The Longs Still Have a Bias

On Monday, index futures
enjoyed a day of rest from the continual upward stagger on the charts.

Instead of the usual early dips and staccato price jerks higher, the markets
sold off in short-term corrective mode. Downward price movement is usually more
methodical than upward, and yesterday was no exception.

On Monday, S&P 500 futures bobbed their way
lower. After opening on the daily pivot point, a lift into the R1 value was
quickly rejected. Back to the pivot, down to S1, up to the pivot resistance one
more time before the afternoon drop to its R2 value finale.

All this inside an 11.75pt total range, a rather
pedestrian span but better than what S&P traders endured last week.

Russell 2000 futures coasted thru a smoother
ride… mostly downward all day. Once the selling began, there were no
measurable lifts upward again. Short signals near the pivot worked for solid to
large profit potential, and subsequent sell signals near 792 also offer a second
shot at substantial gains if taken.

S&P 500 futures closed modestly lower, no big
deal in the general context of this daily chart. Just another pullback session
inside the latest ramp from late November upwards.

Russell 2000 futures by relative comparison
erased the previous thirteen sessions’ worth of upside progress. Yesterday
marked the lowest close for this index since 11/28. This continues to
demonstrate how the Dow and S&P are only two major indexes holding higher on
artificial props. Technology, transports, mid-caps, small caps, semis… all the
rest are lagging in feeble fashion.


Some of yesterday’s behavior could be a hangover
from option expiry, i.e. assigned stocks on expired option contracts from Friday
being liquidated yesterday. However, the overall pattern for months now has been
big caps leading, everything else lagging. The last two weeks in December are
traditionally tough for short-term trading. Sideways congestion interrupted by
sudden surge moves up or down. That is likely to continue or accentuate this
year as we head into year-end, with indexes propped upward interspersed with
bouts of selling like yesterday.

No real fundamental changes visible in sight…
sideways to upward unless some unknown catalyst emerges to derail the year-end
ascent. Tuesday morning is likely to see a continuation of the previous
afternoon trend, but that may not last thru the closing bell. Long side has the
overall bias, but intraday traders are nimble enough to prosper from short term
trends going either way.

Trade To Win

Austin P

Austin Passamonte is a full-time professional trader who specializes in E-mini stock index futures, equity
options and commodity markets. Mr. Passamonte’s trading approach uses proprietary chart patterns found on an
intraday basis. Austin trades privately in the Finger Lakes region of New York.