Thursday, June 10, 2010

10/06: Markets rally strong on /ES crossover day

Briefly, markets are recording a powerful rally today, albeit one that has stalled in the late morning (as these words are being written). Complicating technical analysis is the irksome matter of crossover from the /ES June contract to the September expiry; not a futures trader, my understanding of the logic is fuzzy, as the June contract still has 8 days to expiry; however, I assume it has to do with the accelerated decay of time premium over this home-stretch period.

The crossover has interfered (significantly) with technical analysis, since per my rough calculations and observation:

'/ES June' = '/ES September' + 4.5

From another perspective, and incorporating the above equation perfectly, whereas the prior relationship between /ES (June) and SPY had been: '/ES'*(1/10) + .5 = SPY, the new relationship -- i.e. of /ES (September) and SPY -- seems to be:

'/ES September'*(1/10) + .95 = SPY

Thus, while I would be pleased to post some interesting charts of /ES futures, I fear that my price channels and other support/resistance levels have been temporarily rendered suspect. I'll provide, instead, a chart of a highly tantalizing short set-up in HSY (Hershey); I only wish I'd discovered this robust price channel as HSY was powering through $42 earlier today.

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