Tradewinds
by Chris Curran
July 18, 2003
On Thursday, the September S&P futures (SPU and ESU) opened with a 7.5 point gap to the downside, right at Wednesday's low and just above S1 support. The market gapped despite the Bureau of Economic Research reporting that the recession had ended in November '01 (I must have really been in a perpetual haze to not notice the recession was over all this time!). The size of the gap gave roughly an 85% chance of filling at least part of it (see more on opening gaps below). Morgan Stanley was a good seller of a couple hundred SPU contracts right off the open. Locals bid the price up off the lows and Merrill Lynch was a buyer up to 990.50. After the contract stalled at 991, a big sell program took the market back down to S1 support at 987, and then broke to a new low at 985.25. Merrill Lynch sold the market down to the overnight Globex low of 983.25. The market drifted sideways until the noontime release of the Philly Fed report, which came in at 8.3, above the 7.0 consensus. The September futures did a knee-jerk up off the news, before the brokers lined up and sold the market back down to new lows. Volume took off for lunch and didn't come back until the last hour. Merrill Lynch and Goldman Sachs sellers shook the trees and broke the contract to a another new session low, until a short-covering bounce into the close ahead of Microsoft's (MSFT) earnings report managed to temper a little bit of the damage.
The September S&P 500 futures closed the session with a loss of -14.25, and in the low end of its range. On a daily basis, the contract has continued to decline off bearish Stochastics divergence, and also broke its 20-day MA at 989 and last week's low at 982. The next areas of major support to watch are the 50-day MA at 972 and the 7/1 low at 960.50 (see chart).
On Friday morning at 9:45 am ET, we have the release of the Preliminary Michigan Sentiment report with a consensus of 91.0, from last month's 89.7. Friday is also options expiration and probably a good day to get an early start on the weekend! |
