What The Divergence Implies
The December S&P 500 futures (SPZ and ESZ) opened
Thursday’s session with a +8.75 point gap to a new yearly high, after the market
got the surprise it was looking for in the form of the lowest Weekly Jobless
Claims number since February. A better-than-expected earnings report from YHOO
also helped support the euphoria. Thursday also marked the 1-year anniversary
that the S&P 500 closed at a 5-year low of 776. The contract acted heavy in the
first 90 minutes of the session and filled almost 1/2 of its gap, but the shorts
threw in the towel and propelled it up through R2 resistance at 1,044.50 and
then to the session high at 1,047.25. The futures saw a little downside
pressure as they chopped in a range around R2, but once it was evident that no
new, real buyers were emerging around the highs, enough selling pressure came in
for a late gap fill.
The December S&P 500 futures closed Tuesday’s
session with a gain of +3.50 points, and finished in the lower 1/2 of its daily
range. Volume in the ES was estimated at 771,000 contracts, which was ahead of
Wednesday’s pace, and above the daily average. On a daily basis, the contract
posted a spinning top and settled back under the September high at 1,039. A 2nd
line of divergence has formed when compared to the 9/8 high and the late gap
fill would imply that more weakness lies ahead (see chart). On an intraday
basis, the ES will be starting out Friday’s game, barring any big gaps, with
another game of ping pong between 13-min resistance at 1,039.50 and 60-min
support at 1,037.50.
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On Friday morning at 8:30 am ET, we have the
September Producer Price Index and its consensus of a 0.1% increase. Market
bellwether GE also gives its quarterly earnings report in the pre-market and
could influence the tone of the open. Have a happy and safe weekend!
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Please feel free to email me with any questions
you might have, and have a great trading day on Friday!