Yesterday

The S&P500 mini-futures (ESM5) closed at 2085.00 yesterday (Mar. 24) down 10 points from the previous close on light volume. For the second day in a row, the Plunge Protection Team failed to rescue the Bulls, who pushed the futures up to the support-turned-resistance at 2100 in the morning session, then watched glumly as the market went into an unremitting decline for the rest of the day.

It closed just two points above the low of the day, and even that minor little bump was due to the gleeful shorts squaring their positions before they headed for the bar. The buyers were missing in action.

According to Goldman Sachs, the modest swoon in the market may be attributed to a sharp decline in corporations buying their own stock, as they enter a blackout period before QI earnings are released.

Could be …

Certainly corporate buy-backs have been a major factor in keeping the market afloat; Goldman figures they will pump about $600 billion back into their own stock this year, an unexpected consequence of cheap money.

Whatever the reason, this is still a long way from being a decisive moment in the market. The price action is worrisome for the buyers, and the market has looked toppy, but so far there has not been any determined effort by the Bears to push the market below significant support levels. It looks like a bull market breaking wind, not the end of the reliable levitation we have come to expect.

Today

Today (Mar. 25), we have a support zone at 2076-66, well within reach of the closing price. The next moves in the ES will likely depend on how this support zone holds up – or not – today and tomorrow. 

There is an unfilled gap at 2081.50. Below that level there are inflection point at 2078-76.50, 2064.50-66.50 and 2057.50-59.50, places where the price broke out last week after the FOMC announcement. As long as ES remains below 2089.00 – 90.50 at least some of those breakout levels are likely to be retested.

But a lot of shorts were trapped under water when the Fed stoked the furnace, and they will be coming back into the market to cover their positions as the market approaches those break-out levels. That will slow the decline.

We’ll be trying to capture short-term gains by scalping on the long side around those points, as long as the momentum remains weak. If/when the momentum picks up, we’ll scamper to safety and watch the struggle from the sidelines.

  • Major support: 2075.25-74.50, 2062-58, 2035.50-33.50, 2028-29
  • Major resistance:  2107-08, 2118.50-21.50, 2128-35.50

ESM5 Daily Chart, March 24, 2015

 dampier.3.25.15.png

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