Posted 07:00 CST Equity Index Update Tuesday May 16, 2006 The index markets staged a late session recovery to settle moderately higher in the large cap contracts - SP and DJIA. The ND, Midcap and Russell 2000 finished with moderate losses as sellers continue to focus on selling the momentum issues. It is worth noting that in the past three trading sessions, the Midcap 400 and Russell 2000 futures contracts have both dropped around -4.8%. Typically such velocity based selling runs dry over the next few sessions as players digest the move...I would normally anticipate this pattern to continue - however, given the release of PPI today and CPI tomorrow, there is a pretty good chance that these markets will not find stability until sometime next week. The breadth readings improved yesterday in the SPX and NDX, particularly in their top weighted issues. Yet, the damage that was done from the previous two sessions remains overhead and yesterday acted like nothing more than a quiet short covering bounce off the trading lows. Over the past three years we have seen this pattern of a sharp index sell off, followed by a consolidation, then a rally to new highs. Is this time different? Only time will tell, however, with the breakdown in the NDX and the nervousness in the momentum sectors it certainly seems as though the longs are fearful of losing profits at this juncture. Typically, these type of situations have a way of snowballing into something larger...remember, since this bull move began in spring of 2003, the Russell 2000 has had a -10% correction each year. Another -5% from the current levels would produce what some would say is needed for continued longer term advancement. I have listed 2 charts today, one of the NDX cumulative breadth for 2006, the other for the SPX's top 20 weighted issues cumulative breadth. Interestingly, the top 20 SPX issues have held serve thus far above the yearly lows...is it enough to produce a solid bounce? Good Trading to all, Brad
I'm a newbie to the site, and enjoy catching up on Brad's commentary. Several recent posts by Brad have mentioned charts he is including. However, I have not seen any links to these posts. Can someone direct me to where those charts are. Thanks for your help.... Rick
I need help from Baron to post them. I will email him tonight so he can post them for you tomorrow. Thanks for writing, Fari
Posted 08:45 CST Equity Index Update Thursday May 18, 2006 The index markets were so thoroughly battered yesterday that there is nothing substantive I could possibly add in terms of color. The fact were simple as breadth and volume figures were in line with those of a "puke" in nature. The job at hand now is what to make of the carnage and how to profit from it. Players continue to discuss this move as a correction and a healthy one at that...only time will tell if this is correct or something greater. Given the decline over the past few sessions, a bounce higher seems to be the play at hand...typically though, in this type of environment, when everybody is looking for something, it usually does not happen. I would be extremely cautious over the next couple of sessions from the long side...my feeling is this : if you are looking to get long, wait until the close on Friday. With expiration two days away, lots of things can happen if somebody's hand gets forced. What I mean by that rather cryptic line is that the market has had a very difficult time with expirations. This morning will bring plenty of FED speak, from Bernanke to Lacker, Guynn and Poole...in addition we have LEI and Philly Fed. As for the indices, the SPM closed at a substantial discount to fair value yesterday at 1269.50...expect a rebound in the early trade, but 1280 to 1283 is tough resistance. In addition, there appears to be a flight to quality bid in the long end of the curve this morning and the dollar is back on the defensive. I have included a few charts , specifically looking at MA differentials. These charts show just how far we have moved in the past few sessions. Good Trading to all, Brad
Posted 08:45 CST Equity Index Update Friday May 19, 2006 The index markets took another tumble yesterday as final hour selling grew aggressive and any resting buy orders were seemingly pulled on the institutional end, leading to a meltdown by the close of trading. However, after the close, the brutalized large cap technology sector received better than expected news from DELL and AMD...of course, with the AMD rally comes an INTC decline, so as far as the NDX is concerned it may not be the best situation. This morning, the indices are pointed higher, with the SPM trading up 7.50 at 1270.50 ahead of option expiration. Yesterday's action was stale at best until the final hour of trading...this morning I would expect more volatility in the first hour, followed by a lull. The final hour will once again be critical for the marketplace. In terms of overall activity...I continue to recommend waiting for any long trades until the dust has cleared today. There is a chance, particularly with it being expiration the market could get ugly once again. Good trading to all, Brad
Posted 08:45 CST Equity Index Update Friday May 19, 2006 The index markets took another tumble yesterday as final hour selling grew aggressive and any resting buy orders were seemingly pulled on the institutional end, leading to a meltdown by the close of trading. However, after the close, the brutalized large cap technology sector received better than expected news from DELL and AMD...of course, with the AMD rally comes an INTC decline, so as far as the NDX is concerned it may not be the best situation. This morning, the indices are pointed higher, with the SPM trading up 7.50 at 1270.50 ahead of option expiration. Yesterday's action was stale at best until the final hour of trading...this morning I would expect more volatility in the first hour, followed by a lull. The final hour will once again be critical for the marketplace. In terms of overall activity...I continue to recommend waiting for any long trades until the dust has cleared today. There is a chance, particularly with it being expiration the market could get ugly once again. Good trading to all, Brad
Posted 10:05 CST Equity Index Update Wednesday May 24, 2006 "One minute you're up half-a-million in soybeans, the next they've repossessed your Bentley and your kids can't go to college." So was the tale for those long the index markets yesterday afternoon. For the second session in a row a seller out of Mlynch's desk hit the SPM aggressively in the final hour of trading. This time, there were no takers as players pulled bids and ran in front of the selling all the way down. When the dust had settled the markets were devastated by the lack of early follow to the upside and a whiplash settlement on the lows of the day. In my opinion, this feels very "margin callish" to create my own term...Having traded through similar periods of hedge fund problems - from last springs GLG issue, to the Long Term Capital situation, this market has the same feeling. We will never know - until its too late - who is stuck...all a trader not in the know can do is stay in the flow and operate under the assumption that something very unusual is at play in the domestic equity markets. Overnight action was wide as the SPM traded as low as 1247 and as high as 1259...expect potential outlier trades on both sides of that range by the time the dust clears today. In addition, keep a close eye on the bond market. The USM contract has been the place of safe haven during this equity decline...it will be a reinforcement indicator throughout the trading today. In other words...if USM is ticking lower, players are taking risk premium out of the index market, which should allow for higher pricing. Finally, with the severity of the breakdown yesterday afternoon, keep a close eye on the 1265 to 1268 level. I would treat this zone as a GAP trade. In other words, the selling was so severe that the logical move is to test this resistance zone and treat it as a gap fill if we get towards the top end of the zone. Typical, that will be the spot to fade any updraft. Good trading to all, Brad