We’ve Got Ourselves A Rally
Buyers stepped to the forefront in the SPU pit this morning on strength in the financials and large-cap techs. As we opened near the 1508 area, two major dealers bought nearly 1000 contracts, taking us to the 1513 level. From there it was off to the races as there has been a strong sense of urgency to buy this contract from the dealer community.
What does this mean? With the NonFarm Payroll report Friday morning, I would suspect the institutional community is betting on a benign release, further strengthening the argument for a halt to the FOMC’s tightening cycle.
I must confess that the magnitude of the rally this morning was suprising to me. But, there has been a pattern. At the top and bottom of the hours we have seen the majority of our business, and it has obviously been tilted towards the buy side. This is important because of the participation factor. In other words, the dealers are the major players at these times and the moves add more credence than if it were light and local-based volume.
For the rest of the session, look for a choppy lunchtime trade. We have support around 1518-1516. If this holds, I think we’ll close above the key 1525 level. If this happens, I think we are on the way to 1575 in the next couple of weeks. Resistance on the way up is between 1527-1530 and 1535-1538. If this rally fails, look for the selling to become extremely aggressive and lead us back down towards the 1505 area.