S&P 500 Index Futures Chart – Wednesday March 25
Market participants continue to rally here as the stimulus package of extraordinary size gets put together.
We could be sitting on a slingshot move right back to the upside as short scramble and big hands jump back into the market.
However, we are more likely to follow the 2008 scenario where we rallied into the stimulus getting signed and then collapsed again after the bill is passed. The market is turning and we will have churn in any rotation.
The song remains the same – though confidence in the dollar will weaken after the extraordinary measures of buying treasuries and mortgage securities expansions have created a buying frenzy of short sellers covering and money managers not willing to miss out after the first run they missed- markets will fade once more – eventually to higher lows as we recover.
As I mentioned yesterday, we could be looking at a spike that runs several days. We are in uncertain times and the fallout remains unknown. We have slowed some selling and markets are trying to settle in and weigh in on what it means to have Central Banks throw everything they can at the problems at hand across the world. Short selling of government bonds remains illegal and a dollar starved world will trade their currencies in for US dollars.
Whipsaws remain the name of the game. Let your bounces confirm. Trading these markets takes significant skill – and just because there are opportunities, doesn’t mean you have the chops to do it.
WEEKLY PRICE ACTION
Monthly support has both shifted down with and now sits at 2086.5. Resistance sits at 2380, 2490 and 2554, with 2707 above that. Demand and supply shock is worrisome, and we will continue to sell big bounces until these are resolved. Remember, in bear rallies, bounces can last for days, choppy as they may be.
COMMODITY & CURRENCY WATCH
Gold is on the run again over 1640 as the play by the Fed weakens the dollar and central banks across the world buy up gold. Charts are choppy still with WILD and WIDE swings. The US dollar is up at 101 and holding after testing near 103. Currency markets remain very volatile. WTI fell to 21$ but is now struggling at 24.
TRADING VIEW & ACTION PLAN
We are still looking at choppy news-driven with deep fades and high spikes by momentum traders who give us trading ranges that are large. Bearish at the first passes from resistance to support. Levels near 2274 to 2357 make the wide ranges of support where we are seeing players and the 2490-2707 range looks like front line resistance for now. Traders will be whipsawed trying to engage, so choose wisely.
The theme of INTRADAY motion is: BREAKDOWN with savage bounces into resistance levels that get pressed higher and return to deep support due to momentum trading. Bear rallies can last several days.
NEGATIVE AS LONG AS WE HOLD BELOW 2504 ish today (with sharp bounces failing and deep pullbacks holding).
Follow short term trend and momentum signals while in the intraday trading environment and watch for weakness to develop away from your trade direction in order to leave.
Learn more about my services over at The Trading Book site.
The author trades stock market futures every day and may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.