What Open Interest Can Tell Us Here

March 1, 2004
Chris Curran

Stock index futures opened the new week with modest
upside gaps, despite a downgrade of bellwether INTC. The 10:00
release of the ISM Index came in a bit weaker-than-expected, but the bulls
discounted the news due to the fact that the index has been above the 60 mark in
each of the past 4 months, something that’s only occurred 9 times in the past 20
years.Â Friday’s high at 1152 held on the first attempt and the contract ended
up filling 1/2 the opening gap before retracing back up to form a cup.Â The ES
chopped in a lunchtime range to form the cup’s handle before making another run
at the February high.Â R2 capped the last run and the futures settled into a
quiet range for the last hour.

The March SP 500 futures closed
Monday’s session with a gain of +11.00 points, and finished in the top 1/2 of
its daily range. Volume in the ES was estimated at 533,000 contracts, which was
behind Friday’s pace, and below the daily average.Â We’ll want to be watching
open interest here to see if the futures are getting any new buyers just under
this resistance, or if profits are continuing to be booked.Â Looking at the
daily chart, the ES cleared its 10-day MA, but still has to clear its broken
trend line.Â On an intraday basis, the contract reversed off of a 30-min
Butterfly pattern, giving a 1st target of 1149.

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â

The Banking Index (BKX) broke
the upper trend line of its daily triangle to a new all-time high, and we’ll
want to watch for a retrace back to support at 1012.Â The Dollar Index (DXC)
opened weaker, but recovered mid-day and looks ready to test a triple-top at the
upper end of its trading range at 88.

Tuesday gives us a breather
from the economic calendar and aside from any news surprises, I expect the ES
will spend the morning in an oscillation range as it “backs and fills” just
under the February high.