I’ll Be Looking To Fade Any Upside Gap Off The Open

February 27, 2004
Chris Curran

Stock
index futures opened
Thursday’s session with a small downside gap
after the Durables report and Weekly Jobless Claims both came in
weaker-than-expected. The ES opened just under its Daily Pivot and after
testing it 3 times, sellers stepped in and took the contract down for a test of
S1 at 1138.50. Three tests and a hold of that level prompted a quick round of
short-covering to fill the opening gap. The ES based nicely around the flat
line The contract spent the lunchtime lull doing a choppy grind back down to
test Wednesday’s close, and then made a move to test the session high, but late
weakness gave back the day’s gains.

The March SP 500 futures closed
Tuesday’s session with a gain of +0.25 point, and finished in the upper 1/2 of
its daily range. Volume in the ES was estimated at 528,000 contracts, which was
behind Wednesday’s pace, and below the daily average. Looking at the daily
chart, the ES was able to hold above its 20-day MA, but still couldn’t break
that 10-day MA barrier. It’s going to take a close at least above last Friday’s
high crossing at 1151 to temper the near-term bearishness. On an intraday basis,
flat MAs have given a pretty neutral bias, but 60-min, 30-min, and 13-min trend
line crossings at 1142.50 should be tested at the open.

The Banking Index (BKX)
continues to hold its uptrend as it moves up into the 5th wave of a triangle,
and is approaching a triple-top test with its January and February highs. The
VIX continues to slide and is sitting just above the multi-year low that it
posted in January.

Friday morning brings us a few
key economic reports starting at 8:30 ET with preliminary Q4 GDP, and its
estimate for a slight decrease to 3.8%. That is followed after the open at 9:45
with Revised Michigan Consumer Sentiment, with estimates for a slight increase
to 94.0, and at 10:00 with the February Chicago PMI, and its estimate for a
decrease to 63.5. With the weak closing PREM, I’ll be looking to fade any
upside gap off the open. With the INDU the pockets of strength, I’ll also be
focusing more on the YM on any weakness. So far, the bounce has been just a
bounce with light volume and a pretty high put/call ratio, showing that those
who are buying are pretty nervous. The market is looking for a new catalyst
that will push new money off the sidelines.