Yesterday
The S&P500 mini-futures (ESH5) closed yesterday (Tues.) at 2042. They opened January 2, at 2055, which means that so far this year, 2015 has been a wash. That ferocious ramp up in February, predicated mainly on what had been the safest trade in the market – go long into the close of the ES and count on the manipulators to bump the price up into the close, just stopped working. The Plunge Protection Team (Wall Street’s pet name for the government committee responsible for “regulating” the market) just never showed up.
The futures are looking shaky. The ES opened down in overnight trading, never made any kind of advance, and dropped straight down all day long to close within a point of the low for the day, forming one big long red candle that represents a decline of 35 points on the day, on top of a 30-point loss on Friday.
While this was going on, the US dollar (USD) rose to new highs against the Euro and recent highs against the Japanese yen. It was trading at par with the Swiss franc.
Over the long term, there is little correlation between the USD and the stock market. But the dollar rally this year is unusually fast – up about 9% in 2015 – and a short term inverse relationship between a rising dollar and a falling market may be developing. This year, the SPX dropped on 19 of 27 trading days when the dollar rallied. That’s not enough to draw conclusions, but it is something to watch.
The sharp declines on Friday and Tuesday are still well above the long-term trend line. But they are enough to give a negative outlook for the short-term and move the intermediate term outlook from bullish to neutral. This isn’t done yet.
Today
Right now it looks as if the earlier break-out from 2089 was a fake, and that indicates a further decline. The next key support for the futures is the 135-day moving average and the intermediate-term uptrend line, both around 2020-21. Below that, any decline below 2000 will risk panic selling, and a possible drop to 1975.
We will be watching for a bump in overnight trading, with a view to shorting the bounce – if there is one – as long as ESH5 stays below 2054-56. If we see a decline to the support area 2020-2018, we’ll take a cautious long entry there. That is a scalping trade, intraday only.
It is also time to start watching the prices of the June contract.
- Major support levels: 2035.50-36.50
- Major resistance levels: 2088.75-89.50, 2098.50-99.50, 2104-07
ESH5 Daily chart Mar.10, 2015
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