For An Opening Fade, Here’s The Level I’m Looking At

February 19, 2004
Chris Curran

Stock
index futures opened Wednesday’s session unchanged after Tuesday’s
short-trapping “gap and hold” session. After a little broker selling off the
open, the ES tried to move into positive territory, but failed and took a dip
down to test its Daily Pivot. A choppy range ensued and the contract managed to
print a new high just above Tuesday’s close, but quickly settled right back into
its range. The ES was headed for a NR7 day until just after 2 pm ET, when a
rumor hit the SP pit that the EU was going to support the U.S. $ and sent the
futures into a tailspin. The contract took a sharp bounce off of S1 support and
spent the rest of the session churning at the 50% retrace mark, right at
Tuesday’s session low.

The March SP 500 futures closed
Wednesday’s session with a loss of -5.25 points, and finished in the lower 1/2
of its daily range. Volume in the ES was estimated at 535,000 contracts, which
was ahead of Tuesday’s pace, but below the daily average. Looking at the daily
chart, the ES closed back below the 1,155 level and is showing divergence as it
forms a cup and handle. The cash SPX continues to eye its 50% retracement of the
entire bear market, which also corresponds with a daily Butterfly pattern on the
futures. On an intraday basis, we’ll be starting Thursday’s session with bear
flags on the 60-min, 30-min, and 13-min time frames with resistance from
1,152.50 to 1,154.

AMAT’s earnings report and
upside guidance from BRCM were giving the futures a small boost after the
close. The January Producer Price Index was scheduled to be released on
Thursday morning at 8:30 ET, but it looks like it’s been delayed due to
difficulty in computing some of the components. Weekly Jobless Claims will be
released at 8:30, with estimates for a slight decrease to 352,000. For an
opening fade, I’d like to see a gap into the ES 1,154 area. At 10 am, we have
January Leading Indicators, with a consensus for a 0.5% increase, and the Philly
Fed at 12 noon, with its estimate for a slight decrease to 35.0. After the
close, Dow component HPQ will release its quarterly report.