There is a lot of noise out there. Gargling sounds that are quite similar to the cacophony of the vuvuzelas emanating from South Africa during each of the 61 World Cup matches already completed. To be sure, we received a very modest miss from the ISM Non-manufacturing survey yesterday, but given that indicator’s short history, no one really noticed the third tier economic data. As always, we receive Jobless Claims on Thursday, but beyond that we sit in limbo ahead of what I consider to be the most important reporting period in at least the past several years.
Despite the uncertainty of the lack of material news ahead of companies giving us their numbers, one can filter through the mess of contradictory opinions and attempt to make sense of it all to position oneself appropriately for earnings season. Without question, traders have started to lay out some bets and align themselves in the bullish-bearish spectrum as evidenced by yesterday’s 25 handle range in the E-Minis. As I am currently one of the most sanguine market strategists on the Street, I fortunately saw more reasons for optimism based on Monday’s action. First, while the day session chart did not plot an outside reversal in the futures, it did achieve the technical pattern if one takes into consideration of the overnight trading as well. Although I have always maintained that I am wary of blasting the alarms when we stumble upon such a day, the previous two occurrences on June 21 and May 13 foreshadowed the most recent intermediate tops perfectly.
Next, while we received our daily dose of afternoon selling, at least one very large institutional manager found enough reason to launch a late day buy program to rip the market back up half the session range just minutes ahead of the Close. I would expect to continue to witness such action in the coming days as the Rolling Average NYSE Closing Tick sits deeply oversold at +55. Furthermore, with 175K new E-Mini contracts opened during last week’s deep 5.5% selloff, plenty of short covering explosions sit in the weeds. Finally, I look to something as simple as a technical bounce off Previous Settlement as a signal from those defenders of stocks to avow that they will not let the market finish with another red day, for enough is enough.
Of course, whether one thinks equities will rise or fall, this week’s action is all about jockeying for position, for earnings will tell the real story soon enough as Alcoa kicks things off next Monday night. Arguably, the most important market factoid to chew on from yesterday is another page gets ripped from the wall calendar without any material change in analyst’s estimates for numbers. If these expectations sit at or near these current levels by the dog days of August, then rest assured, stocks will be hotter than the current blazing temperatures outside with the bears desperately and unsuccessfully looking for a cool cave to hide in.
S&P 500 September E-Minis Key Technical Levels
Support: 1016.15, 1013.50, 1012.75/11.25, 1006.00, 1002.75, 1000.00, 991.00/90.00, 980.00/78.00
Resistance: 1024.25/25.50, 1035.50, 1038.50/39.00, 1042.00/44.00, 1047.25, 1055.75, 1062.75, 1066.50, 1071.00, 1078.50/80.00
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