Early merger-and-acquisition news boosted the market to early gains, as we said it might, but the enthusiasm disappeared within 15 minutes of the market open. Most investors will be focused on the data coming from the housing market today (Tuesday) and the GDP report due Friday. By the end of the day Monday all the major indexes gave back their early gains.
Today we may see a small bounce or sharp selling depending on the housing numbers. However if the prices break down overnight, a bounce is pretty unlikely.
On the daily chart, the ES (e-mini futures contract) went sideways. I expect this downside move to eventually break below the 1048 major support level and get close to May 25’s low 1036.75. If today the housing data is not good, expect a sharp decline; if it is less bad — it is not likely to be good — we may see a small bounce up to 1088-90.
There was lots of hedging activity going on later yesterday afternoon. The put/call ratio was 0.69 on closing, which suggests large traders are buying calls and selling stocks. For the short-term trend, as long as price doesn’t exceed yesterday’s high 1080.25, the direction should remain down until price reaches the 1050-40 range.
ESU0 Intraday chart — 60-min. bars
