Watching Index Futures Indices
Each evening we focus on the most interesting aspects for the upcoming trading day. The comments are based on observations of the nightly updates of the Futures and Market Bias pages. They are provided for educational purposes only and are not intended to be direct trading advice. Also, keep in mind that these remarks are made up to 12 hours in advance of the markets opening. Therefore, overnight events may alter the outcome of these observations.
At the time this is being published, the S&P Globex Futures are trading .30 points lower and the bond market is trading up 4 ticks.
The index futures indices are overbought as measured by a CVR III and CVR VI sell signals on the Market Bias Page. However, just because they are overbought doesn’t mean they can’t go higher (and likely will into tomorrow’s option expiration). Therefore, watch for confirmation to the downside before attempting to short these indices.
December Lean Hogs [LHZ9>LHZ9], on the Pullback Off Highs and Momentum 5 Lists, is a pattern I call a Trend Knock Out (TKO). This is where a strongly trending commodity sells off and takes out (at least) the prior two lows (a). The theory is that this knocks out the weak hands and clears the way for the future to trade higher. February Bellies [PBG0>PBG0] are a similar pattern. Look for buying opportunities here.
For you breakout players (or more appropriately breakdown players) January Soybeans [SF0>SF0] and December Wheat [WZ9>WZ9], both mentioned last night, sold off to 3-month and life-of-contract lows respectively. Continue to look for a shorting opportunity here.
Lately (see archives), I’ve been talking about the December Dollar [DXZ9>DXZ9] being at the “do or die†point. Today, it closed at a new 4-month high and looks poised to break higher out of a cup and handle formation. In light of this, the December British Pound [BPZ9>BPZ9], on the Pullbacks Off Lows List, looks like it might be a good play on the short side.
Best of luck with your trading on Friday!
Dave Landry
PS-Reminder: Protective stops on every trade!