Thursday, July 8, 2010

08/07: Markets quieter, no longer fiercely trending

Markets put in a quieter session today, in comparison to the post- July 4th fireworks of this week's first two trading days. /ES futures, after closing yesterday at 1056, quite near the session high, today opened higher, declined modestly through the meat of the session (a peak to trough decline of 13.75 points, or about 1.3%, from 1067.75 to 1054), and rallied impressively into the close, settling at 3:00p just two ticks shy of the intra-day high. Sentiment was boosted with a bullish unemployment claims report released at 7:30a CST. Here's the day's chart:

As already mentioned, markets rallied into the close, which marks a stark departure from markets' habitual PM weakness of the last several weeks. Of course, late-day sell-offs are hallmarks of bearish markets, and afternoon buying, particularly into new highs (which /ES futures today proceeded to set shortly after the 3p CST closing bell), augers well for further gains over the near term. Further bolstering bulls was a decline in Treasuries; /ZN futures declined to below two-seek support of 122'05.

(Editorial aside: To follow-up yesterday's brief commentary regarding the spelling of the plural of Treasury, referring to the bond, today's Financial Times records the spelling of the instruments as 'Treasuries,' which aligns more with my intuitive sense of correctness than the WSJ's reliance on 'Treasurys.' Hence, going forward, I'll stick with the FT's example.)

The bears retain at least two important arguments in their arsenal, the past three sessions' price action notwithstanding. Most importantly, volume failed to climb into above-average territory; today's NASDAQ volume clocked in at 2.06 billion, below the 20SMA of 2.24B and firmly below the volume levels of three particularly active sessions of the recent past: 6/25, 6/29, and 7/1, each of which had volume in excess of 2.65B. (I don't include NYSE volume readings here, as I am finding conflicting values of the metric from various sources; also, I am concerned about the metric's continued reliability, as more trading shifts off the NYSE and onto alternate exchanges.)

Furthermore, /ES futures continue to remain in a 2.5-month, downward sloping price channel; the upper line of the price channel is presently at approximately 1100, which /ES futures would have to top in order to firmly enter more bullish territory. In the region of /ES = 1100 also lurks the all-important 200SMA. Caveat emptor.

No comments:

Post a Comment