When This Number Comes Out, Be On Alert

  • August 7, 2003
  • Chris Curran

The September S&P
futures (SPU and ESU) opened Wednesday’s session with a small 1.25
point gap to the upside after Tuesday’s toilet flush, and the VIX and TRIN both
starting out high. Merrill Lynch and Morgan Stanley were good buyers just off
the open, selling mainly to locals, who tried to push the contract back down. 
When that failed, the locals were forced to cover, hitting stops over 963.25 and
sending the contract over 965.  However, with the VIX and TRIN both in bear
country, something had to give, and the futures rolled over to Tuesday’s close. 
With no economic reports to follow and the CSCO groupies in mourning, the
futures suffered from attention deficit disorder and spent the next 2 hours
gyrating in a range before breaking out of an ascending triangle on the 3-min
chart.  The contract took its cue from the strong bond market and used the
lunchtime period to move to successive new highs before it ran into some
sell-side divergence at R1 resistance at 975 and stalled (see chart).  Once the
bond market closed with a gain over 2 points, however, sellers came back into
the market and never let up the last hour.

                                       

The September S&P 500 futures closed Monday’s
session with a gain of +5.50 points, and finished just in the middle 1/3 of its
daily range. Volume in the September ES was estimated at 722,000 contracts,
which was ahead of Tuesday’s pace and above average.  Tuesday’s slide saw a
decrease in open interest, which would indicate long liquidation and that short
players were possibly cautious about opening new positions (In tomorrow’s
column, I’ll cover some rules of thumb with regards to open interest).   On a
daily basis, the contract posted an inverted hammer and managed to close back
above the 7/1 low at 960.50. The VIX, which gapped up through the top of its
4-month trading range, finished in negative territory and just off the low of
the session.  The 13-min Bullish Butterfly that I posted yesterday hit its
target and then some, before the futures ran out of gas.

On Thursday morning, we have the weekly Jobless
Claims report at 8:30 am ET, which will be closely watched for a 3rd straight
week under 400,000, as well as Preliminary Productivity for Q2, which is
expected to come in at a 4.0% increase.  At 10:00, we have the Wholesale
Inventories report, which is expected to come in at a 0% increase.  Once again,
remember that higher-than-expected inventories reports are theoretically
considered to be bearish.             

Daily Pivots for 8-7-03

Symbol High Low Close Pivot       R1 R2 R3 S1 S2 S3
COMP 1675.46 1648.42 1652.68 1658.85 1669.29 1685.89 1696.33 1642.25 1631.81 1615.21
INDU 9134.57 8997.11 9061.74 9064.47 9131.84 9201.93 9269.30 8994.38 8927.01 8856.92
NDX 1237.14 1211.27 1215.13 1221.18 1231.09 1247.05 1256.96 1205.22 1195.31 1179.35
SPX 975.74 960.84 967.08 967.89 974.93 982.79 989.83 960.03 952.99 945.13
ESU 975.25 958.50 965.00 966.25 974.00 983.00 990.75 957.25 949.50 940.50
SPU 975.50 959.20 965.10 966.60 974.00 982.90 990.30 957.70 950.30 941.40
NDU 1238.00 1211.00 1214.50 1221.17 1231.33 1248.17 1258.33 1204.33 1194.17 1177.33
NQU 1238.50 1211.50 1214.50 1221.50 1231.50 1248.50 1258.50 1204.50 1194.50 1177.50
BKX 872.19 856.70 864.65 864.51 872.33 880.00 887.82 856.84 849.02 841.35
SOX 389.13 378.38 382.26 383.26 388.13 394.01 398.88 377.38 372.51 366.63
DIA 91.50 90.10 90.66 90.75 91.41 92.15 92.81 90.01 89.35 88.61
QQQ 30.77 30.1 30.19 30.35 30.61 31.02 31.28 29.94 29.68 29.27
SPY 98.06 96.42 96.98 97.15 97.89