Trading Rally
The SPU pit came alive with buyers after a failed attempt to sustain any trading below the 1430 level. Much of the purchasing was short covering, but, there were many institutional buyers both on the way down and on the way up to our 1449 session high.
What I think is the most important indicatior to watch today is the spread between S&P 500 cash and the SPU. Fair value is between 8.80 and 10.05, depending on your borrow rate. We have consistently traded at 14.00-15.00 above cash in the SPU, or 4.00 – 7.00 points above fair value. To me this shows that the institutional money came into buy this morning. Typically this continues throughout the session, culminating in a large upmove.
We are trading up 1400 at this time, and our blueprint for the morning was hitting on all cylinders. From here, 1451-1455 is strong resistance, if the buyers get aggressive, we could make it up here. What would suprise me the most would be a settlement below 1430. If this happens it would set a negative tone for the remainder of the week. That being said, I am on my way to the golf course as our morning call afforded me this opportunity.