A sharp retreat in oil prices, and a plethora of buy program premiums had the major indices posting gains, but once again traders wills sense some type of pressure building, and wondering just what is under the Christmas tree as several economic reports get unwrapped in tomorrow's session.
I went back through my notes, or should I say list, and checked it twice, and while I've got a bullish bias headed into the three-day weekend and remainder of the year, I'd sure want to see some green on my screen from the S&P Depository Receipts (AMEX:SPY) by 10:00 AM EST tomorrow morning.
Four more "major" economic reports will be released before tomorrow's opening bell, so I'm including some of today's e-mini S&P futures (es05h) intra-day observations with tonight's wrap, and then revisiting the November 18 and 19 dates, where not unlike today, we saw a lot of buy program premiums generated on 11/18 with little intra-day price movement, followed by a rather bearish option expiration trade that following day, which was a November option expiration.
With today's decline in oil prices on unexpected inventory builds, and a lot of buy program premiums being generated with not a lot of bullish price action, one has to wonder just what Santa is about to deliver. A bunch of goodies for a bull? Or a lump of coal?
Market Snapshot / Internals
There was one buy program premium that did have some meaningful impact on today's trade, and that came right at 10:30-10:35 AM EST as today's EIA weekly statistics were released. On the above market snapshot, I went through my $PREM chart on 5-minute intervals and counted the number of times a buy program premium would have been found from 09:00-10:00, then 10:00-11:00 and so on. I've posted the numbers in GREEN just below the VIX.X.
One thought to today's active program premium alerts is that there was some end-of-year rebalancing by mutual funds as most managers get ready for an extended vacation, which may well run through the end of the year. In last night's Index Trader wrap, I touched on the somewhat difficult year the Dow Industrials had, relative to the other major indices, and I thought the INDU traded tough or seemed a little more resilient, perhaps a sign that "dividend" stocks were a finding more buying that some of the perceived growth, or smaller dividend yielding tech stocks.
Let's take a quick look at a comparison chart of the e-mini S&P futures (es05h) and the S&P Depository Receipts (AMEX:SPY) on an intra-day basis, 5-minute intervals, with the QCharts WEEKLY Pivot levels turned on.
As I wrote tonight's Wrap, I then set up a test based on past observation.
e-mini an SPY Charts - 5-minute intervals
Equity bulls got what they were hoping for as February Crude Oil futures (cl05g) $44.24 -3.32% fell $1.52. My observation is that this news really seemed to bring the buyers into the equity markets, and once the e-mini (upper) cleared its WEEKLY R1, it never came back below.
In the lower SPY chart, I once again tabulate the number of buy program premiums, where we can see that after that 10:30-10:35 action, these buy program premiums, which are really just arbitrage, or "out of whack" differences between futures and cash, that they had little impact the remainder of the session.
One area of interest to me, was that volume "spike" in the e-mini (selling), where 5-minute later, another volume spike, but this time in the SPY, saw more of a bullish bias during that 5- minutes. Then a "buy program premium" was generated during the 02:00-02:05 interval.
What's going on here? I've got to think there was obviously some type of "hedge trade" or "balancing" taking place. Sell some leveraged futures, but come back and buy the basket of stocks. As supply gets eaten up (even on a short-term basis) then some follow through cash buying generates the premium.
What I appreciate more than anything, is reviewing other traders trades. Look at tonight's futures monitor archive, count the bullish and bearish trades of those traders that are more active in the futures markets. Did the bull side (long) win or did the bear side (short) win?
A lump of coal, or a box of bullish goodies?
Tomorrow morning, we'll get a pulse, but my thoughts are a box of bullish goodies as long as futures stay above WEEKLY S1, and should the S&P Depository Receipts bid green at any point early in the session, we could see a sprint to WEEKLY R2 by the close.
Here's what a negative trade would most likely look like. Many of the observations, or comments I make in another e-min S&P (December) and SPY comparison, was taken from the intra-day commentary.
I'm showing 10-minute intervals with these two comparisons, simply to gather some further proceeding and following session trade, which would surround the Thursday November 18 trade, where we also noted a lot of buy program premiums being generated, but very little PRICE action.
e-mini an SPY Charts - 10-minute intervals
In the lower SPY chart, I make note that on Wednesday, stocks traded strong as the SOX.X was breaking above its trending lower 200-day SMA. Hmmmm.... the SOX.X was dead flat-to-lower today (12/22/04). Late that Wednesday, it seemed to me that stocks erased gains as OIL found a late bid.
Then on Thursday, I noted quite a few buy/sell program premiums and sensed "pressure building" in that evening's Index Trader Wrap.
The following session was November options expiration, oil jumped 3.85% to $48.00, and the S&P Depository Receipts never did turn green after the open.
A positive or a negative? On November 18, the SOX.X closed at 445.64. Tonight they closed at 424.05, where this group continues to be a negative drag on the QQQQ/NDX.
If the QQQQ is going to make a run at its recent highs, the for the QQQQ to rock, it'll need some SOX.X.
Pivot Matrix -
In PINK I note today's close for the SOX.X at its MONTHLY Pivot. I also note today's close for the BIX.X above its WEEKLY R2.
The proverbial "rubber band is stretching at both end... something's got to snap." If the SOX.X can pull itself away higher from the MONTHLY Pivot, then I'm thinking further snap higher.
In today's intra-day commentary, I noted that Citigroup (NYSE:C) $48.31 +2.37% had broken out of a huge base, and above 8-month resistance. This action can sway a lot of market theorists to put more money to work in equities, as many investors (including myself) will put great weight as to what this stock's price action says about global economies and business. The KBW Bank Index (BKX.X) 104.23 +0.58% closed at an all-time high, and it two begins to break above 8-month resistance. Some "strength from the bottom" in a big money center bank? You better believe it.
In this morning's Market Monitor, just minutes after the EIA weekly inventory figures were released, I profiled a bullish swing trade in the QQQQ at $39.74, stop $39.50, target $40.25. I make some notes in the pivot matrix. If the markets bid early tomorrow morning, I'm thinking I won't have to "worry" about QQQQ $39.50, but on some early morning weakness, I may well adjust my stop just fractionally lower to perhaps $39.45.
Jonathan Levinson noted his thoughts regarding some resistance at $39.71 on his intra-day charts. I also made some notes in the 03:15 PM EST update and U.S. Market Watch as some type of intra- day gravitation around $39.72.
U.S. Market Watch - 12/22/04 Close
In today's Market Monitor at 02:21:28 PM EST, I posted a little Yield curve observation, examining today's bond trade, and impact that it has had on the yield curve for the past 5-days (steepening) and 20-days (still flat). I must say that I'm disappointed in bond traders. They used to be AHEAD of a move for equities, but it would have to be my analysis, that bond traders wait for every piece of "news" (oil, Fed talk, etc.) before they react. If anything, today's steepening curve only confirms what stocks have been saying.