Why This May Be The Calm Before The Storm
I hope everyone had a
happy and safe holiday weekend!
Last week, the September S&P 500 futures contract
(SPU) gained 9 points to close at 982.50. While this may not seem like much on
the surface, these gains came in the face of several weak economic reports,
including a jobs report showing that unemployment had surged to a 9-year high of
6.4%. An order input error created some excitement on Thursday as a firm
mistakenly entered an order to sell 10,000 September Dow E-mini (YMU) contracts,
instead of the intended 100 contracts. With average daily volume in the Dow
E-mini at 48,000 contracts, there was no way for the market to absorb that kind
of error and it sent the market tumbling 300 points. The mistake created a
ripple effect in the S&P 500 futures as pit traders saw the YM falling and began
dumping the SP and ES. The September S&P contract experienced “fast market”
conditions as the contract fell 16.00 points and pushed the premium to -10.00
against the cash index. The CBOT announced that all trades in the YM below 9,018
would be busted, however, all trades in the other index futures were valid. The
SPU recovered most of its ground that it lost before the error was discovered,
but profit taking ahead of the extended weekend weighed on prices for the
balance of the holiday-shortened session.
On Thursday, the September S&P 500 contract
posted a market structure high and closed back below its 20-day SMA at 988.25.Â
But, on the positive side, the contract was able to hold at least a 38%
retracement of the Tues-Wed up move. If the contract is gapping up at all before
Monday’s open, I’d be very cautious of a “gap and trap” based on the weak
closing premium of -3.20. The weekly bearish Gartley pattern is still intact
but would be negated with a weekly close over the 6/17 high of 1,015 (see
chart).
Looking ahead next week, the economic calendar
takes a breather or more of the “calm before the storm” of a new earnings
season. Earnings season officially starts next week with a handful of reports,
including reports from blue chip General Electric (GE) and tech bellwether
Yahoo!
(
YHOO |
Quote |
Chart |
News |
PowerRating), but doesn’t really get rolling until the week after. While
it will be interesting to see if companies can make their Q2 bottom line from
something besides cost-cutting and “smoke and mirrors” accounting methods, the
real focus again will be on forward guidance and any indication that business
and spending may be turning around and/or picking up. The economy WILL rebound
in the 2nd half, according to 54 economists surveyed by the Wall Street
Journal. But before you give a resounding “woo hoo,” you should know that the
same group of economists has been predicting a 2nd half recovery for 3 years
now. Even a broken clock is right twice a day!                             Â
Daily Pivots for 7-7-03
| Symbol | Pivot | Â Â Â Â Â R1 | R2 | R3 | S1 | S2 | S3 |
| COMP | 1669.39 | 1677.84 | 1692.21 | 1700.66 | 1655.02 | 1646.57 | 1632.20 |
| INDU | 9085.06 | 9134.78 | 9199.35 | 9249.07 | 9020.49 | 8970.77 | 8906.20 |
| NDX | 1236.79 | 1245.17 | 1259.01 | 1267.39 | 1222.95 | 1214.57 | 1200.73 |
| SPX | 988.01 | 992.69 | 999.67 | 1004.35 | 981.03 | 976.35 | 969.37 |
| ESU | 983.75 | 993.00 | 1003.50 | 1012.75 | 973.25 | 964.00 | 953.50 |
| SPU | 984.23 | 992.47 | 1002.43 | 1010.67 | 974.27 | 966.03 | 956.07 |
| NDU | 1236.33 | 1245.67 | 1262.33 | 1271.67 | 1219.67 | 1210.33 | 1193.67 |
| NQU | 1236.67 | 1245.33 | 1261.67 | 1270.33 | 1220.33 | 1211.67 | 1195.33 |
| BKX | 870.47 | 873.99 | 880.25 | 883.77 | 864.21 | 860.69 | 854.43 |
| SOX | 371.49 | 374.04 | 379.11 | 381.66 | 366.42 | 363.87 | 358.80 |
| QQQ | 30.96 | 31.46 | 32.33 | 32.83 | 30.09 | 29.59 | 28.72 |
| SPY | 98.83 | 99.76 | 100.78 | 101.71 | 97.81 | 96.88 | 95.86 |
Good luck with your trading on Monday!