Rally, Fade, Rally, Fade?
There are times in this business when the patterns of preceding sessions continue to hold true. Today seems to be one of these examples in the SPZ. After a weaker opening, we rallied sharply on heavy expiration-related buying and rumors of a major hedge fund purchase in the NDZ. The daytrading shorts were caught and aggressive bids from dealers pushed the market into overdrive.
But a funny thing happened on the way to a serious rally, and that was continued selling into strength. For the analyst/trader, this is a disturbing trend. Why? Institutions tend to show their hand as the trading day wears on, typically, the weak hands move the market early in the session. In other words, it seems to me that the sellers still have the upper hand.
Moving forward today, I expect the choppy, volatile trade we have seen already to continue. The odds are such that we should rally in the final 30 minutes, but in the meantime, we may struggle down to new session lows. Accordingly, I would be a buyer near 1488-1491 for a run higher the remainder of the week.