Monday, August 1, 2011

1 August (Mon), Evening summary

Markets were whipsawed today in turbulent trade, with S&P 500 E-mini futures (/ES) registering a range of nearly 35 points. Of particular note, the period of 9:30a to 10:15a (EST) saw the /ES contract plummet nearly 30 points, in the process undercutting the lows of last week’s volatile markets. The afternoon saw a rebound, unlike the bearish declines seen on every afternoon of last week, but the indices nonetheless closed lower.

At the close of trade, the S&P 500 settled 0.41 percent lower, the DJIA inched down 0.09 percent, and the NASDAQ slipped 0.43 percent. The small-cap Russell 2000 shed 0.52 percent.

The swift declines of the last six sessions chart in particularly elegant fashion with respect to DJIA E-mini futures (/YM). Consider their 15-minute bars chart below. A single price channel fits many critical points of the data, including today’s capitulation low and the high of the subsequent afternoon rally. Of note as well is last night’s overnight price action: a princely rally. Indeed, such was the futures’ immediate reaction to Sunday’s news that a debt-ceiling deal was tentatively accomplished.

/YM, 15-minute bars:

Shifting to a more macro perspective, there exists significant evidence that today’s capitulation low may be durable. A 4-hour bars chart of /ES supports this thesis of a durable low through a snug price channel (the peach coloured lines in the chart below). Indeed, the slope of this line also carries significance when plotted within the price channel (for instance, as depicted by the green line).

/ES, 4-hour bars:

More evidence for a bullish outlook exists in the precious metals market. Neither silver nor gold are leaping to fresh highs, which indicates that investors are not acutely fearful of a fresh financial crisis. More specifically, silver futures (/SI) continue to ease off the highs reached in the middle of last week: $39.32 (latest tick) versus a high of $41.46 on Wednesday, July 27th. The gold futures contract (/GC) is some $15 off its high of $1637 reached last week.

Nonetheless, the market is in a confirmed bearish reversal: lower lows are in abundance. Caveat emptor.

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