Bears in Command of Micro Trend
By Mike Paulenoff, MPTrader.com
Since this morning’s recovery high, the market’s been straight down in the E-mini June S&P. From 1150 even we’re now at 1130, so we’ve had a substantial 20-point turnaround. The magnitude of the drop is significant in and of itself, but the fact that we’ve broken below Thursday’s pivot low at 1133 makes it even more significant. So the indices are definitely on the run to the downside, and my next downside target for the E-mini June S&P would be right around 1128.
As of this minute, it looks like we will go there. The low for the day is 1129.50. In order to get anything going on the upside, the first thing that has to happen is the index has to pivot back above 1133 and sustain up there and then to trigger a signal we need a rally above 1135 ¼. We’ll be watching those levels.
Right now it looks like the market, for starters, is afraid of the Bush press conference tonight and how that might impact equity prices. Today, in particular, the bond market is getting clobbered because of the very strong retail sales data. So you have higher interest rates and the expectation for the Fed to move sooner rather than later during the summer, and the third element today is that the dollar is extremely strong, although the Euro is trying to stabilize at the $1.19 level.
So it’s a higher interest rate and lower equity price relationship, and it’s been that way since 9 o’clock this morning and it’s that way right now at 2 o’clock this afternoon.
Over in the QQQs, you have a similar situation. The Qs popped to the upside this morning, made a marginal new high for the move from last Thursday into a high during pre-market of 37.44, and right now as we speak we’re at 36.70. So it’s been quite a turnaround in the Qs.
36.66 is the low established on the 7th, which was Wednesday of last week, the pivot low that was very important. Below 36.66 I have very little technical justification for staying long or looking to get long the Qs at least for a while.
So we’ll be watching the 36.66 level very closely. If that breaks, then we could go down to 36, which would be an extension of a natural decline. If associated with a negative reaction to Intel and/or a negative reaction by investors to whatever Bush may say at the press conference tonight, then it will add fuel to the downside and possibly go right through 36 to a much more important level, which is 35.30.
If the Qs somehow reverse out of this and this downmove turns out to be a trap, the Qs will have to rally back above 36.19 to suggest to me that the bulls are back in command of the micro trend.
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