Tuesday, April 5, 2011

Pre-market thoughts 5th April 2011

Looking for a good entry to get short today on a day trade (probably fading the gap fill). Volume has dried up considerably (lowest in 2 months on yesterdays session). Also there is a bit of uncertainty out there with the US debt limit situation and the ECB rate announcement on Thursday.

Confirming indicators or assets are that bonds have stayed strong and other risk assets have come off it's highs. Technically the market is overbought and I see some resistance at these levels on the ES.

Quant studies are also confirming the short term bearish bias. In terms of market structure we had a fairly convictionless trade yesterday and the Open could be classified as a Open-Rejection-Reverse (for more refer to Mind over Markets trading book). Pattern wise, it was an inside day yesterday on the ES so watch for a breakout if we do not hold the extremes from the last couple of days. I'm favoring the downside here.

Market internals also reflected the lack of conviction as A/D lines or breadth (yes that is the correct term I've realised) finishing flat along with up volume versus down volume. Cumulative also finished at +6000 but this is considered a neutral number.

If the ECB does raise rates, then that could make things very interesting! I don't the market will like it is my gut feeling.

Trade safe!

2 comments:

  1. Hi MC yes feels like the Institutions have been selling into this rally, maybe they're setting up the next cycle. Most of Reuters institutional interviews are spruiking overweight equities and sounding bullish trumpets. Counter-intuitively, if they are looking to get long wouldn't they be promoting lacklustre returns to the public?
    I'm short deltas (also vega... but will rectify this today).
    Long GLD too - your thoughts on this?
    dP

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  2. I'd be wary of being long gold especially seeing as since I expect the dollar to rally in the face of any equity weakness and commodities to sell off. Everyone in trading universe is heavily net short the USD and Yen still....

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