Thursday Futures Thoughts – Dow, Which Way Will You Go?
My attention today will be focused on the Dow Jones Industrial Average and the Dow E-mini June Contract YMM8.
There are several factors that drew my attention. First is the tremendous bullish sentiment on the street in both the public and professional segments. Living and working in New York City, one is always overhearing financial chatter while dining or just commuting. Overwhelmingly, this chatter has been stock market positive.
Everyone seems to be interested in the market, from the shoe shine guy to Rudy G. himself. What makes this observation peculiar is the fact that the market is going up despite extremely bearish and negative underlying economic factors.
Is this some sort of blindness that takes over the populace prior to a complete meltdown, so that the market machine will keep pulling in more and more capital until the last second?
Is it portending to an improvement in the underlying factors that will usher in a run to new all-time highs in the DJIA? Only time will tell, but one thing is for sure, there are exciting trading days ahead!
On the less esoteric side, Ben Bernanke will be speaking today at 2:30 PM GMT at the Chicago Fed Conference. He is expected to speak on the current credit crisis and his solutions.
Any hints he may provide regarding future rate cuts could throw the YM today. Be alert during this time if you have open positions. The Empire State Manufacturing Report due at 8:30 AM, The Home Builders Sentiment Survey, and the Philly Fed Report at 10:00 AM may all positively or negatively effect the DJIA today.
I also look at the future prediction markets and spread betting indexes to get a feel for sentiment prior to open and throughout the day.
The United Kingdom’s IG index is one place to look for hints about the future market direction of the DJIA.
Technically, the DJIA is looking very bullish. A bullish candlestick pattern formed over the last 3 days and the market has been climbing over the last 2 months.
Here is how I am structuring a potential entry today: utilizing the channel system, the lower line will be at 12877 and the upper line will fit right at 12957 on the YM June contract price chart. The system dictates that one is to remain flat within this channel, go long if the upper line is broken by a 3 minute bar, and short if the lower line is broken by the same parameters.
There is the 200 day MA to contend with at 13017 after entry on the cash DJIA. So should longs be triggered, be certain to watch this figure on the cash DJIA as a possible exit point should price retreat near.
Dave Goodboy is Vice President of Marketing for a New York City based multi-strategy fund.