Here’s Why Today May Provide Some Playable Action

  • November 17, 2004
  • Chris Curran
 


Stock index futures opened Tuesday’s session
with downside gaps after the October Producer Price Index rose at the fastest
pace since 1990, and raising concerns that the FOMC may have to alter their
course and head off inflation.  What a difference 1 day makes!  While the
probabilities of some gap fill were good, the futures wanted no part of it and
immediately headed further south off the open.  The pattern we’ve seen recently
of buyers stepping up to the plate didn’t materialize as the market kept
breaking down sharply to new lows.  However, 1 day doesn’t define “the top,”
especially since we were overdue for some retracement in a very short-term
overbought market.      

The
December SP 500 futures closed Tuesday’s session with a loss of —8.50 points,
while the Dow futures slid -59 points.  Open interest spiked sharply on Monday,
and just like a volume spike in a stock or futures contract, the game of musical
chairs may have stopped abruptly with more than a few chairs short for the
latecomers.  Looking at the daily charts, both the ES and YM posted a market
structure high and are testing their steep uptrend lines.  For you 3-Line Break
followers, both the ES and YM break prices remain at 1167.75 and 10404
respectively.  In the small caps, the ER2 reversed off of Monday’s hanging man
to post a market structure line and settle right on its uptrend line.  The VIX
showed complacency throughout Tuesday’s slide and continues to hold the 13-14
previous reversal area.


                     

Wednesday
morning gives us a few economic reports starting with Housing Starts, Building
Permits, and the October Consumer Price Index at 8:30 ET.  Pundit estimates are
calling for a 0.4% increase (0.1% for the core index), but I’ll be looking for a
higher number after the high PPI.  Those are followed by Industrial Production
and Capacity Utilization at 9:15.  Also, during the past few options expiration
weeks, Wednesday has been the day with the best playable action.

 


Please feel free to email me with any questions
you might have, and have a great trading week!

Chris
Curran

 

 

 

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