A Volatile Mixture
Here is a potent mixture that, although it does not
happen too often, should be noted and searched for because of the rare and
desired trading characteristics brought together: direction and
volatility.
Last night we had four signals from the Market
Bias Indicators Page pointing down, suggesting stock index futures would decline.
Three or more indicators pointing the same direction provide a much
higher-than-normal chance the major indices will move in the direction set
forth. Four can give an even better edge.
Providing the fuel for a volatile mix, the Multiple Days Low
Volatility page had all three stock index futures on the list, implying that stock index futures
— (
(
NDU1 |
Quote |
Chart |
News |
PowerRating),
(
SPU1 |
Quote |
Chart |
News |
PowerRating),
(
DJU1 |
Quote |
Chart |
News |
PowerRating)) — could each make outsized moves as volatility
reverted
to to the mean in the contracts. Volatility contraction is often followed by
volatility expansion as market’s normalize through the cycles of their own
internal rhythms.
All three contracts lapped lower on a downgrade by
Sollys of Intel and the prediction from Lehmans that Intel will slash prices
for certain semiconductors as much as 50% by the end of the month.
Nasdaq 100 futures
(
NDU1 |
Quote |
Chart |
News |
PowerRating) closed 27.50 lower at 1714.00,
S&P futures
(
SPU1 |
Quote |
Chart |
News |
PowerRating) fell 17.00 at 1203.00, and
Dow futures
(
DJU1 |
Quote |
Chart |
News |
PowerRating) slumped 145.0 to 10,405.0.
Although these contracts also lapped lower over the
weekend, euro FX futures
(
ECU1 |
Quote |
Chart |
News |
PowerRating) and Swiss francs
(
SFU1 |
Quote |
Chart |
News |
PowerRating)
demonstrated price persistency throughout the session to close on their
highs in a sign that their upside bias, demonstrated by their standing on
the Momentum-5
List, is still intact. The ECU1 erased more than 30 ticks of its early
deficit to close down .00230 at .88100 and the SFU1 erased over 20 ticks,
closing down .0008 at .5853.
In the grains,
November soybeans
(
SX1 |
Quote |
Chart |
News |
PowerRating) rallied again after approaching the
50% retracement of their early summer rally. An excellent indicator of the
potential end to the current downswing in the soy complex was the
Turtle Soup Plus One Buy signal in soy meal
(
SMZ1 |
Quote |
Chart |
News |
PowerRating). November
beans closed 7 1/4 higher at 492 3/4 and meal added .7 to close at 162.6.
“Tails” defined the lows in other futures
contracts.
August pork bellies
(
PBQ1 |
Quote |
Chart |
News |
PowerRating) gapped higher
on the open, also showing price persistency out of their number-one billing on
the Momentum-5
List. Intraday, using five-minute bars, bellies left a “tail”
which defined the low and a potential entry pivot out of the morning
pullback for traders looking to get long this market.
In a
Turtle Soup Plus One Buy setup, natural gas
(
NGU1 |
Quote |
Chart |
News |
PowerRating)
faded from opening levels but also defined support off a “tail”
that came on the low of the session, a bar which coincided with Friday’s low.
As mentioned in the Mid-Day Futures Market Alert, nat gas was setting up in a
Haggerty Slim Jim-like pattern and broke out of the pattern in the last hour
to close near the high of the day, up .056 at 3.027.
September cocoa
(
CCU1 |
Quote |
Chart |
News |
PowerRating) broke through resistance to trigger stops,
exploding after trading above Friday’s high to close up 49 at 1005.