ES Journal Archive (2009 - 2010)
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Continued pressure on dollar helps commodities sector and related stocks move higher today
While the broader market is taking a break from its recent run today, the commodities sector and related stocks are showing notable strength on continued pressure on the dollar following yesterday's FOMC decision. In addition to the weakness in the dollar, there have been a few pieces of news that are also contributing to today's gains... In the energy sector, crude oil ($50.76 +$2.62) is trading back above the $50 level supported by the weakness in the dollar, while natural gas ($4.101 +$0.417) saw a sharp spike following this morning's inventory data, which showed a modestly larger draw than was expected. The strength in the underlying commodities is leading to gains in the sector ETFs (OIH +2.9%, UNG +10.6%) and related individual names: BEXP +21%, BDCO +8.3%, GMXR +10%, AXAS +5%, SFY +8.3%, SGY 28+%, SM +7.2%, KOG +5%, ATN +5%, REXX +26%, SD +6.8%, DEJ +4%, FXEN +6.1%, and ATLS +9.8%... In precious metals, gold ($954.00 +$64.90) and silver ($13.435 +$1.50) are extending their rallies from yesterday afternoon, where both metals spiked sharply as the dollar retreated following the FOMC's decision. As such, money is flowing into gold and silver as a hedge against inflation. Names seeing strength include: GLD +0.7%, SLV +3.9%, HL +10.6%, SLW +6.8%, SSRI +9.1%, NSU +6%, VGZ +5.1%, NAK +9.4%, TRE +7.8%, EGO +5%, NXG +9.2%, AUY +4.1%, GSS +9.3%, KGC +5.5%, GG +5%, BVN +13.5%, and GRS +8.2%... The steel sector is also seeing considerable strength, following news from the Treasury that the govt will provide $5 bln in financing for auto suppliers, giving suppliers the confidence they need to continue shipping parts, pay their employees and continue their operations. While its doubtful that the steel cos themselves will get direct aid, the incrementally positive news for a steel consuming industry is a positive for the steel group (SLX +3.8%) moving higher include: AKS +10.7%, X +9.4%, WOR +7.1%, NUE +9.3%, and STLD +7.9%... Finally, as we mentioned this morning, names in the drybulk sector continue to trade higher today, supported by improvement in the commodities sector in general. There was also company specific news, with DRYS getting a contract and EXM delaying Q4 earnings while it negotiates waivers of certain financial covenants in its credit. Drybulk names participating in today's move include: DRYS +21%, DSX +3.4%, GNK +7.2%, NM +5.6%, and TBSI +7.2%, Today's gains come despite the sixth consecutive drop in the Baltic Dry Index, which fell 66 points to close at 1795.
The pivot served as resistance this time around. If prices jumps over the daily pivot, and if the pivot point starts acting like support, 60's are not going to be likely after all.
Been waiting for a PP breakout upside.
Risk reward on selling break down does not worth it at the moment.
BATTLE FOR SPX 800
Market wrestles with a significant resistance zone
Today's decline in the major averages, and especially in the leading Financials group, can best be described as an entirely normal bout of profit-taking following the ~20% surge off the March 6 lows. Yet today's selling pressure is not occurring in a vacuum: although today has been a fairly quiet session in terms of news flow, the major averages and many individual stocks are reacting to some very important technical levels.
First some context: It's worth recalling that sentiment had become so overwhelmingly bearish as the month of March began, that when the bottom was suddenly put in on March 6 few longs were around to meaningfully participate. As is typical, the rally started out as a round of short-covering from extremely oversold levels, but this short-covering for the first time in many months was superceded by aggressive buying by the long-dormant longs. The rapidity of the advance forced new longs to "chase" the rally, since prices never pulled back to allow for better-priced entries. This was exacerbated by the battering that shorts have taken, as new shorts who underestimated the power of this rally were forced to continually cover at successively higher levels as institutional money flowed back into the market.
Which brings us to today. Market technicians have been pointing to the 800 level in the S&P as a kind of "line in the sand" that will give a good indication as to whether this rally was just an oversold bounce, or a signal that an intermediate-term bottom has been put in. This level is key because it lines up with the January low (804), the downward-sloping 50-day moving averages (currently sma 800, ema 793), and the round number 800 psychological level. Following yesterday's Fed announcement, the market's rally slammed up against this zone, and sure enough that's where we saw the first wave of profit-taking. Today, this struggle for the 800 level continues, with the shorts pointing to the extreme near-term overbought state of the market (especially in the Financials), and with the longs focusing on still deeply depressed valuations and the positive headline risk we've been in the midst of (i.e. yesterday's surprise Fed announcement that they are actually going to buy longer-dated Treasuries, a modification to mark-to-market rules, the potential re-imposition of the uptick rule, a glimmer of hope in the housing data, etc). Coincident with this rally has been a plunge in Treasury yields and the "safe haven" dollar, which has lit a fire under the entire commodity complex.
Looking forward, investors should expect continued volatility near here as the market wrestles with a significant technical resistance level. Looking at it in a broader context, what the 800 level in the S&P represents is a test of conviction in the March rally. A pullback near here would be entirely logical given the overbought state of the market, but is the pullback bought or do we return to the familiar pattern of skittish longs dumping stock on any hint of weakness? Moreover, an eventual break above 800 -- if it happens -- would be a very bullish sign, suggesting that this rally could have a lot more left in the tank and is more than just a near-term oversold bounce.
Market wrestles with a significant resistance zone
Today's decline in the major averages, and especially in the leading Financials group, can best be described as an entirely normal bout of profit-taking following the ~20% surge off the March 6 lows. Yet today's selling pressure is not occurring in a vacuum: although today has been a fairly quiet session in terms of news flow, the major averages and many individual stocks are reacting to some very important technical levels.
First some context: It's worth recalling that sentiment had become so overwhelmingly bearish as the month of March began, that when the bottom was suddenly put in on March 6 few longs were around to meaningfully participate. As is typical, the rally started out as a round of short-covering from extremely oversold levels, but this short-covering for the first time in many months was superceded by aggressive buying by the long-dormant longs. The rapidity of the advance forced new longs to "chase" the rally, since prices never pulled back to allow for better-priced entries. This was exacerbated by the battering that shorts have taken, as new shorts who underestimated the power of this rally were forced to continually cover at successively higher levels as institutional money flowed back into the market.
Which brings us to today. Market technicians have been pointing to the 800 level in the S&P as a kind of "line in the sand" that will give a good indication as to whether this rally was just an oversold bounce, or a signal that an intermediate-term bottom has been put in. This level is key because it lines up with the January low (804), the downward-sloping 50-day moving averages (currently sma 800, ema 793), and the round number 800 psychological level. Following yesterday's Fed announcement, the market's rally slammed up against this zone, and sure enough that's where we saw the first wave of profit-taking. Today, this struggle for the 800 level continues, with the shorts pointing to the extreme near-term overbought state of the market (especially in the Financials), and with the longs focusing on still deeply depressed valuations and the positive headline risk we've been in the midst of (i.e. yesterday's surprise Fed announcement that they are actually going to buy longer-dated Treasuries, a modification to mark-to-market rules, the potential re-imposition of the uptick rule, a glimmer of hope in the housing data, etc). Coincident with this rally has been a plunge in Treasury yields and the "safe haven" dollar, which has lit a fire under the entire commodity complex.
Looking forward, investors should expect continued volatility near here as the market wrestles with a significant technical resistance level. Looking at it in a broader context, what the 800 level in the S&P represents is a test of conviction in the March rally. A pullback near here would be entirely logical given the overbought state of the market, but is the pullback bought or do we return to the familiar pattern of skittish longs dumping stock on any hint of weakness? Moreover, an eventual break above 800 -- if it happens -- would be a very bullish sign, suggesting that this rally could have a lot more left in the tank and is more than just a near-term oversold bounce.
PP was tested from beneath three times, in a head and shoulders, intraday.
Intraday, 778 looks like a likely retest.
holding 780, could easily rip up 790+
There is a buy signal triggered at 780 level when it was taken out and bounced back to 84. It confirmed a 2-leg drop of 12+ pts each can only result in a retest of 780.
Flat at 84. Simply put, the selling is being met with buying.
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