Here’s What The Current TRIN Level Indicates
Stock
index futures opened Tuesday’s session with a small upside gap, which
was more of a dead cat bounce after Monday’s slide. After oscillating around
the flat line for most of the morning, a descending channel started to form and
eventually the contract couldn’t keep its head above water anymore. What was
interesting throughout the session is that at most of the new low of day prints,
a broker such as Merrill Lynch would step up with a good-sized bid (200-300
contracts) to hold that low, locals would sell it all to them, and then we’d see
hard pop off the low as locals were forced to cover their shorts.
The March SP 500 futures closed
Monday’s session with a loss of -4.50 points, and closed in the lower 1/2 of the
daily range. Volume in the ES was estimated at 644,000 contracts, which was
behind Friday’s heavy pace, but still above the daily average. Looking at the
daily chart, the ES cracked last week’s low but bounced off of its 50-day MA,
which it hasn’t tested since last November. That support is the “toe in the
sand” to hold back the aggressive shorts. On an intraday basis, the contract
followed a descending triangle throughout the session, but reversed in the last
30 minutes and settled on the broken trend line as support to start Wednesday’s
session.
The Banking Index (BKX)
continues to retrace from its all-time high and bounced off of its 10-day MA.
The Dollar Index (DXC) opened below its daily support but was able to rally to
test its 100-day MA and post a bullish engulfing line for the day. The SOX
formed a doji right off of 480 support, giving room for a technical bounce back
up into the 495-500 area. The VIX closed right at its 100-day MA after a sharp
3-day move, and based on its previous reactions to this resistance, I’d expect a
pause/retracement here.
Wednesday morning gives us a
couple of menial reports with the Trade Balance at 8:30 am ET and Wholesale
Inventories at 10 am ET. On a few trivial notes, the TRIN came close to closing
above 3.0, which it’s only done 11 other times since 1997. Three days later,
the SP 500 was higher all 11 times, with an average gain of +2.5%. Also, the
NASDAQ Composite gave back all of its 2004 gains a day before the 4-year
anniversary of its all-time high at 5048.
Program Trading Levels
Fair Value – (0.22)
Buy Program Premium – 0.65
Sell Program Discount – (1.09)
Closing Premium – (1.08)
Closing Bias: If the futures gap up at the
open, watch for a retracement down towards the gap fill.
Please feel free to email me with any questions
you might have, and have a great trading day tomorrow!
Chris Curran