A pullback would be healthy now

Wednesday’s stock index session was one
of reluctant buying
. Sellers tried to press the old economy and especially small
cap indexes in the morning. Each dip was met by another rush of eager buyers
akin to January 2000 again. In the end, all indexes closed higher with techs
leading and small caps lagging. There is clearly a reluctance to sell and
pent-up demand to buy, a market bias that may persist for quite some time.

ES (+$50 per index point)

S&P 500 futures gave three distinct buy signals
off the daily pivot point. Trade bias chart remained 100% bullish all day… buy
signals only. The first two swings may have offered +3pts max, the last swing
+5pts potential of slightly better.

A total intraday range of 7.5 points from low
to high? Incredibly dead tapes right now.

YM (+$20 per index point)

Dow futures gave similar buy signals off the
daily pivot in methodical fashion, albeit micro-range span. Same story as ES
above… extremely tight intraday ranges right now.

NQ (+$20 per index point)

Nasdaq 100 futures were by far the most
methodical of all. They remained 100% bullish from bell to bell and offered four
very crisp long trade entry signals. The total range of 18 index points from low
to high = $360 per contract span… clearly a scalper’s realm here, too.

Remember the days of 100 and 200+ intraday
ranges for the NQ? Flip back thru the charts of 2000 and 2001 if you don’t
recall. Techs have come a long way… down the VXO scale for sure!

(+$100 per index point)

Russell 2000 futures were the spoiled child on
Wednesday. They apparently couldn’t figure out whether to follow the S&P 400
down or NQ up, so they did neither. Or both.

Momentum traders were selling 62% values of
inside swings, buying & selling the pivot point and a few other sideways range
tactics as well. When the dust settled and tape cleared, it was a buzzy little
V-shaped session in the small stocks.


Stock index traders are working for their gains right now. Markets
absolutely refuse to sell off for even a day-long pull back, as all dips are
bought. This type of churn may continue for awhile as newbie investors pile into
a media-hyped market. Playing the short side unless all indexes are clearly 100%
bearish in unison does not have bias potential as upside with any clear buy
signals given.

First two days this week were excellent trading
for the ER. Wednesday offered ES, YM and NQ traders a sequence of long trades.
Here’s hoping the last two sessions before a holiday weekend have all symbols
cranking in unison, be it up or down. Recent micro ranges in the ES are spawning
at least one large-range session ahead, and that could very well be today.

Indexes appear extended and overbought, a pull
back on sharp selling would be most healthy for new long trades indeed. Whether
that happens sooner or later remains to be seen, but we will certainly witness a
pull back correction sooner or later.

Trade To Win

Austin P


(Weekend Outlook trend-view section
open access)

Austin Passamonte is a full-time
professional trader who specializes in E-mini stock index futures, equity
options and commodity markets.

Mr. Passamonte’s trading approach uses proprietary chart patterns found on an
intraday basis. Austin trades privately in the Finger Lakes region of New York.