Here’s The Bias On The Three Line Break
The September S&P
futures (SPU and ESU) opened Thursday’s session with a +2.25 point
gap to the upside, after a slight increase in Weekly Jobless Claims and a report
that Q2 economic growth was stronger than expected. The contract looked like it
wanted to hold its gap until Morgan Stanley shook the trees by showing an offer
for 500 SPU contracts and sending longs running to liquidate.  Merrill Lynch
and Bear Stearns joined the party, each offering a couple hundred contracts that
together pressured the futures to break Wednesday’s low at 992.50. Trying to
hold the market down was like trying to hold a beach ball under water, though,
as buying interest in the Banking sector sparked a bid in the September S&P
contract. The futures managed to claw their way back to oscillate around the
flatline until a strong bond close triggered another round of
buying/short-covering.
The September S&P 500 futures closed Wednesday’s
session with a gain of +5.50 points, and finished in the top 1/3 of its daily
range. Volume in the September ES was estimated at 421,000 contracts, which was
ahead of Wednesday’s dismal pace but still below the daily average. On a daily
basis, the contract was able to confirm Tuesday’s key reversal up and is forming
the handle on a cup-and-handle pattern. On an intraday basis, the ES spent most
of the session forming a 13-min triangle that finally broke in the last hour
(see chart). With the late round of profit-taking the 1-min 3-Line Break chart
actually closed with a short bias and a break price of 1,002.
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On Friday morning, we have a couple of economic
reports after the open, starting with the Revised Michigan Consumer Sentiment
Index at 9:45, with a consensus of 90.4. That is followed by the Chicago PMI at
10 am ET, which is expected to come in at 56.0. The icing on the cake will be a
bout of “Greenspeak” to contend with, as the Fed Chairman addresses “Monetary
Policy and Uncertainty” to a group of bankers.
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Please feel free to email me with any questions
you might have, good luck with your trading on Friday, and have a happy and safe
holiday weekend!
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