Stock and Commodity Quote Ticker
| Market jitters shake stock index futures bulls and bears |
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| Written by Administrator |
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Market jitters shake stock index futures bulls and bears
It is difficult to determine which party is more nervous, the bulls or the bears. Each time the market runs to the highs, the bears panic and cover and the opposite happens near the lows. It's clear that traders and investors alike are uncertain as to where to go from here.
It is becoming glaringly obvious that stock index futures traders have essentially become currency traders. We have been looking for the bottom in the Dollar for several reasons. For one, the primary counter currency (Euro) isn't backed by impressive fundamentals and recent downgrades of Spanish debt in late September is a sure sign of troubled waters. Also, the markets have been pricing in the next round QE2 for months now and even if the Fed does come through, it might not have much of an incremental impact on currency trade. In fact, some argue that QE2 could actually be bullish for the greenback! A dollar recovery will take some of the fluff out of stock and commodity prices and that is just what we need to trigger a healthy correction in equities.
Similarly, some analysts claim that $600 billion in QE2 equates to a 6 to 8% increase in equity pricing...and the S&P 500 futures have done that and more. In other words, the Fed has accomplished its goal without even lifting a finger. Unfortunately, they have come too far to back out now; failing to meet the market's expectations could prove to be disaster.
We aren't advocating getting overly bearish, that viewpoint hasn't been successful in months and long-term stocks are still attractive. However, moderate and hedged bearish positions established on rallies to resistance makes sense. Sloppy entry is dangerous!
Coming into today, we were looking for a dip in the dollar to push the S&P futures to 1190. It didn't quite make it, but the 1186.25 print was enough to reverse the rally in its tracks. We would normally look at this as a good sign of a top, after all...the sell stops were taken out yesterday and the buy stops today; this sometimes paves the way for a reversal. However, it isn't as easy this time around given the Fed's scheduled POMO purchases which have been undeniably bullish on operation days. If the market rallies on the Fed's asset purchases look for a good place to be short; mid to high 1180's in the S&P, 716ish in the Russell (a bit of a stretch but possible) and 1209.
* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software. **Seasonality is already factored into current prices, any references to such does not indicate future market action.
Please note: An e-mini S&P and e-mini NASDAQ chart are used because they better for charting purposes, but trade recommendations can be applied to either the full-sized S&P or the mini. Unless otherwise noted, profit and loss will be based on the mini version.
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