...typically though, in this type of environment, when everybody is looking for something, it usually does not happen. I would be extremely cautious over the next couple of sessions from the long side...my feeling is this : if you are looking to get long, wait until the close on Friday. With expiration two days away, lots of things can happen if somebody's hand gets forced. What I mean by that rather cryptic line is that the market has had a very difficult time with expirations.
This morning will bring plenty of FED speak, from Bernanke to Lacker, Guynn and Poole...in addition we have LEI and Philly Fed. As for the indices, the SPM closed at a substantial discount to fair value yesterday at 1269.50...expect a rebound in the early trade, but 1280 to 1283 is tough resistance. In addition, there appears to be a flight to quality bid in the long end of the curve this morning and the dollar is back on the defensive.
I have included a few charts, specifically looking at MA differentials. These charts show just how far we have moved in the past few sessions.
Good trading to all,
Brad
Hamzei_Analytics
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Posted 10:05 CST
Equity Index Update
Wednesday May 24, 2006
"One minute you're up half-a-million in soybeans, the next they've repossessed your Bentley and your kids can't go to college." So was the tale for those long the index markets yesterday afternoon. For the second session in a row a seller out of Mlynch's desk hit the SPM aggressively in the final hour of trading. This time, there were no takers as players pulled bids and ran in front of the selling all the way down. When the dust had settled the markets were devastated by the lack of early follow to the upside and a whiplash settlement on the lows of the day.
In my opinion, this feels very "margin callish" to create my own term...Having traded through similar periods of hedge fund problems - from last springs GLG issue, to the Long Term Capital situation, this market has the same feeling. We will never know - until its too late - who is stuck...all a trader not in the know can do is stay in the flow and operate under the assumption that something very unusual is at play in the domestic equity markets.
Overnight action was wide as the SPM traded as low as 1247 and as high as 1259...expect potential outlier trades on both sides of that range by the time the dust clears today. In addition, keep a close eye on the bond market. The USM contract has been the place of safe haven during this equity decline...it will be a reinforcement indicator throughout the trading today. In other words...if USM is ticking lower, players are taking risk premium out of the index market, which should allow for higher pricing. Finally, with the severity of the breakdown yesterday afternoon, keep a close eye on the 1265 to 1268 level. I would treat this zone as a GAP trade. In other words, the selling was so severe that the logical move is to test this resistance zone and treat it as a gap fill if we get towards the top end of the zone. Typical, that will be the spot to fade any updraft.
Good trading to all,
Brad
Equity Index Update
Wednesday May 24, 2006
"One minute you're up half-a-million in soybeans, the next they've repossessed your Bentley and your kids can't go to college." So was the tale for those long the index markets yesterday afternoon. For the second session in a row a seller out of Mlynch's desk hit the SPM aggressively in the final hour of trading. This time, there were no takers as players pulled bids and ran in front of the selling all the way down. When the dust had settled the markets were devastated by the lack of early follow to the upside and a whiplash settlement on the lows of the day.
In my opinion, this feels very "margin callish" to create my own term...Having traded through similar periods of hedge fund problems - from last springs GLG issue, to the Long Term Capital situation, this market has the same feeling. We will never know - until its too late - who is stuck...all a trader not in the know can do is stay in the flow and operate under the assumption that something very unusual is at play in the domestic equity markets.
Overnight action was wide as the SPM traded as low as 1247 and as high as 1259...expect potential outlier trades on both sides of that range by the time the dust clears today. In addition, keep a close eye on the bond market. The USM contract has been the place of safe haven during this equity decline...it will be a reinforcement indicator throughout the trading today. In other words...if USM is ticking lower, players are taking risk premium out of the index market, which should allow for higher pricing. Finally, with the severity of the breakdown yesterday afternoon, keep a close eye on the 1265 to 1268 level. I would treat this zone as a GAP trade. In other words, the selling was so severe that the logical move is to test this resistance zone and treat it as a gap fill if we get towards the top end of the zone. Typical, that will be the spot to fade any updraft.
Good trading to all,
Brad
Hamzei_Analytics
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Posted 08:30 CST
Equity Index Update
Tuesday May 30, 2006
The index markets produced decent gains on shallow volume during Friday's pre-holiday session. Institutional activity was bordering on non-existent after 10:00cst. This morning, the indices are called to open lower with the SPM trading at 1277, down -5.75 on the session. European markets are lower by nearly -1% across the board, in addition these markets had moderate declines in Monday's session, during our holiday. Further issues this morning stem from Chicago Fed President Moskow discussing inflation on CNBC this morning. He took the stance that inflation is at the high end of the FED's comfort zone. This comment puts two events this week on everybody's radar screen. The first event will be tomorrow's release of the FOMC minutes, followed by Friday's employment report. In between we will get readings from the ISM, so keep a close eye on the prices paid index.
As far as the equity market is concerned, the data flow this week will be critical in moving forward. Clearly, if inflation figures remain on the strong side, the markets could be in for some difficult trading. In addition, we are here at month end over the next two sessions...typically, particularly in a month that has been sharply one direction, the markets will move with that direction into the final trading session for that period. All told... the indices will need some good news on the inflation front this week to help build on the recent two day updraft.
In other events this morning...Treasury Secretary Snow is being replaced by Henry Paulson from Goldman Sachs...in addition Kinder Morgan is offering to take itself public at a premium of nearly 20% to Friday's close...this could be very strong news for the entire energy sector. Given the significant weight of these issues in the indices, it could in fact spark higher pricing from our opening levels.
Good trading to all,
Brad
Equity Index Update
Tuesday May 30, 2006
The index markets produced decent gains on shallow volume during Friday's pre-holiday session. Institutional activity was bordering on non-existent after 10:00cst. This morning, the indices are called to open lower with the SPM trading at 1277, down -5.75 on the session. European markets are lower by nearly -1% across the board, in addition these markets had moderate declines in Monday's session, during our holiday. Further issues this morning stem from Chicago Fed President Moskow discussing inflation on CNBC this morning. He took the stance that inflation is at the high end of the FED's comfort zone. This comment puts two events this week on everybody's radar screen. The first event will be tomorrow's release of the FOMC minutes, followed by Friday's employment report. In between we will get readings from the ISM, so keep a close eye on the prices paid index.
As far as the equity market is concerned, the data flow this week will be critical in moving forward. Clearly, if inflation figures remain on the strong side, the markets could be in for some difficult trading. In addition, we are here at month end over the next two sessions...typically, particularly in a month that has been sharply one direction, the markets will move with that direction into the final trading session for that period. All told... the indices will need some good news on the inflation front this week to help build on the recent two day updraft.
In other events this morning...Treasury Secretary Snow is being replaced by Henry Paulson from Goldman Sachs...in addition Kinder Morgan is offering to take itself public at a premium of nearly 20% to Friday's close...this could be very strong news for the entire energy sector. Given the significant weight of these issues in the indices, it could in fact spark higher pricing from our opening levels.
Good trading to all,
Brad
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Posted 07:20 CST
Equity Index Update
Monday June 19, 2006
The index markets gave back a significant portion of their outsized gains from Thursday's rally. The early tone was set from St. Louis Fed President Poole's hawkish tones on the inflation front. Accordingly, buyers never really materialized and prices drifted lower...however, there was net little damage in the SPX and DJIA as bids are beginning to underpin these issues ahead of the end of a painful Q2. The selling in the NDX and Russell 2000 was more aggressive, with both indices giving back essentially 50% of their gains from Thursday. Could this be an indicator of things to come in the last two weeks of this quarter? Long large caps, short small caps?
European markets are higher, particularly the DAX as Siemens and Nokia have agreed to a merger. Siemens is up around +8% and Nokia around +4%...this merger has placed a solid bid across the Eurozone indices and has helped push the U.S. overnight market to its sessions highs. Currently, the SPU is trading at 1265.50, up 5.50 on the session. Keep a close eye on this opening...normally if the bid is based on "fluff" - in this case the Euro merger news - then we should see an early test of the opening higher gap with a trade towards the unchanged level.
This week should provide lighter volume ahead of next week's fireworks. We have little in the way of economic and earnings data to spark a move during the upcoming 5 sessions, however, next week brings earnings, the FOMC meeting and the end of Q2. Suffice it to say that the volume will flow during those events...in the meantime, keep the powder dry.
Good trading to all,
Brad
Equity Index Update
Monday June 19, 2006
The index markets gave back a significant portion of their outsized gains from Thursday's rally. The early tone was set from St. Louis Fed President Poole's hawkish tones on the inflation front. Accordingly, buyers never really materialized and prices drifted lower...however, there was net little damage in the SPX and DJIA as bids are beginning to underpin these issues ahead of the end of a painful Q2. The selling in the NDX and Russell 2000 was more aggressive, with both indices giving back essentially 50% of their gains from Thursday. Could this be an indicator of things to come in the last two weeks of this quarter? Long large caps, short small caps?
European markets are higher, particularly the DAX as Siemens and Nokia have agreed to a merger. Siemens is up around +8% and Nokia around +4%...this merger has placed a solid bid across the Eurozone indices and has helped push the U.S. overnight market to its sessions highs. Currently, the SPU is trading at 1265.50, up 5.50 on the session. Keep a close eye on this opening...normally if the bid is based on "fluff" - in this case the Euro merger news - then we should see an early test of the opening higher gap with a trade towards the unchanged level.
This week should provide lighter volume ahead of next week's fireworks. We have little in the way of economic and earnings data to spark a move during the upcoming 5 sessions, however, next week brings earnings, the FOMC meeting and the end of Q2. Suffice it to say that the volume will flow during those events...in the meantime, keep the powder dry.
Good trading to all,
Brad
Hamzei_Analytics
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Brad Sullivan Daily Market Commentary
Posted 08:35 CST
Equity Index Update
Thursday June 22, 2006
The index markets rallied sharply through the late morning into early afternoon trading hours yesterday, however, late session selling produced some questions as to the move's durability. On the plus side, a strong move higher in commodity related issues helped underpin a bid in the midcap and small cap issues, two indices that have been suffering during this trading decline. That being said, neither the Midcap 400 or the Russell 2000 could push into positive territory for the week...seemingly there continues to be a liquidation of these issues at higher levels ahead of next week's ending of Q2. The beneficiaries, so far, of this selling seems to be the DJIA and SPX. The DJIA took our its recent bounce highs from last Thursday on yesterday's close as money continues to flow into these issues. The key question is this : is it enough to stop the downside bleeding? Or is it simply a case of minor rotation that will have no lasting impact on the trade?
This morning the indices are called to open lower as early buying in Europe has evaporated...keep a close eye on the Russell and Midcap indices today as they should provide the most interesting trade due to the end of the quarter and Russell rebalancing over the next week.
Good trading to all,
Brad
Posted 08:35 CST
Equity Index Update
Thursday June 22, 2006
The index markets rallied sharply through the late morning into early afternoon trading hours yesterday, however, late session selling produced some questions as to the move's durability. On the plus side, a strong move higher in commodity related issues helped underpin a bid in the midcap and small cap issues, two indices that have been suffering during this trading decline. That being said, neither the Midcap 400 or the Russell 2000 could push into positive territory for the week...seemingly there continues to be a liquidation of these issues at higher levels ahead of next week's ending of Q2. The beneficiaries, so far, of this selling seems to be the DJIA and SPX. The DJIA took our its recent bounce highs from last Thursday on yesterday's close as money continues to flow into these issues. The key question is this : is it enough to stop the downside bleeding? Or is it simply a case of minor rotation that will have no lasting impact on the trade?
This morning the indices are called to open lower as early buying in Europe has evaporated...keep a close eye on the Russell and Midcap indices today as they should provide the most interesting trade due to the end of the quarter and Russell rebalancing over the next week.
Good trading to all,
Brad
Hamzei_Analytics
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Brad Sullivan Daily Market Commentary
Posted 07:50 CST
Equity Index Update
Wednesday July 5, 2006
The index markets continued to build upon the Bernanke led rally from last Thursday's FOMC statement during Monday's abbreviated trading session. Volume flows were very light with the 4th of July holiday keeping most players away from their screens. The ISM survey was the one key piece of economic news for the session. The headline rate came in on the low side of expectations at 53.8, however, the jump in new orders to 57.9 offset the potential weakness of the report. In the release, it is interesting to note the ISM chair's view of the report, "Manufacturing growth continued in June, and although the rate of growth slowed slightly, renewed strength in June's New Orders Index provides encouragement for the third quarter. The sector is benefiting from the weaker dollar and business investment...our members generally see their business in a continued growth mode."
The index markets now stand slightly above their respective 50% retracement levels from their 2006 highs to our June trading lows. This week will bring the employment report, while next week brings the beginning of earnings season and more economic releases. Considering the FOMC language is - in my opinion - a relatively worthless task for any trader. The key is understanding how the marketplace will respond to any subtle change in the language. After Thursday's release, many major participants produced notes saying the FED was done, however, the bond market never really bought into that theory and currently resides just a bit lower in yields than it was on Thursday before the FOMC announcement. Equities, the dollar and certain metals have had the sharpest directional moves since the release...the question is pretty simple, was Thursday's FOMC statement a trigger that leads to a sustained one way street in these markets? Or are we smack in the middle of a suckers rally that will get awfully painful once the buying subsides? This last statement reminds me of a quote that George Soros said once in regards to speculation - and I am paraphrasing here - "the trick to successful speculation is to ride the false trend and get off before everybody else."
Good trading to all,
Brad
Posted 07:50 CST
Equity Index Update
Wednesday July 5, 2006
The index markets continued to build upon the Bernanke led rally from last Thursday's FOMC statement during Monday's abbreviated trading session. Volume flows were very light with the 4th of July holiday keeping most players away from their screens. The ISM survey was the one key piece of economic news for the session. The headline rate came in on the low side of expectations at 53.8, however, the jump in new orders to 57.9 offset the potential weakness of the report. In the release, it is interesting to note the ISM chair's view of the report, "Manufacturing growth continued in June, and although the rate of growth slowed slightly, renewed strength in June's New Orders Index provides encouragement for the third quarter. The sector is benefiting from the weaker dollar and business investment...our members generally see their business in a continued growth mode."
The index markets now stand slightly above their respective 50% retracement levels from their 2006 highs to our June trading lows. This week will bring the employment report, while next week brings the beginning of earnings season and more economic releases. Considering the FOMC language is - in my opinion - a relatively worthless task for any trader. The key is understanding how the marketplace will respond to any subtle change in the language. After Thursday's release, many major participants produced notes saying the FED was done, however, the bond market never really bought into that theory and currently resides just a bit lower in yields than it was on Thursday before the FOMC announcement. Equities, the dollar and certain metals have had the sharpest directional moves since the release...the question is pretty simple, was Thursday's FOMC statement a trigger that leads to a sustained one way street in these markets? Or are we smack in the middle of a suckers rally that will get awfully painful once the buying subsides? This last statement reminds me of a quote that George Soros said once in regards to speculation - and I am paraphrasing here - "the trick to successful speculation is to ride the false trend and get off before everybody else."
Good trading to all,
Brad
