Did they employ $500,000,000.00 of S&P futures or did they threaten to?
Larry Levin’s Nightly Newsletter & Trading Signals
Slam
The markets were slammed today after opening fairly weak and never gaining upside momentum. Yesterday I questioned Monday’s late spike and believed it could have been nothing more than short covering.
I said “…This led to a bit of a mixed market today as well; however, there was a strong close. It was such a burly late move that a full 60% of the entire day’s range came within the final 35-minutes. One wonders whether this was just short cover from a weak open and so much selling in the overnight market. We call this type of late move a buying spike and how the market reacts to it in the morning should provide the answer.
“On a larger scale we believe the market may have reached a Make or Break area (M.O.B), which is how we often refer to a critical level in our trading room. The markets have been trading sideways to lower for a full month now and the S&P500 has reached the first support level of 884.00. The next level, which is even more critical, is 873.00 and a close below that level could lead to a swift drop lower. Oddly enough, Wall Street is now second guessing their “green shoots” mantra and wondering if recovery will come in 2010…or later.”
In addition to Wall Street questioning whether it sees “green shoots” or “poison ivy,” news from the Obama administration hurt stocks. Stunningly, President Obama’s economic advisors are pushing for ANOTHER porkulus bill. Are they mad?
That MOB level was right on the money as the S&P500 eventually plummeted nearly 20-handles to trade 875.00. Our overall critical level was 875.00 (as mentioned in Notes from the Pit) to 873.00 mentioned above. Keep an eye on 873.00 tomorrow, especially early. If the market gaps open far below this level, we could see the market attempt a rally. At that point sellers may take profits while bargain hunters pile in, but you should follow the trend no matter what happens.
As the market dropped below 882.00, it became more volatile. In fact, as called by our auctioneer service (Paul specifically) of PitNoise.com, things got a little wild. Near 882.00 a large order came into the pit to buy 400 contracts, which has a notional value of $100-million! At first these contracts were not taken out by the locals in the pit and Paul even told us locals began bidding in front of this large order. This helped spark some short covering and the market bounced 6-handles.
The S&P began its next slide, trading back down to that 400-lot buy order and the locals took it out, thus slamming the market to new lows on huge volume. Longs were liquidating and floor traders pressed the trade lower. The Obama news of endless profligate spending wasn’t helping matters at all.
When the market finally reached our 875.00/873.00 MOB level, it got crazier. Paul called another 400-lot order, and another, and another…and yet another. The final order was never filled. What happened? The locals in the pit who trade their own accounts got the picture: whoever was buying was not going to stop. The market finally popped somewhat going into the close.
Overall, our PitNoise feed gave us a heads-up warning that someone was endeavoring to buy nearly $500,000,000.00 of S&P futures. Thanks Paul! If you would like to know more about this, please visit www.pitnoise.com for the information and a trial. There is a recording of an open on the site that you will find interesting as well as this link on YouTube youtube.com
The unfilled 400-lot order, the market’s month long malaise, insane government spending news, and the S&P reaching a clearly important MOB level should make tomorrow morning’s open very interesting. Will you hear it?
Trade well and follow the trend, not the so-called “experts.”
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