Follow The Momentum Leaders
It pays to stay with the strongest momentum leaders.Â
Stock index futures are leading the downside momentum
Implosion-5 List. After a brief bump higher on the opening, index futures
have been taking a sleigh ride on a slippery slope south.
There have been multiple ways to enter the equity index futures short
this morning. Using the S&P futures
(
SPZ1 |
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PowerRating) as an example,
the first opportunity occurred about 45 minutes into the session. The SPZ
had already set a session high at 1042.70. Many locals will key off prior
highs and prior lows in the session. The rule: a breakout (of the high, and
therefore, potential for additional upside) occurs if the intraday high is
broken by more than 1.70. Otherwise, traders in the pit get short near the
highs, anywhere between the intraday high and 1.60 above the intraday high,
signaling a “failed” break out of the high. This is a phenomenon
repeatedly brought to your attention in this space and in Futures Recaps.
The high was then set at 1043.3, less than 1.70 and therefore, a failed
breakout.Â
Another shorting opportunity occurred on a move below the low of the high
bar at 1040.50. Then another short triggered once the SPZ moved below
1032.50, the low of the prior day’s final hour. This is an Off The Blocks
short, which you can review by clicking on the provided link. Similar setups
occurred in the Nasdaq 100 futures
(
NDZ1 |
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PowerRating), S&P futures
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SPZ1 |
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PowerRating)
and
Dow futures
(
DJZ1 |
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PowerRating).
Now that a major cascade has occurred, oversold indicators have become more
oversold. Look for some intraday capitulation and support levels and for the
potential for the five up-pointing signals from the Market
Bias Indicators Page
to kick in. Of course, keep protective stops tight as this would be a trade
against a very well-established downtrend.
One of the best-performing markets on the upside is the leader on the Momentum-5
List. December silver
(
SIU1 |
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PowerRating) has been playing catch up with
gold as a store of value in this uncertain market environment. The metal is
also making good on an Off The Blocks
long entry when it exceeded the high of the opening five-minute bar
range.Â
A slowdown in air travel, decline in demand for jet fuel, and prospects
for a more rapid slowdown in the US economy due to recent terrorist events
is sending energies down sharply for a second day. Heating oil
(
HOV1 |
Quote |
Chart |
News |
PowerRating),
a contract that sometimes represents a proxy for “distillates”
such as diesel and jet fuel, scored a
New 10-Day Low yesterday, making it eligible for an Off The Blocks
short entry. Notice how heating oil failed to break above the first
five-minute, triggered at the low of the opening bar, and is now down .0393
at .7950, or 5%.Â
October sugar
(
SBV1 |
Quote |
Chart |
News |
PowerRating)Â is another market that scored
a
New 10-Day Low, and is breaking down in similar fashion to heating
oil.Â
Follow the momentum leaders.