Here’s What Will Define Tuesday’s Range

November 18, 2003
Chris Curran

The December S&P 500 and
Dow futures opened the week with gaps to the downside, as renewed
terrorism jitters overshadowed upbeat news out of the manufacturing sector.
After filling half of the gap, heavy broker selling took the upper edge, with
First Chicago Corp. and Merrill Lynch selling well over 1,500 SPZ contracts
between the two of them, and sending the contract down for a test of S2 support
just above 1,036.

The subsequent retracement ran into 13-min chart
resistance to form another bear flag that broke to the session low at 1,034.25.
The TRIN was a nice guide down as it kept pulling back to support before
reversing to another new high. Buy-side divergence and the contract’s 50-day MA
attracted enough buyers to lift the futures back above S2 (see chart). A choppy
post-lunch range gave way to short-covering the final hour to settle the
contract just above the opening print.

The December S&P 500 futures
closed Monday’s session with a loss of -5.50 points, and finished in the upper
1/2 of the daily range. The December Dow futures closed the session with a -48
point loss, and also finished in the upper 1/2 of its range. Volume in the ES
and YM was estimated at 686,000 and 60,131 contracts respectively, which was
ahead of Friday’s pace and above the daily average. Open interest did increase
in the ESZ on Friday’s slide, but actually decreased in the SPZ.

On a daily basis, the ES gapped
below its 20-day MA, confirming Friday’s key reversal, and closed with a doji. The
YM also confirmed Friday’s reversal with the break of its 20-day MA support and
closed with a doji. The contract also broke short again on the daily 3-Line
Break chart with the close below 9,719.

On Tuesday morning, look for
the Consumer Price Index at 8:30 am ET and its expectations for a 0.1% increase
for both the full and the core index. Barring any surprises, the opening ES
range will be defined by 30-min support at 1,040 and 60-min resistance at
1,046.50.