Before You Load Up Short, Remember This…
Well, we wanted this
trading range to break, right? The September S&P futures (SPU and ESU)
opened Tuesday’s session with a small 1.25 point gap to the downside after yet
another tight overnight range. After a quiet gap-filling open, the market
reverted into its “sell the so-called good news” ways after the release of the
highest ISM Services reading since 10/97, when the survey began. Broker selling
pushed the contract through the daily pivot at 976.25 and then to a new session
low at 971.50. After the first hour, the futures spent the rest of the morning
oscillating back up to test the opening price before chopping back down to test
the low. Selling into the close of the black hole known as the bond market
snapped the S&P futures back, as the contract followed the bonds to a new
session low. After the
equities market closed, tech bellwether Cisco Systems
(
CSCO |
Quote |
Chart |
News |
PowerRating) offered no positive surprises in its earnings report, which
was the nail in the coffin needed to send the futures tumbling down another leg.
The September S&P 500
futures closed Monday’s session with a loss of -20.75 points, and finished at
just a hiccup off the low. Volume in the September ES was estimated at 677,000
contracts, which was behind Monday’s pace but still average. On a daily basis,
the contract broke the 7/1 low support at 960.25 and also broke short on the
3-Line Break chart (click
here for more details on that method). The VIX closed at the high of the
session and at its highest level since the end of April.
However, before we start to load up the
proverbial dump truck on the short side, we need to remember that, many times,
severe actions are met by even more severe reactions. In other words, the harder
the dump, the harder the bounce. The 13-min chart has completed the first
possible reversal area of a bullish Butterfly pattern, giving a target of 973
(see chart). With the abysmally high closing discount of the SPU to the cash
SPX, and no economic reports scheduled, I wouldn’t be surprised to see at least
some spill-over bleeding at Wednesday’s open. If that’s the case, the second
reversal area to watch on the Butterfly would be 952.25.
Daily Pivots for 8-6-03
| Symbol | Pivot | R1 | R2 | R3 | S1 | S2 | S3 |
| COMP | 1685.24 | 1699.43 | 1725.31 | 1739.50 | 1659.36 | 1645.17 | 1619.29 |
| INDU | 9086.21 | 9137.84 | 9239.37 | 9291.00 | 8984.68 | 8933.05 | 8831.52 |
| NDX | 1240.13 | 1253.45 | 1277.14 | 1290.46 | 1216.44 | 1203.12 | 1179.43 |
| SPX | 971.02 | 977.06 | 988.66 | 994.70 | 959.42 | 953.38 | 941.78 |
| ESU | 966.67 | 975.08 | 990.67 | 999.08 | 951.08 | 942.67 | 927.08 |
| SPU | 966.57 | 974.63 | 989.87 | 997.93 | 951.33 | 943.27 | 928.03 |
| NDU | 1232.00 | 1249.00 | 1282.00 | 1299.00 | 1199.00 | 1182.00 | 1149.00 |
| NQU | 1233.00 | 1251.00 | 1286.00 | 1304.00 | 1198.00 | 1180.00 | 1145.00 |
| BKX | 862.22 | 868.09 | 879.00 | 884.87 | 851.31 | 845.44 | 834.53 |
| SOX | 386.88 | 390.86 | 398.38 | 402.36 | 379.36 | 375.38 | 367.86 |
| DIA | 90.70 | 91.38 | 92.72 | 93.40 | 89.36 | 88.68 | 87.34 |
| QQQ | 30.58 | 31.11 | 32.01 | 32.54 | 29.68 | 29.15 | 28.25 |
| SPY | 97.17 | 98.01 | 99.59 | 100.43 | 95.59 | 94.75 | 93.17 |
| SMH | 32.10 | 32.48 | 33.15 | 33.53 | 31.43 | 31.05 | 30.38 |
Fair Value & Program Levels
Fair Value — (0.84)
Buy Premium — (0.02)
Sell Discount — (2.66)
Closing Premium – (6.07)
Please feel free to email me with any questions
you might have, and good luck with your trading on Wednesday!
P.S. Learn to trade the E-minis in my new
interactive CD-ROM training module! Click
here for details.