Four Factors You Should Pay Attention To Now

  • September 27, 2004
  • Chris Curran


The major indexes suffered a setback last week,
after being plagued by a spike in crude oil, further profit warnings, and the
prospect of continued Fed tightening.  Additionally, it’s important to remember
that the indexes were a bit extended coming into the week, so equities were
vulnerable to some weakness.  The most noteworthy event was Tuesday’s FOMC
Meeting, where the Fed raised rates by 25 bp and also maintained their previous
bias towards further tightening at a measured pace.  It was also mentioned that
economic growth was gaining traction, while inflationary pressures were
declining.  Many economists refer to this condition as the “Goldilocks economy,”
or an economy where conditions are ideal for further growth.

The
December SP 500 futures closed out the week with a loss of -17.50 points to end
its 6-week winning streak, while the Dow futures tumbled -236 points.  On a
weekly basis, the ES posted a market structure high and erased over 2 weeks of
gains.   Looking at the daily chart, the ES posted an inside market structure
low, leaving room still for a retracement back to its 200-day MA at 1116.50. 
The YM reversed off of its weekly doji at the top of its channel and posted a
daily market structure low just above its 61.8% Fib retracement of its Summer
rally, which coincides with the magic 10,000 level.. In the small-caps, the ER2
posted a weekly market structure high and held its daily trend line break and
200-day MA resistance.


                               

The
Banking Index (BKX) continues to hold its weekly and daily Gartleys, with a
target of 95.60, but was able to post a daily hammer off of its 200-day MA.  The
SOX broke its 50-day and 10-day MAs to give back all the week’s gains and settle
on its 20-day MA.

Looking
ahead, a cautious approach continues to be warranted, and although the markets
may catch a bid for a few days with the quarter’s end upon us, factors such as
institutional tax loss selling, Q3 warnings season, election uncertainty, and
questions about sustainability of the economic recovery are all still in place. 
Keep in mind, from an intermediate-term standpoint, the key indexes all remain
in firm downtrends, and all of them failed just below the downtrend lines that
started earlier this year.  I wouldn’t be surprised to see another washout-type
sell-off during this historically weak seasonal period.

The economic calendar is
fairly heavy this week, with Consumer Confidence on Tuesday, Q2 GDP on
Wednesday, the Chicago PMI on Thursday, and the Michigan Consumer Sentiment
Index and ISM Index on Friday.  Also, a couple of the Fed clones are speaking
every day this week except Wednesday.

 

 

 

Program Trading Levels

Fair Value – 0.27   

Buy Program Premium – 1.24

Sell Program Discount – (0.71)

Closing Premium – 1.39

Closing Bias – If the futures gap down at the
open, watch for a retracement up towards the gap fill.

 

Please feel free to email me with any questions
you might have, and have a great trading week!

Chris Curran

 

 

 

Â