Yesterday the S&P sold off after Boehner walked off, flexing that the Republicans were planning to vote on Plan B, and today the markets were consolidating, digesting the news of the stalemate. The public negotiations look to be going right down to the wire. This morning, the U.S. equity futures were trading above fair value, with focus on the announced mergers and acquisitions between [ICE][NYX], [ROG.VX] [ILMN], [GOOG] [ARRS] and earnings reports from [RIMM], [CCL], [NKE] and [DFS]. It was a relatively busy day for macro data. GDP third quarter was revised up to 3.1% from second quarter estimate of 2.7%. Second quarter growth was a meager 1.3 percent. The fourth quarter should be a bit more interesting. However, the most chatted about subjects today were Washington and the Mayan calendar coming to end. Source – is suggesting the early price weakness today came from a Mayan Hedge Fund that was selling – like there is no tomorrow! Happy Holidays!!!
Today’s observations: The Bradley Model Turn date is 12/22/12.
This morning’s short-term framework: Cliff concerns and continued posturing led to the dip in the equities and we prefer to be SELLER on strength today and only would consider a counter-move scalp long trade below 1420 => Short 1434.50 area using > 1438 (pivot from yesterday) as a stop. Jill Malandrino
SPY notes by Jim: From the Nov. 15th/16th lows we have completed the length of the pattern, measured…. next if it pulls back to 50 day and reverses then the cup and handle formation is in play. Unless that fails. Andy saw the same pattern. Chart measured move to 50d and Elliott Wave pattern http://screencast.com/t/XpmejZI3wK
The quarterly reviews of the major European benchmarks, FTSE All World and FTSE EPRA/NAREIT indices will take place tomorrow. Within the Americas, Russell will implement its monthly share changes and quarterly IPO additions; S&P will implement its quarterly share changes, and the annual reviews of the Nasdaq will take place. In the Asia-Pacific region, FTSE will implement the quarterly rebalance of the China 25 and A50 indices, and the S&P ASX will undergo its regular reshuffle. Notably, S&P and Stoxx have announced a number of exceptional changes to their large cap benchmarks; turnover is therefore higher than normal for a December review. In aggregate, we expect US$21bn will need to be traded globally, of which approximately $19bn will be within the Americas.
Posted yesterday, interesting Morgan Stanley [MS] color: The SPX futures roll has never traded at this big of a premium to fair value…ever….. Why do we care??? *Because it suggests that the willingness to provide short term balance sheet is drying up as we approach year end. *Suggests arb guys aren’t around playing *BUT Most importantly it suggests that long holders may let them expire and buy the settlement which means Friday is to buy. Just a reminder, Elway!
Pivots: http://t.co/MLXxpJEv and Webcast: http://t.co/oQz2wFXU posted premarket by Mike V aka @princetontrader Mike also posted his vol windows at (09:00CT) ES: 1437.00 x 1426.00 and NQ: 2705.00 x 2671.25.
Premarket charts posted by Kathy: GOOG http://screencast.com/t/062LY5o9
SP http://www.mrtopstep.com/spy-testing-heavy-confluence-support/
CL http://www.mrtopstep.com/how-much-clg13-bearish-bat-retraces-is-key/
Note: Kathy teaches how to trade harmonics. I’ll be doing an introduction to harmonics webinar on Jan 12. In a nutshell, emerging patterns give targets to the completion point, completion pts or PRZ (potential reversal zones) are places to scale or tighten position, understanding price action offers the reversal trade at the PRZ. When volume profile levels correlate with harmonic levels, it strengthens the significance of that level.
Today’s S&P futures (spoos) started with 255k ESH and 800 SPH traded on Globex, trading range was 1434.70 –1427.30. Wednesday’s regular trading hours (RTH’s), pit session trading range was 1431.20 – 1443.80 before settling at 1433.10, down 8 handles. Today’s RTH’s opened 1432.00-1432.70, traded 1433.00 down through yesterday’s low, 1431.20 in light trade as all three major indices in the red. 1429.60 traded by 8:50CT, followed by 1428.80 into the economic data. The 9:00 economic releases were better than expected, but the indices were slow to react. The spoos did grind higher to print 1434.30, 9:18 and tested the Globex high 9:23 before a small fade holding the opening range (OR). For the most part, the VIX was dormant, trading near unchanged after being up 11% yesterday. By 9: 44 the spoos double-topped before retesting and holding the OR again as the Nasdaq was briefly tracking higher lows and the Russell made new highs at 10:06. At 10:25 the spoos broke through the OR and held the 1430.50 area before the sideways in the middle of the six-handle daily range. At 12:00 the spoos were sitting in the OR 1432.50 area, consolidating in listless trade.
The press conference by House Speaker Boehner came and went with the same hard lines drawn. By 12:35, the Russell once again caught a bid and traded new daily highs and lifted the spoos to 1437 at 12:56, followed by 1437.50 trade by 1:18. After holding the 1435.50 area the spoos continued to grind slowly higher trading 1438.50 at 1:58. After the new high the SPH gradually sold back off down to the 1436.50 area as we waited on the imbalance. At 2:45 the broader market imbalance showed MOC sell $110mil. The cash close traded 1438.82 (new high), then the SPH jumped up, made two new highs, up to 1439, 1440 and then up to 1441 just before the futures close. On the close the SPH settled at 1440.60, up 7.5 handles on the day.
Brian Shepard is a 20-year exchange member of the CME Group.
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