Singing The Rollover Blues
Spread trading continues to dominate this low-volume rally in the SPZ contract. Today marks the first session that December, or “Z,” becomes the most active contract, or “front month” in trading terms.
After a back-and-forth open this morning, locals were very aggressive in offering the market below 1520, but the strength in the tech sector was too much to overcome for the crowd and a short covering rally ensued. Our session high of 1528.5 equates with the 1505.50 area that was support for much of yesterday in the SPU. Since then, we have been rather quiet.
Moving forward, I expect the market to gather itself after the declines seen earlier in the week. Simply put, we were due for a bounce. Now that we have it, the question is where do we go from here? My feeling is any trade above the 1531 level would provide a solid spot for fresh shorts to enter the market. In fact, I am looking for lower prices this afternoon, as the buyers/short-covering parade should end. What I am not looking for is a full-scale sale to occur. Instead I think we will grind lower and eventually, surpass yesterday’s low.