The best play for Monday is to sell the currencies, particularly the yen and the Swiss franc, which both posted negative numbers in the signal categories. All the currencies have formed âcapâ tops, although the yen isn't posting one because it is occurring following a down rather than up move. All of them have just come off two consecutive up open-to-closes, a contrarian indicator also indicating a probable downmove. As you'll further notice, the either-ors are negative in both the yen and franc and neutral in the euro.
The bond complex is pretty much the opposite -- uncontradicted buys across both signal groups. The 30-year bond is neutral, which means it's not arguing with the solid buys in the 10- and 5-year notes.
Something else to keep in mind is that the Chicago Mercantile exchange is at it again -- playing with the end-of-month closing prices. The âofficialâ mini S&P close was 1303.25, which was more than four full points lower than the last 1307.50 tick.
Why do they do it? They have their reasons, which are related to the end-of-month closing time differences between the cash and future indices (15 minutes earlier for the cash), and also the portfolio readjustment. (Some stocks going in the indicies, some coming out.) It's a technical trading nightmare, though, and I can't for the life of me understand why every system trader isn't hounding the exchange via phone and emails. I posted as much on the TradeStation discussion site and it was total apathy. Doesn't anyone realize that if you're talking a simple 20-day moving average, one day's price anomaly will reverberate for the next 20 days? Use a 35-day and virtually every day in your study will be skewed.
My signals come off the âofficialâ close -- to do anything else would involve a revamping of TradeStation windows that would be a logistical nightmare. I have to think systems will remain close to their theoretical models and that discrepancies will tend to bounce roughly equally both ways -- windfall and unexpected loss.
But why would anyone want to settle for close? I urge everyone to bombard the Merc with complaints. Tell them this is price fixing, pure and simple. The market, not goofballs in ivory towers, should decide how prices will resolve relative to portfolio adjustments and whatever other dance the officials choose to perform.
