In The Weeks Ahead, Watch For This

  • August 18, 2003
  • Chris Curran

The September S&P 500
futures (SPU and ESU) finished higher in what was a very quiet week
of trading.  The gains for the week were not overly dramatic, and it seemed like
a struggle for both the futures and the equities markets to move higher.  At the
same time, however, there was a clear absence of any real sellers.  Friday was
an extremely low volume session due to the blackout that struck the Northeast,
but it should be noted that volume was low all week ahead of the blackout. 
Despite the low volume, breadth did improve significantly for the bulls.

The September S&P 500 futures closed Friday’s
session with a gain of +2.75 points, and finished the week with a gain of +12.50
points. Volume in the September ES was estimated at 311,000 contracts, which was
well behind Thursday’s pace and well below average.  On a daily basis, the
contract was able to close back above its 50-day MA at 988, but needs to show
some follow-through here to avoid posting a triple-top with a 3rd lower high
(see chart).  A close above the 7/31 high on the SPX at 1,004.59 would put me in
the short-term bull corral, and open the door for a probable test of the
June/July highs in the 1,015 area.

                               

With such low volume, it’s difficult to draw many
conclusions from this past week’s action.  Without a doubt, a large percentage
of the economic reports are showing improvement.  However, this shouldn’t be a
huge surprise given that spending plans were put on hold before the war.  The
Fed also engineered a massive liquidity program following the war, which was
similar to what was seen following 9/11.  Clearly, the actions taken have had a
positive effect in most sectors of the economy, but, as we’ve seen, the major
indexes have not really benefited much from the upbeat data.

Since the economic data started improving, the
S&P 500 and the NASDAQ Composite have traded down slightly, while the Dow has
tacked on minor gains.  This recent rally still hasn’t surpassed the gains seen
after the September ’01 lows.  If you recall, the economic data started to show
significant improvement in March ’02, but the market ended up topping out just
when the positive data started to appear.  So, is the recent market action once
again telling us that a lot of the good news may already be priced in here at
current levels?  Or, are the futures and equities markets merely consolidating
after their nice moves before heading higher in the near-term?  It’s going to be
important to watch how the markets respond to any decent data in the weeks ahead
because a continued failure to move higher could be the proverbial writing on
the wall.

Looking ahead this week, the market may really
feel the effect of the “dog days” of summer with a light economic calendar,
highlighted by the previously postponed Michigan Consumer Sentiment Index on
Tuesday, and the Weekly Jobless Claims, Leading Economic Indicators, and
Philadelphia Fed reports on Thursday.

Daily Pivots for 8-18-03

Symbol Pivot       R1 R2 R3 S1 S2 S3
COMP 1700.41 1706.93 1711.86 1718.38 1695.48 1688.96 1684.03
INDU 9313.45 9345.41 9369.12 9401.08 9289.74 9257.78 9234.07
NDX 1252.47 1258.61 1263.61 1269.75 1247.47 1241.33 1236.33
SPX 989.83 993.23 995.78 999.18 987.28 983.88 981.33
ESU 985.42 997.58 1004.67 1016.83 978.33 966.17 959.08
SPU 989.50 993.50 996.50 1000.50 986.50 982.50 979.50
NDU 1253.00 1260.50 1266.50 1274.00 1247.00 1239.50 1233.50
NQU 1244.67 1269.33 1284.17 1308.83 1229.83 1205.17 1190.33
BKX 883.93 886.85 889.56 892.48 881.22 878.30 875.59
SOX 394.33 396.97 399.45 402.09 391.85 389.21 386.73
DIA 93.25 93.60 93.87 94.22 92.98 92.63 92.36
QQQ 31.13 31.33 31.49 31.69 30.97 30.77 30.61
SPY 99.51 99.90 100.18 100.57 99.23 98.84 98.56
SMH 32.45 32.74 32.99 33.28 32.20 31.91 31.66

Fair Value & Program Levels

Fair Value — (0.73)

Buy Premium — 0.22

Sell Discount — (1.92)

Closing Premium – (0.17)

Please feel free to email me with any questions
you might have, and good luck with your trading on Monday!

Chris
Curran

P.S.  Learn to trade the E-minis in my new
interactive CD-ROM training module!  Click

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